Orlen S.A. (PKN) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the press conference which will summarize the financial performance of PKN ORLEN after the fourth quarter of 2020. At your disposal today are members of the management board, Mr. Zbigniew Leszczynski, Management Board Member for Development; as well as Jan Szewczak, Member of the Management Board for Finance. I'll give now the floor over to Jan Szewczak to discuss our financial performance.

Good afternoon, and welcome to the conference, which will recap our performance after 2020. [indiscernible] the date fell on February 11, we would be very glad to summarize it as solid -- sweet performance, this being a date for the sweet holiday in Poland. And we do believe that this is a major success for us in this very difficult year that 2020 was and the challenges that it posed even to worldwide global concerns and companies which faced many challenges and reported millions in losses and released thousands of employees. For PKN ORLEN, however, none of this happened, and none of these threats came to realization. Our employment situation is stable and solid. And our performance -- financial performance is also very solid, we will share it with you in a second. But as a word of introduction, even in the face of the lockdown and restrictions and COVID-19 epidemics and lower margins and lower consumption figures, we can still -- a large group as ours, we can still manage the company efficiently and deliver successful results and solid results, not only in the fourth quarter of the year, but throughout the year in general. It is enough to compare certain figures. We have -- we are already in the -- we have entered the next year in 2021, but we are discussing still the crisis year of 2020. This could be compared to 2008, a crisis year in Poland and around the world. In 2020, however, our LIFO-based EBITDA stood at more than PLN 12 billion, to be specific PLN 12.1 billion, with net profit at PLN 3.4 billion. Going back to 2008, a crisis here as well, as I've mentioned, our LIFO-based EBITDA stood at PLN 2.7 billion, and net profit was delivered -- or net loss was at nearly PLN 2.5 billion. So it is evident that even in the face of such challenges, with such a strong involvement of both our employees and the management as well as the management board, it can be still delivered -- we can still deliver and we can still report success despite those challenges. Therefore, it makes us very satisfied, and we do believe that our performance is absolutely solid. We'll discuss it in a second. It all happened despite a very difficult situation with very negative impact on Downstream margins and macro effect. And the pandemic had a devastating effect on those margins, especially in the Downstream segment going down by over 30% to 7 -- nearly $7 per barrel. Lower demand for fuels, obviously, because Poles did not go on holiday, winter holiday, did not travel a lot. It obviously had an effect on lower crude throughput, and the drop was bad -- and the drop was slightly over 30 million tonnes. It all affected our utilization figures and also our sales figures. This comes as no surprise, obviously, as the aviation business came to a almost complete standstill and the use of fuels, especially aviation fuels, dropped significantly. Despite all those problems, as I have mentioned before, our LIFO-based EBITDA at more than PLN 12 billion is absolutely satisfactory, and it's very solid. It is a good result, and it shows -- proves beyond a doubt that such a well-managed corporation, multi-utility group is very strong and is resilient to such great challenges as 2020 brought. Despite low -- record low refining margins and the problems that the refining business faced all over the world with lots of refineries put on sale around the world, we have managed due to solid management and efficient management and the involvement and devotion of our employees and managers, we have managed to offset those losses. And in terms of our retail and energy business, they reported historically record-breaking results historically at more than PLN 3 billion for retail, to be specific, PLN 3.3 billion. This is a record high result. And as for energy, LIFO-based EBITDA stood at PLN 3.4 billion. It is yet another proof that our strategy adopted both by the owner and the management board and the President of the management board, Daniel Obajtek, were correct. It is worthwhile to be consistent. It is worthwhile to take over, acquire ENERGA, another company in the power sector, because it had proven -- it is approved that they have become a solid source of revenue and profit for our business. And it is a proof that our decision to create a multi-utility group that ORLEN, PKN ORLEN is, or multi-business group even, was a good decision with a great impact, positive impact on our performance figures. Concerning detailed facts and figures, but again, going back to some introductory remarks, it is not that we want to blow our trumpet. But our performance, our good performance was recognized by our ratings and ratings assigned by the rating agencies, such as Moody's. And our rating was maintained at Baa2. It was difficult to maintain in such a difficult period, but well-known renowned rating agencies around the world saw our efforts and recognized them. We generated PLN 7.6 billion in our operating cash flows, and