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

Ladies and gentlemen, welcome to the conference call of PKN ORLEN. At our customer's request, this conference call will be recorded. [Operator Instructions] I will now hand over to your host, Mr. [indiscernible] Sir, please go ahead.

Thank you, operator. Good afternoon, ladies and gentlemen. Thank you for your attendance, and welcome to the PKN ORLEN conference call regarding agreement on cooperation between PKN ORLEN S.A., LOTOS S.A. Group, PGNiG S.A. and the State Treasury concerning taking control over LOTOS Group and PGNiG S.A. by PKN ORLEN S.A. For those that may have missed the morning report, I will briefly go through its main topics, and then we will proceed with Q&A session, during which several directors from PKN ORLEN will be ready to answer your questions. So let's go to the brief. According to the above-mentioned agreement, the approved scenario of taking control over LOTOS Group and PGNiG by PKN ORLEN is a merger between those companies by acquisition, pursuant to Article 492.1.1 of the Code of Commercial Companies in such a way that all the assets of LOTOS Group and PGNiG will be transferred to PKN ORLEN for shares, which will be granted by PKN ORLEN to LOTOS Group and PGNiG shareholders within 1 or 2 separate processes of a merger. As a result, shareholders of LOTOS Group and PGNiG in exchange for the shares held in the share capitals of LOTOS Group and PGNIG will acquire new shares in increased PKN ORLEN share capital and as of the day of the merger or the mergers, respectively, will become PKN ORLEN shareholders. PKN ORLEN, subject to the exceptions resulting from law, will take over rights and liabilities of LOTOS Group and PGNiG, respectively, through the universal succession. And PKN ORLEN will have the leading role at carrying out the merger and the acquiring company, and those processes will be conducted in close cooperation of the parties on the principles set out in the agreement. So this is a brief summary of today's morning report. Now we'll proceed with a Q&A session. So we are waiting and open for your questions.

[Operator Instructions] The first question will come from Henri Patricot from UBS.

Yes. I was just wondering in terms of the time line, in particular, I mean in terms of the acquisitions of LOTOS and PGNiG, when can we expect you to get more details on that?

Okay. So Robert Sleszynski speaking. Our goal is to have it finalized still this year by the end of the year and that anticipates that we will get the consent from both European Commission with regards to LOTOS and Polish antitrust authority with regards to PGNiG. And at the end, to comply with the Polish commercial code, we will need the acceptance of the general assembly of all 3 companies. And our goal is to have that consent in fourth quarter still this year. And then there is a registration process in Polish code, which may take from 1 to 3 months. But our goal is, as I said, to have all the agreements put in place still this year by the end of the year, actually. So this is the logic behind, and there are a couple of streams which are much more detailed like the discussion with the European -- like the European Commission and the acceptance provided by them for the suitable buyer of the remedy proposal -- remedy packages. And with regards to the PGNiG, we have submitted the application form to antitrust authority and we do expect that, that kind of an approval is feasible within 6 months starting from today. So that would result actually that at the end of the year, we are able to take over both companies. But as I said, there are 2 conditions precedents, which are extremely important, the acceptance of the European Commission and antitrust authority at the Polish level.

Okay. Got it. If I understood you correctly, we will only know how many shares you intend to issue to acquire these companies in the fourth quarter of this year?

Yes. So the scope of the takeover results in the fact that we will issue -- let me calculate the number of shares to be issued. Nonetheless, of course, it will be the result of the valuation process. So we will issue as much as it is required to provide the shares to the shareholders of PGNiG and Grupa LOTOS to takeover 100% of that company. So that's the logic behind. But in terms of the number of shares, it is...

Accordingly to current capitalization of companies is something like 650 million of shares.

To be issued within the capital raise of PKN ORLEN.

Next question from Jonathan from Lamb Wood & Company (sic) [ Jonathan Lamb from Wood & Company ].

It's Jonathan from Wood & Company. I was wondering if you could tell us how the process of the shareholders of PKN giving their ascent to this deal works as presumably you have to have a general meeting and you need to get a certain vote from the shareholders. How much would that be? And what timing would you expect for that to happen?

Of course, the threshold that is expected is regulated by Polish commercial code and abode by statutory documents. With regards to PKN ORLEN and PGNiG, it's 2/3. With regards to LOTOS, it's 4/5, so it's 80%. 63% PKN ORLEN and PGNiG, and 80% LOTOS. And yes, we will need to get a consent from general assembly, as you have just said. And our expectation is that, that general assembly will take place in fourth quarter this year.