it makes us very happy to say that our investment project -- program was delivered at PLN 9 billion. Our net debt stood at PLN 13.1 billion, and our financial leverage was at slightly more than 30%. However, our debt covenants, net debt to EBITDA, which is very important to us, at -- is at 1.32, which is a little -- which is more than -- which is away from the figure stated in our strategy. We secured our financing all across the company for ambitious projects, investment projects. We signed a consortium agreement or consortium revolving facility at EUR 1.5 billion, and we started an issue of 5-year corporate bonds at PLN 1 billion, which met great interest or attracted great interest among our investors with an oversubscription, which means that our securities offered are very sought after, and they are very appreciated. And we are thinking, considering to continue those efforts in order to secure such financing for the company. We are also considering green bonds. We are preparing or taking preparatory steps to take that step or -- in order to meet great interest also from our big partners in Europe. We paid dividend to our shareholders. It was, obviously, slightly lower than we assumed -- or we had assumed, at PLN 400 million. But we have to remember that a lot of companies listed at WIG20 index and the Warsaw Stock Exchange did not pay any dividend at all. But we knew that our shareholders were looking forward to the dividend, and we did not want to disappoint them. Therefore, we expect that this trend will continue in 2021 in order to pay out dividend at PLN 3.5 per dividend for 2020. In this very difficult context, also in terms of our health and the safety of our employees and our customers, we are continuing our acquisition efforts. We are negotiating with our partners, not only around Europe, but also from all around the world. In terms of the remedies of the European Commission that we have negotiated with the European Commission in terms of acquisition of LOTOS, the LOTOS Group. We have been continuing our efforts. And I can only tell you that it looks very promising. I will skip the details, obviously, at this point, but we do expect to communicate some good news to you soon. We acquired ENERGA almost 29% (sic) [ 90.92% ] of the capital -- of the shares. And we are continuing our work in this area as well. We do expect to file an application for the concentration in March. We also took the shares at RUCH. And we started the acquisition of Polska Press, Polska Press Group. So a lot has happened in 2020. And it has been very challenging, and some of these challenges are still ahead of us, but we do expect those efforts to have a great impact, a great positive impact for our strong retail business, and we're very proud to say that. This is how our world is evolving. So it is not really worthwhile to mock some of these efforts because we have a lot of appetite, not only for hotdogs, but we are developing also for -- in the direction of e-commerce as well and in other business areas. So these decisions were substantiated as we can clearly see right now. We also plan -- we also delivered almost 100% of the planned CapEx figure, not only in terms of the construction of our Visbreaker, hydrocracking at Plock, but also, we are expanding our production capacities in the fertilizer plant at Anwil. And most recently, at the end of the year, we selected a designer and a partner for wind farm in the Baltic Sea. We will launch that project, short -- in approximately 2023, and it will be brought on stream 3 years later in 2026. As you know, we have signed a letter of intent with PGNiG in terms of our potential cooperation for the CCGT unit in Ostroleka. We are developing also our, not only gas units, but also biohydrogen with a -- in a hydrogen hub in Wloclawek. We are hoping for this area to grow, and we are hoping to be one of the pioneers and the groundbreakers in terms of the use of hydrogen bulk and transport industry. We are increasing the accessibility of alternative fuels in our stations, service stations. We are developing also the chain of our service stations, not only in Poland, but also abroad in the neighboring countries. In terms of other key information, key facts and figures, it is worth pointing out that the strategy for the reduction of CO2 emissions by 2023, as decided by the management board and Daniel Obajtek, these are not only our aspirations, but these are the plans to be delivered fully in terms of zero-emission or neutrality, CO2 neutrality. We were recognized as an employer. This comes as no surprise because we are doing our best. We are taking best endeavors in order to maintain solid relations not only with the trade unions, but also to develop or expand the -- our forces, workforces in terms of experienced managers and employees. We were recognized as top employer for Poland 2020 in terms of meeting higher standards in HR policy, and we have been also recognized with a number of other awards, for instance, for the best Integrated Report, the Golden Leaf of CSR assigned by Polityka weekly. And as a recap, I'd like to extend my gratitude on behalf of Daniel Obajtek and the management board and congratulations to all the employees across the PKN ORLEN Group that it all would not have been possible without your involvement, especially in the face of such great challenges and the threats and dangers that COVID-19 pandemic brought with it. So all your efforts in terms of your involvement and our involvement in terms -- as regards the protection of health of Poles and our involvement in the preparation of temporary hospitals will be successful in the way that they will reduce the scale and impact of the epidemic. In terms of our figures reported and ratios reported for the fourth quarter of 2020, I'd like to point out that the model Downstream margin went down by USD 3.7 per barrel compared to a year before, year-on-year, obviously, on the back of lower refining margins, but also lower demand for fuels, not only due to COVID-19, but also, in general, due to lower -- due to lower consumption and [ worse ] sentiment among Poles. Average Brent/Ural differential was also lower and also other ratios going down substantially for diesel and gasoline going down by 71% and 44%, which was a major drop, offset by other figures in terms of our product mix. The depreciation of PLN versus euro was also important as well as appreciation of PLN versus US dollar. These were also major factors for us. We did expect lower consumption year-on-year in terms of fuels across all our home markets because we were aware of the fact that the travel was restricted and there was no tourism as well as the spread of the pandemics, not only in Poland, but also all around the world. On Slide 8, you can see our financial performance in quarter 4 2020. We reported a decline in revenue year-on-year by 16%, due to lower quotation in refining and petrochemical products and lower sales volumes and price decreases as well. However, despite the drop in revenue, we did report more than PLN 2.2 billion LIFO-based EBITDA for this particular area in refining going up by PLN 1.2 billion year-on-year, mainly due to positive impact of higher fuel margins; reversal of write-offs on inventories, NRV; consolidation of the ENERGA Group results with PKN results; and also settlement of CO2 contracts. These positive factors were partially offset by the negative macro impact and lower sales volumes as well as slightly higher fixed cost and labor cost. A positive NRV impact in the quarter 4 2020 was slightly more -- slightly above PLN 360 million. Changes in crude oil prices on our inventories valuation, the LIFO effect, in other words, stood at PLN 100 million, which affected our LIFO-based EBITDA, but still our LIFO-based EBITDA performance is very solid. Our financial results in quarter 4 stood at minus PLN 300 million due to negative FX differences. And we also saw -- we also had a negative impact of settlement and valuation of derivative financial instruments and also interest costs. In the fourth quarter, we reported net profit at PLN 600 million, and -- in the fourth quarter alone, obviously, practically comparable to the fourth quarter of 2019 PLN 1 million more, going up by PLN 1 million. But we have to remember that 2019 was not yet a pandemic year, and it was not affected by declining consumption and lower tourism and lower fuel consumption. Obviously, our financing sources and our financing structure is very strong. We have mentioned covenants at 1.32 versus the strategy, which states a level of 2.5. The increase in debt in the fourth quarter was only by PLN 1 billion. Slide #9 shows our LIFO-based EBITDA breakdown for individual segments. As per shortly, our Refining segment stood at 100 -- minus PLN 145 million, but our petrochemical muscle was above 0 and -- was positive at PLN 508 million, going up year-on-year more than PLN 30 million. Our Energy segment reported a great result at more than PLN 1 billion, PLN 1.1 billion, going up by more than PLN 730 million year-on-year. Our Retail segment was our another flagship business area, delivering PLN 127 million (sic) [ PLN 827 million ], going up by more -- by around PLN 250 million year-on-year. And our Upstream segment, which makes us very proud to report that it also went up year-on-year to reach PLN 50 million. Our corporate functions delivered a result solid EBITDA LIFO at PLN 83 million , mainly due to the settlement of CO2 contracts at more than PLN 380 million, lower -- higher labor costs and also our spending on the -- on combating the effects of the pandemic because we felt compelled and obliged to spend that money on the fight with the pandemic, on the projects, which will guarantee the safety and health of our clients and of our employees as well because we need both clients and employees to be successful. Slide #10 presents a more detailed breakdown in terms of EBITDA, LIFO-based EBITDA by segments, starting with Refining segment, generating a minus PLN 145 million for LIFO-based EBITDA. However, you can see on the bottom part of the slide, the main reason for that situation was the negative macro effect at nearly PLN 930 million, obviously, due to lower margins, mainly on middle and light distillates, lower Brent and Ural differentials for crude oil, as I've mentioned before. We obviously reported lower sales for the Refining segment, going down by 12%, obviously, due to lower sales of fuels and, obviously, aviation fuel and LNG as well and other types of fuels. Slide #11 will be discussed by my colleague, Zbigniew Leszczynski. I will -- at the end, I will also present certain more -- some more details on our financing structure. But now I'll give the floor over to Mr. Zbigniew Leszczynski.