Next question from Lukasz Prokopiuk from DM BOS.

Yes. It's a long question. I mean, could you please help me understand the business case of LOTOS. Because based on the requirements of the European Commission, you have to swap more or less 40% of LOTOS assets and probably obtain minority assets elsewhere. And -- well, given your long track record of having problems with assets where you don't have 100% control, like, for instance, Unipetrol, like BOP, Lithuania -- ORLEN Lietuva, where you always wanted to have 100% and you eventually got the 100%. The question is, why do you think it's worth to buy LOTOS and give the rights to -- I mean, get minority assets elsewhere and share your shareholdings in LOTOS? Why do you think it's worth it, given your track record?

Okay. So there are 2 perspectives on that. So first of all, just to clarify, the European Commission decision does not require from us to swap the assets. So the commission stated that we need to sell 30% of the shareholding in LOTOS refineries. So that's first. Secondly, as I said, we don't need to swap that asset for the other assets in the refinery. We just say that our preferable scenario is that as a whole we would like to have the opportunity to swap the assets for the divested packages. But at the end, this is the business perspective. And you are fully right that at the end we will need to compare the NPV coming from the assets which are subject of the divestments with the assets to be acquired. And actually, that needs to reflect the business case going forward. So we don't need in our -- per definition, to have an asset swap -- each specific assets like the refinery for the refinery. From the business perspective, we as a team recommend to the Management Board the business case. So we would compare the NPV coming from the assets divested and the assets acquired. With regards to the operational model which you referred to, I would ask Robert Czekaj, who used to be head of our supply chain management and he's dealing with the operational model of the refinery just to provide you kind of a clarity of how we would run that refinery and how we would manage that based on the experience in the past.

Yes. Let me put it this way. First of all, we would like to reflect, to some extent, the operational model we implemented within PKN ORLEN assets from various perspective, from refinery streams, for petrochemical streams, chemical streams [indiscernible]. As of today, we manage all these assets in the -- looking at all assets from integrated perspective, which means we focus on identifying, implementing and make benefits from integrated management of value stream, including the purchases of the feedstock, joint operation of plants, which are in our hands. As well as, we implement the model of integrated management of sales. We would like to extend such a model and cover our part of Gdansk refinery and include in this model just to catch up the synergies, just to utilize fully from synergistic perspective all our assets in entire supply and value perspective. As of today, we're working on this case. We identified several synergies in terms of logistic production exchange of semifinished products and other streams. Then we expect to implement an integrated model for operations, but also for optimization of investment and other things like that.

And just to sum up because based -- well, we cannot provide you the details, but what we can say is that based on the negotiations which we have with the partners, we may say that, that synergies and the fact that ORLEN is the operator of the refinery is not being undermined. And this is extremely important because we utilize our historical experience coming from Unipetrol. Of course, we know that not everything worked very well, but this is the experience which we utilize and take into consideration when negotiating with the potential partners the key rules of operating the refinery. And as of today, we may say that all of the synergies which we included in our synergetic model are not undermined by the fact that the partners will step in into the part of the shareholding structure.

So to sum up, is it possible that the offers you will obtain will not be satisfying? I mean, is it possible that the purchase of LOTOS will not take place because you're not happy with what you negotiated? Is it possible at this point?

The results of the actual negotiations show that the transaction is much more probable than it is not. I would say it like that.

But it's -- I mean, it's possible that it won't take place if there is just some kind of probability, yes?

If we say that 1% is a probability of not taking place of something, we may say like that.

So in other words, you say that the NPV of the asset swaps or of the sale of asset of LOTOS will be positive.

We say that the transaction as a whole package, yes, it will be positive. This is what we can say today. And based on the negotiations which we have had so far, I can say that it is the case.

And can you just shed some light on what kind of assets it is on this case?

No, no, no. Not at this stage.

Like business-wise, is it upstream, downstream, refinery, petrochemicals, anything?

We are mostly considering petrochemicals and midstream, to some extent retail. Of course, there is a discussion about the refinery. But I would say as general, in terms of the priorities, these are petrochemicals, retail and the midstream as a whole.

Next question from Alexander from Renaissance Capital.