Hello, ladies and gentlemen, and a very warm welcome to all of you. My colleague has discussed our solid financial results. I'd like to discuss it in more detail in terms of our record-breaking performance that PKN ORLEN delivered for the fourth quarter alone and also for 2020 in general, but before we get to that, I'd like to point out, again, that our solid performance was appreciated by the Warsaw Stock Exchange in terms of our stock price. And this shows that our investors do appreciate and recognize our solid financial performance, but not only that because our financial performance would not be possible without a very courageous and at the same time, very good and effective decision of Mr. Daniel Obajtek and the management board, in general, to step on the growth of our Energy and Petrochemicals business and also the Retail business. And as you will see shortly, Retail and Energy are still the pearl in our crown and our flagship muscles, and the same applies to the Petrochemicals segment. Therefore, we still insist on developing those particular areas of our business. Obviously, the Polish economy, both the Polish economy and also PKN ORLEN fared better, way better, versus the economies of other European countries because -- which is due to its strength in general, and therefore, this translates into our solid performance at PKN ORLEN. Let me start with the Refining business in terms of discussion of our financial figures, considering a very difficult and challenging macro conditions and -- which was offset by our solid operational performance. The Refining business generated a loss, but this was due to the fact that the crude throughput was lower year-on-year by 1 million tonnes versus 2019 due to lower utilization of crude across all our refineries, which was mainly driven by the market situation and the impact of COVID-19. The utilization of our production capacities at Plock was mainly down due to lower -- due to the fact that our production units were not used, and the utilization was lower and also the same applies to Unipetrol, going down by 80 percentage points. And this was also due to lower demand for middle distillates and the maintenance shutdowns of CDU Visbreaking, FCC and PE3. In ORLEN Lietuva, the crude throughput was lower by 0.4 million tonnes year-on-year and to a challenging macro situation. Moving on to the analysis by country, which is presented on Slide #11, and in Poland, we had a lower production in terms of the throughput of crude oil, and sales went down in Poland by 2% for gasoline and also in terms of benzene as well -- gasoline as well. And the aviation fuel as well went down in terms of sales. And the same for LPG going down by 13% year-on-year. Bitumen sales were also down 6% year-on-year. At ORLEN Lietuva, our volumes went down by 15% year-on-year due to lower sales of gasoline by 18%, jet aviation fuel by 64%, diesel oil by 10% and bitumen by 33%. In the Czech Republic, we had a drop in sales year-on-year due to lower sales of LPG by 25% -- 22%; diesel oil by 16%, gasoline by 20% and also jet aviation fuel due to the very difficult situation in the aviation segment by -- going down by 90%. Moving on to the next segment, the Petrochemicals segment, which is a very strong muscle for us, which delivers very solid results. And this is the segment that we are developing very consistently and will continue to develop it in the future in accordance with our strategy, which we have discussed and presented and published. The result of LIFO-based EBITDA was at PLN 508 million in the fourth quarter, which was going up -- which went up year-on-year, with the greatest effect of positive macro and also higher sales volumes. The macro impact -- positive macro impact was due to increase in margins on polypropylene and polyolefins as well the weakening of PLN against the euro, as we have mentioned before, which was partially limited by lower portions -- lower margins on the polyethylene. In the fourth quarter, we saw volumes increased in terms of sales in Petrochemicals by 17% year-on-year, of which polyolefins went up by 47%, which was a very substantial result, and fertilizers went up by 12%, PVC went up by 115% and PTA staying at 15%, at comparable level year-on-year. Anwil generated great result at PLN 85 million for LIFO-based EBITDA, and our PTA sales stood at PLN 99 million. The next slide presents other data -- operational data for the Petrochemicals segment. In the fourth quarter, we saw utilization ratio for PVC and PTA in Wloclawek went up and higher production of olefins at Plock going up by 6 percentage points year-on-year and by 15 percentage points year-on-year. This translated into higher sales in Poland. We sold 13% more of the products, especially in terms of polyethylene, PVC and fertilizers in Poland, going up also in the Czech Republic by 22%, mainly on the back of higher sales of what we are doing and also polypropylene and PVC. In Lithuania, we increased our Petrochemicals sales by 20%, mainly due to higher sales to external parties of polypropylene. The next slide discusses another segment of our business, which is Energy. Its results confirm beyond any doubt that our earlier decisions, very courageous and bold decisions to invest into the Energy muscle and the Petrochemicals segment as well were really good, were very right because the solid performance we see in the Energy segment proves that the decisions, Mr. Daniel Obajtek and the management board have taken were right. And our shareholders can be confident in us and in the strategy that we had adopted because those results are a proof that our decisions were the best decisions that we could have taken. As I said, Energy, the Energy segment generated more than PLN 1.1 billion in LIFO-based EBITDA, going up year-on-year, mainly due to the consolidation of the ENERGA Group and also a correlation of electricity prices with gas prices. We also reported higher volumes, sales volumes, for electricity across the ORLEN