Yes. So I do understand that this proposed deal, particularly with Grupa LOTOS is very synergistically beneficial to PKN ORLEN as you just described. My question is more from the point of view of Grupa LOTOS shareholders. So far, this process has been going on since 2018. And I have not heard anything yet as to why the shareholders of Grupa LOTOS should accept this deal. And you said today that in case of Grupa LOTOS, you will require 80% approval at the AGM. So thinking about this deal from the perspective of Grupa LOTOS, so my first question is, why do you think they should accept this deal? The second question is what happens to the shareholders of both companies -- or actually all 3 companies, PGNiG, PKN ORLEN and Grupa LOTOS, what happens to those shareholders who vote against this deal? Will they be offered an opportunity to sell their shares? And if so, at what price? And finally, with respect to the Grupa LOTOS deal in particular, if there are -- assuming that the deal passes, so you get 85% acceptance, what happens to the remaining 15% shareholders? So will you go ahead with the deal and 15% will be minorities? Or will you aim to buy them out? And if so, again, what will be the price that will be offered to them?

Okay. So there are a couple of very important questions, of course, from the perspective of Grupa LOTOS shareholder. In terms of the refinery and the business case for the Grupa LOTOS, the refinery...

Please take into consideration that LOTOS have refineries exposed to the macro influence for this kind of business. And Grupa LOTOS [ possessing ] only the refinery asset is, we believe, and we are convinced that is exposed to the macro influence versus being part of the multi-energetic concern. Then the risk profile is different if you compare the refinery versus PKN, including various value streams within PKN ORLEN and future entity. That we believe that Grupa LOTOS also will be less exposed as a part of bigger company in terms of the macro. Then this is the one issue. The second issue, this macro influence is visible in terms of the current results. Of course, we expect that the macro will be better. But the fundamental risk for the, let's say, stand-alone refinery business will be bigger versus integrated company, with petrochemical streams, with chemical streams, with retail streams, and this is it.

To continue on that, I would say that we cannot exclude the situation in which, for example, the consent from the Polish trust authority on PGNiG will take place sooner than the consent -- the ultimate consent coming from the European Commission. So it is also probable that the first merger which will take place will be between PKN ORLEN and PGNiG. And then the following one probably very soon after, but we cannot exclude that, that will be the second, will be the merger between already merged ORLEN and PGNiG and then Grupa LOTOS. So I would say, to continue on what Robert has just said that the shareholders of Grupa LOTOS will be offered to be part of the multi-energy concern, that's the logic, and actually be part of the synergies chemicals that come from that kind of a merger. And at the end, just to clarify, the formal perspective of the transaction, because this is the merger based on the Polish commercial code, it means that all the shareholders will be offered with ORLEN shares. It means that Grupa LOTOS as a separate entity and the PGNiG as a separate entity from the formal perspective will disappear. They will become as part of the PKN ORLEN Group, but not as a subsidiary, but the headquarters will be merged. So there will be no minorities at the end because all of the shareholders will be offered with PKN ORLEN shares. So that's the logic. So there will be no separate entities. The capital -- the subsidiaries, which are today the subsidiaries of Grupa LOTOS and PGNiG will be the subsidiaries of PKN ORLEN. And the headquarters will be merged. So that's the formal perspective of the merger.

And so those shareholders who vote against the transaction, assuming that more than 80% vote for it, then those who vote against, they just go with it, and there is no opportunity for them to sell shares.

Yes. Yes.

Okay. And so what happens -- can you also clarify, please, what will happen if, for example, some shareholders, whether it's PGNiG or Grupa LOTOS in the first instance do not vote for this transaction? So if they do not like the terms that are being proposed, then what will be the next stage? Will you try to improve the terms or will you not do that?

Of course, all the scenarios are feasible, as you say. Our primary one is that we achieve the thresholds, which will allow us to finalize the merger. But -- and we see that we have a strong business case for that and the strong opportunity to realize that case. So this is our primary scenario. If that does not happen, of course, we will have the scenario be in our minds. Nonetheless, at this stage, I would assume that we have a strong business case to get that kind of approval from the general assemblies.

Your next question from Piotr from Citi.

I have a couple of questions. So firstly, I'd like to understand the synergies you can generate with PGNiG because there are no business overlaps, very small upstream in Poland. But what is the really -- apart from this kind of creating multi-energy conglomerate, what is the logic to buy it? And are you aware of any problems? Because I can name quite a few of PGNiG business model. Are you aware like what exactly they generate? And so let's first discuss about the synergies you can generate with PGNiG.