group despite the pandemics, the COVID-19 pandemics. Others -- item Others presented on Slide #14 include the results of consolidation of the ENERGA Group, which are discussed in more detail on Slide #37, and accompanying slides. Moving on to operational data for the Energy segment, Slide #15 is, as I said, a proof that our strategy to focus on 0 and low-emission sources was a right one. We produced by 10% more year-on-year of electricity due to good macro for CCGT units and hydropower and also wind power units. Our production was at 3.3 terawatt hours, mainly coming from our renewable energy sources and gas-fired units, with our distribution -- electric distribution figures solid as well. Installed capacity is at 3.2 gigawatts of electricity, of which -- most of it installed at ORLEN Group and rest of it at ENERGA. Our CO2 emissions stood at 1.9 million tonnes. This does not include ENERGA. The next slide moves on to our additional -- our next segment, which is Retail. And quarter-after-quarter, this segment, our Retail segment, delivers record-breaking results, and quarter 4 2020 was not exception -- not an exception. Our Retail segment is obviously our flagship business. And we are already accustomed to the fact that it generates more and more solid results quarter after quarter. This is a -- this sends a strong signal in which the focus on the expansion of our Retail business should be continued, and this is what we are planning to continue in the years to come in order to deliver a strategy. The Retail business delivered PLN 827 million year-on-year, going up by 41%. We reported higher fuel margins, especially in Poland and in Germany with a comparable level reported year-on-year for the Czech Republic and Lithuania. The volume, sales volumes went down by 14%, of which gasoline by 13% diesel by 14% and LPG by 21%, due to lower mobility of Poles and other societies in our home markets. The fuel margins -- nonfuel margins in Poland went up, especially due to the sales of hot snacks and the beverages in Poland and also in the Czech Republic, with comparable levels of margins in Lithuania and also higher margins in the German market. We are also developing our alternative fuel chain. We now have 212 alternative fuel points going up year-on-year by 104 [Audio Gap] with Polish producers, 85% of the products we sell at PKN ORLEN service stations were produced in Poland, which is very good news for the Polish economy and for the Polish producers. The next slide presents our operational data for Retail. At the end of fourth quarter, our Retail network had 200 -- more than 200 -- or 2,290 locations, including convenience stores, going up year-on-year across all our home markets, except for Germany. As we had announced before, we have managed to double the number of our service stations in Slovakia, with 13 modern or state-of-the-art fuel service stations and the rest of the number assumed before will be brought on stream soon. Due to lower demand on the back of COVID-19, our Retail segment reported higher -- lower sales volumes across all our home markets. Our market share increased in the Czech Republic and in Slovakia, staying at comparable levels in Germany and reporting a slight decrease in Poland and in Lithuania. We need to point out that our nonfuel offering is developing very solidly. We have opened more service points, and we have now 2,290 nonfuel locations, including 662 convenience stores. We also attach great weight to development of alternative fuel points. We have no recharging stations brought on stream -- with more to put on the stream shortly, including EV chargers, of which most of them were in Poland, but also in the Czech Republic and in Germany, going up year-on-year. We also have 2 hydrogen stations in Germany and 43 CNG stations in the Czech Republic. In total, we have 212 alternative fuel points across all our markets. Moving on to the next segment, namely the Upstream segment. In the fourth quarter 2020, we generated PLN 50 million in LIFO-based EBITDA in the Upstream segment going up by 52% year-on-year, mainly due to the impact of our hedging transactions, and also, this was offset by the decrease in crude oil and NGL prices and high gas prices. We also reported negative effect of lower sales volumes, going down by 12% year-on-year. And the average production went down by 2.5 thousand barrel of oil equivalent per day, of which in Poland, down by 0.2 thousand barrel of oil equivalent per day and in Canada by 2.3 thousand barrel of oil equivalent per day. The next slide presents operational data for the Upstream segment. We have lower average production of minus 2.5 thousand barrel of oil equivalent per day, and our average spending on investments was delivered in 1/3 in Poland and for the remaining part, it was delivered in Canada. In terms of operational efforts in quarter 4, we -- in Poland, we continued our work on the development of the Miocen, Edge and Plotki fields and gas deposits. We launched the production at Bystrowice at the end of the year, and this is worth pointing out because it was the first ever ORLEN Upstream individually operated and independent units. We are continuing our work to develop the Chwalecin deposit, the Plotki project. In Canada, quarter 4 saw further development of our productive assets. We started drilling in 3 wells in the Ferrier area and 1 well in the Kakwa area. We also consolidated our productive assets in the Ferrier and Strachan areas in order to lower our operational costs based on the production using our own infrastructure. We are also continuing our efforts to reduce the greenhouse gases emissions and also to meet our all environmental requirements introduced by both the federal and provincial governments of Canada, for instance, limiting of flaring or counteracting methane emissions. The next slide, #20, goes back to our financial data. Therefore, I'll give the floor over to my colleague, Mr. Jan Szewczak. Thank you very much for your attention.