I will divide that question into 2 separate streams. So it's not always the case that to acquire the business, you need to get straightforward synergies based on the optimization and the cost effectiveness in operating model, that's first. Because you may add some additional streams of the value, which you didn't have so far. That's first. Secondly, of course, there are synergies. For example, in upstream, what the President said today is that we will build one structure, which will be dealing with the upstream processes based on the upstream of PGNiG. So we will put all of them together. And of course, we will get the synergies, for example, in Norway. That's the logic. But additional one is, of course, if you take a look from the perspective of stabilizing the revenues and generating the operational efficiency, we are diversifying the portfolio of that stream, yes. So this is a synergy, and this is the logic behind building the multi-energy concern. So it is not always based on the discussion. For example, there are straightforward overlaps like between LOTOS and PKN ORLEN. Yes, they are. And we see a lot of synergies coming from that. But we see also the rising potential of diversifying the streams of revenues and operational efficiency.

Okay. What do you think about the PGNiG gas procurement portfolio or the major headache ahead of the company in 2023?

Well, [indiscernible] oil and gas.

First, we need to look at the document contract. Now it is not possible for many of us. Then we'll start the discussion, what strategy will be taken after 2022. It's not a stand-alone issue because we need to match that with the infrastructure accessible as of today and future potential new possibilities, new routes nearby Poland or directly to Poland. So that is just in front of us.

Okay. Okay. And then I have -- why do you want to do it with a share swap? You will run very suboptimal capital structure post the deal. Why don't you buy it with cash? Why do you need this balance sheet? I mean, that's the main logic, I mean, to put in these nonoverlapping businesses together. I understand the synergies with LOTOS. That's kind of part of the -- kind of could be another facility of yours. But then creating both more or less the same size companies with very strong balance sheet of PGNiG and then a relatively strong balance sheet of yours, why do you need so much firepower?

Yes. There is a logic behind. So first of all, that's the easiest way of taking over 100% of the companies, which will be acquired. So within that process, we'll have a full control. We will not have a separate -- not integrated groups with minority shareholders because by the fact that the merger will have a full control because the headquarters will be merged. So there is a huge potential of synergies coming out from that kind of -- from our perspective. That's first. Second, yes, we don't want to get rid of cash because we want to stay with that cash for the future investments and acquisitions which we have in mind in the region. That's second. And of course, at the end, the dividend policy. It's much easier to provide the shareholders with a stable dividend with that kind of a balance sheet.

Okay. And what happens to your dividend post the deal? Because it looks like -- I mean, it's just a market opinion that I repeat that potentially the dividend that PKN is just to change the parity ratio between companies to convince PKN shareholders to vote in favor of the deal because that's when AGM were -- there may be a struggle to pass it through. What happens with this dividend beyond then? And what gives the guarantee you may continue to pay the dividends going forward?

When we had announced our strategy for 2030, we said that we would like to pay dividends on a regular basis and [indiscernible] dividend. It was also mentioned many times by CEO and our representatives after that conference call, and the subject comes back and back again. And as we answered before, once we take over PGNiG and LOTOS as well, as we said before, we will have to announce an update in our strategy that actually consist of PGNiG itself as well. Because LOTOS -- as we said before, LOTOS was included in that strategy. PGNiG was not. And after we take over PGNiG, we'll have to update our strategy. And from today's conference call in the morning, CEO said that he would like [indiscernible] that we will pay dividend on a regular basis. So I think that it's too early to decide now because we do not know how it stands -- how this entity look like at the end at the moment because there are no issues for [indiscernible] at the moment. But basically, we would like to stay a dividend-paying company and the dividend is a key feature. So it's been repeated many times and at many places that PKN ORLEN will pay dividends on a regular basis, which is now 8-year straight, and it should be [indiscernible].

Okay. Just to clarify, because that's I think is quite important, and this is the last question, I promise, from me. Because we've seen a number of companies in Polish market which promise there will be dividends, suspending dividends temporarily and then revisiting it. Then when it came to the end, all of a sudden there was like no dividend and we were negatively surprised. Are there any consequences, whether legally or in terms of remuneration of certain managers, there is -- you merge all these companies and PKN cancel the dividends, what would actually happen in reality that minority holders would have any visibility that this dividend is important for management, for the company, for something. I mean, what is the real driver that you really need to pay it? Is there anything that really gives us, apart from kind of your promise, a security behind it?