Thank you, and we will continue discussing our financial figures and starting with cash flows and cash flow from operations. In the fourth quarter, our cash flow from operations stood at PLN 1.6 billion, with higher capital -- working capital, going up by PLN 900 million. In terms of cash flow from investments, we spent more than PLN 2.4 billion on investments, and the remaining spending included mainly the acquisition of ENERGA shares and also cash flows on loans and the rights of use and also a change in the balance of our investment liabilities. In the bottom part of the slide, you can see our free cash flows and cash flow management throughout the 12 months of the year 2020. We have generated, as I have mentioned before several times already, $12.1 billion LIFO-based EBITDA, PLN 12.1 billion, obviously. Our LIFO effect stood at minus PLN 2.4 million (sic) [ minus PLN 2.4 billion ] . Our working capital went down by PLN 2.2 billion, and our CapEx, as we have mentioned before, going at -- standing at PLN 9 billion. As I have mentioned, we paid out dividends to our shareholders at PLN 400 million. In terms of our profit on a bargain purchase of ENERGA, of ENERGA shares, it is reflected by the figure of PLN 4.1 billion . This was spent on the acquisition of 91% of the shares in ENERGA. And the purchase of ENERGA shares represented PLN 3.1 million. In terms of our net debt in ENERGA Group as of the acquisition date, it stood at PLN 6.2 billion. Others, the item Others presented on the slide at PLN 0.2 billion includes taxes paid. We are a solid and reliable taxpayer. And you can count on us in terms of our tax-paying performance. In terms of the net debt increase, it increased by PLN 10.7 billion year-on-year. And despite the fact that our net debt increased, I can still assure you that both in terms of our performance due to -- on the back of the acquisition of ENERGA and other efforts, our financial indicators remain solid. Our net debt is at PLN 13.1 billion, going up by PLN 1.1 billion year-on-year, versus the fourth quarter of 2019. However, you must remember that the situation across all the markets is -- must be taken into account. We need to remember about the leases as well and also positive impact of our operational cash flows. And across all our markets, you can see there's a lot of cheap money and there's a lot of interest from financial -- large financial institutions, foreign institutions, they are interested in cooperating with us in terms of our financial strength. And we see a lot of favorable offers, and we are also considering to diversify our financing sources. We want to expand, solidly expand our project finance position, focusing on concrete projects, specific projects. And we see a lot of interest, especially from banks, Asian banks, Japanese banks as well. I've already discussed the issue of 5-year bonds. These will be bonds depending on our ESG ratings, and they will be related to the ESG rating, with a total nominal value of PLN 1 billion. On Slide #23, you can see our CapEx figures at PLN 9 billion, including on ENERGA Group at PLN 1.3 billion. What could be of greatest interest to you is the fact that we want to break down those investments into Refining, 36%; 20% (sic) [ 26% ] Petrochemicals; and Energy; we spent 15% of our CapEx figure on Retail and [Audio Gap] CapEx projects, including Visbreaking unit in Plock and polypropylene glycol at ORLEN Poludnie and also fertilizers production in Anwil Petrochemical development program. In terms of Energy, we started the offshore wind farm project on the Baltic Sea. This project attracts great attention. In terms of Retail, this has already been discussed by Mr. Zbigniew Leszczynski in detail. We are happy to say that we opened 109 Stop Cafe and also this includes convenience stores. And we are developing our business in this particular area, very dynamically. Slide #25 presents the macro effect and downstream margins. I will now give the floor over to my colleague to discuss that.

Before I move on to the macro environment, and the analytical data, I'd like to mention at this point that in addition to the fact that we reported higher -- reported record high CapEx figures in 2020, 2021 will be even more ambitious in terms of CapEx spending as Mr. Daniel Obajtek has already announced. We want to invest PLN 9.5 billion on our CapEx investments, and these are the investments that will deliver strong financial performance and will enable us to pay out dividends. So we will continue those efforts. We'll continue our CapEx projects, in the coming years. I'd like to point out, however, that compared to the previous years, for instance, 2015 and earlier years, our investments are more than double compared to those financial years. Therefore, this is the reason why we report such solid financial performance. Moving on to the macro environment figures. I'd like to share our observations and findings with you in terms of the macro environment in the first quarter of 2021. In this period, the beginning of the year, in the first quarter, model Downstream margin went up by USD 5.1 per barrel quarter-on-quarter to USD 5.9 per barrel due to higher differential Brent/Ural differential and also higher Petrochemical margin. The prices of crude oil in that period went up by $5 per barrel quarter-on-quarter, standing at an average $55, $57 per barrel, mainly due to the launch of the vaccination program, COVID-19 vaccination program around the world, but also the decision of OPEC to extend the period of production for crude oil to February and March 2021 to 7.2 billion barrels per day [Audio Gap] as well as lower production of crude oil in the U.S.A. This was also impacted by the enthusiasm of our investors and the stimulation package in the U.S. economy, which was introduced in the U.S.A. and also the information that the supply of crude from Iraq is going down, mainly due to the exceeding of OPEC limit in 2020. And the number of active units -- drilling units in the U.S.A. went down to 220 -- 219. And the demand went down to 2.5 billion by the international energy agency. So all these factors, in our opinion, had an impact on the way that the crude price level behaves. Our diesel crack margin went up quarter-on-quarter, standing at an average of $34 per tonne, mainly due to expected lower imports to Europe from the U.S.A., Asia and Middle East of these products. Our gasoline crack margins