Well, I guess -- well, at this stage, there is like no decision for paying the dividend. It comes back every year. General meeting -- I mean the Board of managers voted that this year a dividend should be paid at the amount of PLN 3.50 per share. And also as we have today in the morning, the main investor, which is State Treasury, also commented on the dividend policy of PKN ORLEN, which was, as I believe, that he would like to receive a regular dividend payment, the State Treasury. So basically all the investors, including State Treasury, are very interested in the dividend policy of PKN ORLEN. And that you have to like take it for granted that we would like to continue with our [ dividend policy ] at the moment. But as you know, there is like no obligation to pay it every year. We are doing it for 8 years straight. And in our strategy for the next 10 years, we also said that we would like to pay it every year in the future. So you can hold on to that, I guess, because it's hard to give you any, I don't know, [indiscernible] confirmation that we would like to pay dividends on a regular basis.

I understand. I just thought that kind of -- LOTOS said exactly the same comments and eventually investors [indiscernible] investment and never seeing the cash flow being returned to them. And their promises were the same as yours. But I just thought that that's a fair comment from your side. There is no obligation within it. And yes, good luck with the completion of the deal.

Next question from Michal Kozak from Trigon.

Yes. I have a couple of questions. The first one, I would like to confirm this. You would like to issue new shares for the amount of the total capitalization of LOTOS and PGNiG. So you want to issue this to all shareholders and delist these 2 companies, yes?

Right. That happens automatically, actually.

Yes, yes. And so what is the minimum of PKN share in LOTOS and PGNiG that you want to acquire?

That structure implies that ORLEN, once it is approved by general assemblies, will acquire 100% by definition of PGNiG and LOTOS. There is no other scenario. Because once it is accepted by the general assemblies, it says that the merger will come. And the merger says that all the shareholders of PGNiG and Grupa LOTOS will be offered with PKN ORLEN shares. And that's it, yes.

So this is decision of not shareholders, but general meeting.

If you could repeat the question, please?

No, no. Sorry. Okay. Another question. Why you don't want to issuing shares only to State Treasury?

Because the full merger will give us the most rational business perspective of operating that kind of group. Because basically, if we offer the shares only to State Treasury, for example, in Grupa LOTOS, we will get 53%. The rest will stay to the other shareholders. With PGNiG, it's 70 -- almost 73% and the rest to the other shareholders. But we think that the most valuable for all of the shareholders and the most valuable ultimate scenario is that there is no additional capital groups, additional subsidiaries under PKN ORLEN because based on that kind of a scenario where the companies are fully merged, we're able to squeeze out much more synergies from the operational perspective than in any other scenario.

And what next if the general meeting of these 2 companies will not accept your offer?

As I said previously, we are quite sure about the business case. But yes, you are right, all the scenarios are feasible. Of course, we'll have a roadshow with the shareholders and the key investors to try to persuade them to vote for that kind of a scenario. And this is our primary scenario. Of course, if the conditions are not satisfactory for them, we will think it over. Nonetheless, the primary scenario which we have in mind, based on the initial discussions which we already had, is the one which we are proposing that we are anticipating that we will get the approval of the general assemblies of all 3 companies. Of course, in case PGNiG is the easiest because the State Treasury, they already have the appropriate threshold.

And in your opinion, how is it possible that you announce cash tender offer in LOTOS, if this proposal does not...

Yes. Today, I can say that the probability of that kind of a scenario is extremely low as of today.

So do you want to sell part of LOTOS businesses that is in line with European Commission conditions after this transaction, yes? So this potential risk exposure will concern only PKN shareholders, yes, not directly LOTOS shareholders?

Of course, all the divestment processes might take place ultimately only after the fact when PKN ORLEN will take the control over Grupa LOTOS. So ultimately, that will happen once the ORLEN is the owner of Grupa LOTOS.

So this will not be the case of minorities of LOTOS [indiscernible].

Ultimately, it's the case of the merged multi-energy [indiscernible].

Okay. When you want to present share exchange prices for PGNiG and LOTOS?

Yes. That's somewhere between the third and fourth quarter this year.

Yes. Do you -- the last question, do you think that several -- yes, so do you think that several shareholders of LOTOS assets are more preferred in [ refining ] than the only one?

If you could explain yourself -- the question -- you mean is it one partner or more partners?

You are referring to the remedies packages? I mean that you are referring to the partner which will step in into the [ Gdansk ] refinery? Or is it something else?

Yes. Yes.

Yes. There are a couple of potential investors interested. And I would say that as of today, the competition is quite strong. So we just want to utilize that [indiscernible] and actually squeeze as much as possible from that negotiations. But there are a couple of them.

But finally, it can be a couple of companies that will have obtained this asset, not only one, yes?

In the refinery, there should be one partner, and that should be the partner which owns the stake in the refinery and takes over the wholesale chain. With regards to the retail, that can be a separate partner.

Next question from Tamas Pletser from Erste Bank Investments.

Yes, two questions on my side. Just first of all, can you just tell again what are the thresholds on the general assemblies to approve this deal? I mean, what are the thresholds in case of PKN and PGNiG and LOTOS Group? That will be my first question. And second question is regarding this corporate process or the corporate law in Poland. I'm not really aware of it. How does it work? If the shareholders approve this merger, would it be obligatory for all the shareholders to exchange their shares? Or I as a shareholder can still say, sorry, I don't want to take part in this share swap. I want to keep my LOTOS, PGNiG shares? So what is the general procedure over here?

This is [indiscernible]. I'm legal adviser for PKN in this deal. So again, the thresholds are 2/3 in PKN ORLEN shareholders meeting and 2/3 in PGNiG and 4/5 in LOTOS. And answering -- and of course, you have to take into account analyzing the number of votes, not only the abstract number of State Treasury votes, but the actual number at respective meetings. And it's much higher, I mean, especially in case of LOTOS and PGNiG. And with respect to your second question, this is a very precise procedure detailed by law. So in essence -- and I'm sorry for repeating myself, again repeating what we've said earlier, but by the force of the law, with the registration of the merger, the existing companies cease to exist. So both PGNiG and LOTOS cease to exist. Their assets become assets of PKN ORLEN. And existing shareholders of LOTOS and PGNiG become shareholders of PKN ORLEN, acquiring the newly created shares. So -- and this is all -- it's actually a quite simple procedure, very well tested, detailed by the law.

So basically, it means if the 80 -- or 4/5 for the shareholders at LOTOS, if they approve these conditions, then basically these old LOTOS shares will be swapped to PKN shares whatever I want in the shares. But that's what you say, right?

Precisely. Yes.

And one more follow-up. You mentioned also in the past that you believe that with these remedies at LOTOS, you want to have a partner which you want to have a share -- I'm sorry, kind of an asset swap. Is it still the case? Is it still a scenario are you looking for?

Yes. This is one of the scenarios. Yes, we are looking for the asset swap in the region where we are not present or we can improve our presence and to prolong our value chain. So as I said before, we are looking for the assets in the areas of the retail, midstream and petrochemicals as the main priority to improve our value chain in the regions where we can improve that in order not to, I would say, undermine the antitrust thresholds. But yes, yes. In general, yes, because we want to utilize that situation to improve our business positions in some kind of regions and the value chains.

We have a new question from Lukasz Prokopiuk.

Yes. The State Treasury mentioned that it wants to obtain 50 -- near 50% of ORLEN shares after all the share swap, yes? And my question, I mean, should we treat this as an approximation? I mean, like if we take today's prices, today's parities, you would end up like 52%. And the question is, if we happened -- if the assemblies happen in September and if you obtain 52% from the parities, then you're okay with it, yes? It can be 51%, 52%, 53%, depending on the parities.

I would -- yes. First of all, all depends on the parities. But I would say that it will be not more than 50% because of some regulations. For example, from the perspective of the flexibility of the concern in the future, we don't want to be under some regulations which kills that flexibility like special provisions and regulations regarding the purchases or something like that. So I would assume that it's up to 50%. And there is an idea that the State Treasury don't want to exceed the 50%. If they exceed, I think that they may consider the sale of the above -- of something above 50%, like 2% or something like that, yes.

So to sum up, if you obtain 53% because the parities are accepted, that's guaranteed you obtaining the 53%. Then you will sell 3% of the share after the transaction is executed, yes?

Can you please repeat the last sentence because something canceled. Last sentence.