went up by 19% quarter-on-quarter on average, standing on average at $85 per tonne, mainly due to the reduction of exports, U.S.A. and Africa and also lower inventories in Arab ports. The crack margin for heavy fuel oil went down, going down to $106 per tonne, mainly due to lower demand for certain products from the U.S. and also higher inventories in Arab ports, mainly due to higher inflows of products and supply of products from Russia. And the differential went -- Brent/Ural differential went up, standing on average at $1.6 per barrel, mainly on the back of higher planned supply of Ural crude imports for January -- for the month of January and lower demand in European markets. And the Petrochemical margin went up by EUR 34 per tonne going -- standing at EUR 89 per tonne currently, mainly due to higher price of polymers. These are very optimistic signals, very good signals for us. So we are optimistic in terms of the future. We count on -- we bet on solid financial results in 2020 based on these signals. As we have mentioned before, and we have communicated before, at the conference by Mr. Daniel Obajtek, in 2021, we will not lose momentum. We also raised the bar for us, and our CapEx spending will reach 5 -- PLN 9.5 billion, including both in ORLEN and in ENERGA. The highest, record highest spending at ORLEN will be devoted to -- will be directed to our Refining business and also on the Petrochemical business and the Energy business. We'll spend PLN 1 billion on Retail and PLN 0.3 billion, production Upstream segment. Our main projects for 2021 will include the continuation of the Visbreaking, Plock and the glycol production, propylene glycol production [indiscernible]. In Petrochemicals, we will develop our production capacities at Anwil, but we'll also have the extension of the olefin production in Plock. And the DCPD unit in Unipetrol. This is the construction of the [ remaining ] units and also for rectification columns. The DCPD unit is an input for the production of specialized plastics, such as resins, gums and copolymers, which are used for the dying segment and automotive segment and also shipbuilding segment. In Energy, we will keep on -- or keep up with the construction of our offshore farm -- wind farm in the Baltic Sea. We'll have modernization of our existing assets and the connection of new customers in ENERGA Group and also the development of our EV chargers network, including 70 new stations. In Retail, we plan to open 50 new stations and -- including 30 owned stations, and we'll continue to develop our nonfuel sales with 140 new Stop Cafes and Star Cafe locations and also want to introduce new products and services. We will discuss this in more detail in upcoming conferences. The last slide of our presentation presents our market outlook in terms of the macro until the end of 2021. For Brent crude oil, we expect an increase in crude oil prices in comparison to 2020, mainly due to the forecast strong effect of demand growth on fuels in the second half of 2021, which is related to the COVID-19 vaccination program. As at the beginning of the year, the Saudi Arabia reduced production of crude oil by $1 million -- by 1 million barrels per day, which limited significantly crude oil surplus on the market. Those factors translated into an increase of price expectations. And we expect that crude oil price in the first quarter of '21 will reach USD 55 per barrel to reach a level of USD 60 per barrel at the end of the year. In terms of the Refining margins -- margins in general. In terms of the Refining margin, we expect an increase of the Refining margins, correlated to an increase on the crude margins. We expect it to increase in comparison with 2020. However, this increase will be slow until the global production potential is reduced by around 3.7 million of barrels per day, including by about 1.7 million barrels per day in Europe, which may take several quarters. In terms of Petrochemical margins, they are expected to remain at around EUR 100 per tonne and the Petrochemicals segment depends largely on the business activity and economic activity, which -- both in Europe and around the world. However, in Europe, which is an importer of a lot of base petrochemicals, we saw new opportunities for local sales and local production due to a breakdown and a slump in imports. This all should have a great impact on our Petrochemicals figures in 2021. In terms of demand, we expect higher demand for fuel due to an economic revival related to the situation in COVID-19 pandemics. In terms of regulation, the National Index Target for 2021 is set at 8.7%, and PKN ORLEN will be able to take advantage and opportunity to reduce that ratio to 5.7%. This is what I would like to -- this is what I was going to tell you about our market outlook and our expectations in terms of macro. And thank you very much for your attention, and Mr. Jan Szewczak will add a few words to finalize the meeting.

We do not want to end this meeting with purely financial figures. I'd like to recall a very famous saying quote from our famous Polish comedy that our word is more worth than any money. And I'd like to point out and promise you that we will be doing our best to deliver strong results. And we have, because our EBITDA LIFO-based EBITDA at PLN 12.1 billion and our net profit are PLN 3.4 billion is a strong and solid figure. This is something we can take pride and not only in Poland, but also in Europe. And in the face of this very challenging situation in petrochemicals, which is faced by a lot of huge companies in Europe and around the world, this figure -- this performance of PKN ORLEN can be a reason to be proud and is the reason to be proud, both for us and for our shareholders and also our consumers, who believe in the company, a Polish company that ORLEN is. Thank you very much for your attention. We'll now move on to a Q&A session.

And we received a number of questions by e-mail concerning a number of our business areas. There is a question on one of those areas. We have a winner in terms of the number of questions, but we will get to that. Starting with [indiscernible] When will you file an application to the European Commission on the acquisition of PGNiG? It were supposed to do that at the turn of January and February. So when can you expect -- when can we expect that? And when can we expect the decision of the European Commission on the clearance?

Well, we proceed as planned, and we want to meet the promises. So we want to file an application to the commission, European Commission by the end of March. And we do believe that the European Commission will consider that application or actually forward the application to the Polish consumer competition protection office. And this will offer a less complicated and faster track to proceed that clearance decision. The same applies to the acquisition of the LOTOS Group. So I believe that this transaction is feasible to be completed by the end of 2021 and at the turn of 2021-'22.

Thank you very much. The next question from [indiscernible]. How many fuel service stations do you want to acquire in Slovakia in 2021? Is it possible to enter another Retail market in 2021 to expand your market footprint?

Thank you for that question. Yes. As we have communicated before, Retail segment is our flagship project and flagship segment. It delivers record-breaking results quarter after quarter. So as we had announced before, in our strategy until 2023, we have a lot of appetite to expand our service station network. We want to have 3,500 service stations in our network. We want to develop our network, especially abroad in foreign markets, and we plan to have an increase in foreign markets at around 45% compared to 37% as of now. Of course, Slovakia is a very attractive market for us, and it delivers strong growth every quarter. And we have solid results confirming quarter after quarter that this is a good direction in terms of our fuel offering and nonfuel offering, obviously, as well. I'd like to expand my gratitude to all our clients to -- for them to choose a Polish station, a Polish service station network. 85% of our products that we sell on our fuel -- on our service stations is produced by Polish producers. This is the so-called economic patriotism that we follow, that we have adopted. And we do believe that this is a great signal for us because it shows that our products -- Polish products are sought after by our customers. So thank you very much for that. Coming back to your question, we want to expand our footprint in Slovakia, but we're also considering both organic and nonorganic growth. We are obviously considering certain M&A projects. It will all depend on the situation in the market. In Slovakia, we have 20-something -- 20-plus service stations, and 13 are already brought on stream and will be brought on stream in this year.

A number of -- serveral -- a number of additional questions, some of them repeat themselves. So let's start with the question about the Petrochemical segment. And the question is: What is the progress in terms of the petrochemical development project? When can we expect the selection of general contractors by -- for investments in the Petrochemical segment? [indiscernible] also asks: What is the progress of work in terms of the olefins, aromatics and phenol production units development?

Thank you for that question as well. As we have announced, I can only confirm my earlier announcements during earlier meetings. The petrochemicals development project is progressing as planned. This is historically, the largest investments in PKN ORLEN, therefore, it requires a lot of time, a lot of preparations, a lot of decision-making, but also intensive work with our business partners. All these efforts are taking -- are taken as planned and progressing as planned. In terms of the chemical -- petrochemical development program related to the expansion of our production capacities in olefins, for instance, we are planning to select a general contractor in the second part of the year -- second quarter of the year. But we'll also select a general contractor for the olefins production units in 2021 as well. Therefore, we are planning our investment plan -- we are delivering our investment plans as planned and also very dynamically with a great momentum and as of now, we are very happy with our cooperation with the business partners, and we are counting on that cooperation to be proceeding smoothly at the construction, at the very stage of actual construction. We are developing our production -- or expanding our production capacity, and we are betting on it in the strategy because we see that the Petrochemicals segment is a segment that has a very, very positive outlook and it has a very promising future. And we are almost finalizing the construction of our R&D center, with which we will work on the new licenses, on the patents, on the extension of our value chain so as to be able to specialize on high-margin projects. This is what the R&D center, state-of-art R&D center is for. And it is to be brought on stream shortly, and this will ensure that our products meet the expectations of the customers, and our products will be state-of-the-art, very modern, but also high-margin products. And quarter-after-quarter, we will see an improvement in the figures reported by the Petrochemicals segment and the contribution to the overall performance of PKN ORLEN.

[indiscernible] representing Biznes Alert asks whether the partnership with the Canadians in terms of offshore projects could lead to new contracts relating to Canadian assets at ORLEN?

We are very happy with our selection of Northland Power as our business partner for the offshore wind project. But it is obviously limited to an offshore wind power project. This company is not involved in any upstream production -- onshore production in Canada. But we are very happy to have such a swift decision, such a quick decision in terms of the selection of our partner for fluid power projects. Thanks to the legislative process, fast legislative process based on Polish regulations. Because formerly, we had certain regulatory legal limitations and restrictions for the investors. This we can put beyond us due to the amendments of the Polish law. And this will be one of the largest investment projects on the Baltic Sea ever, a huge investment, no doubt about that. And we do believe that it will contribute greatly to the reduction of emissions and also will improve the recognition that Polish power -- utility groups have as green players, green energy producers.

There are a number of questions, a lot of questions concerning the future of RUCH. [indiscernible] representing [indiscernible] Virtual Media asks when will you launch the RUCH concept? And also [indiscernible] asks about the acquisition of RUCH. And what is the timetable for the integration schedule for the integration of this new acquired company. When this process will be completed? And what are the growth plans for RUCH?