Okay. So if depending on the parities in September, you obtain 53% of shares in ORLEN, then you will -- after the share swaps are executed, you will sell 3%, yes?

Of course, it's up to State Treasury. We are not the State Treasury, but that can be the scenario. That can be the scenario.

Next question from Ekaterina Smyk from Bank of America.

Sorry in advance if something -- if some of these questions have been already asked. I had technical issues dialing in from the beginning. I have several questions. The first one is in terms of timing. So we have September for the general assembly. And then basically no milestones before that, that you need to achieve to get to that point. Then further on, in terms of timing again, when do you -- when will you have to implement the remedies after the merger, remedies for LOTOS, I mean? What would be the timing then by when you have to sell a stake in the refinery and divest some of the retail assets? And another question, on the dividend side. I mean, currently, obviously, State Treasury receives dividends from all 3 entities. When the merger happens, first of all, will sort of PKN ORLEN be consolidating free cash flow across all of the 3 entities at the parent company? And whether sort of the dividend that PKN can be paying to shareholders and to State Treasury, in particular, we can think about it as something comparable to what the State Treasury already receive. Just how to approach potential dividends in the future.

Just to comment on time line and to clarify, we said that we expect that general meetings will take place in the fourth quarter this year, not September. So this is fourth quarter. And before that, of course, the Management Boards of all 3 companies, they need to agree on the merger plan. So that's the logic. And once they agree and they agree on the parity, that will be presented to the public and will be presented to the shareholders. So that's the logic. And of course, there are 2 key conditions precedent to that merger to take place. There are 2 antitrust approvals. I mean, first of all, we would need to get the consent from the Polish antitrust authority, to get the consent to take control over PGNiG and get the ultimate consent from the European Commission for the selected partner to be the suitable buyer of the remedy packages. So that's on the time line. In terms of dividend policy, I will hand over to [indiscernible].

So regarding the dividend policy, this question has already been asked today, but I'll be happy to answer it again. As you may have heard on today's morning briefing, also -- as well our CEO -- so our CEO and the President of -- representative of State Treasury, they both said that they would like to -- from our side, would like to stay a dividend-paying company on a regular basis with a substantial dividend. And on the other side, as for the State Treasury, they said that by increasing their shares in PKN ORLEN, they will receive a higher amount of dividend. So basically, you can expect that we will stay a dividend-paying company. But of course, as we said before, we'll have to update our strategy after this merger and announce some changes preferably in the dividend policy as well. But as we stated many times before, we would like to stay a dividend-paying company. We know that portion of our income have to be shared with our investors and those are -- this is what they expect from us. So you can expect that dividend policy should stay, how to say, very optimal part of our business and the reason why our investors should keep our shares. And as for the nominal amount, it's hard to answer today. Of course, a bigger entity will be able to pay a bigger nominal dividend as well. As for the dividend per share, still enough said that it's not possible to pay the dividend in [ EPS ] metrics as we did before. So we've paid the dividend 8 years straight, and we are going to pay dividend according to our strategy as well. I don't expect that, in this update of the strategy, we will make some significant changes in our dividend policy, which means that we would like to pay a dividend on a regular basis.

Understood. And in terms of determining agreement on the parity, by when can we hear some details on that side? When Management Board will have to take the decision before the general voting.

Somewhere between third and fourth quarter this year. It's hard to say very specific month because the valuation processes would need to take place. And there needs to be an agreement between the Management Boards. But we are aiming at, as I said, somewhere between the third and fourth quarter.

Next question from Monika from Societe Generale.

I have one question on -- you mentioned that you would still continue with acquisitions despite the LOTOS and PGNiG being planned and continued. So would that refer to the OMV filling stations that we've had the news, yes?

In terms of refilling stations, what I can say is that we are monitoring every possible acquisition in scope of our core business. And actually, the retail is one of them. Nonetheless, as you may be aware, from the formal perspective, it's very difficult to comment whether we are taking part in the specific process or not.

[Technical Difficulty] I had some technical issues and had to hang up. So I was asking a question on impending acquisitions that mentioned. Would that also refer to the OMV filling stations? And what else would you probably have in mind? You mentioned petrochemicals and retail as areas of interest. So could we see anything over there as well?

Yes. So first of all, in terms of the OMV filling stations, what I can say is that we are always analyzing the opportunities in our core businesses. And definitely, retail is one of that areas. Nonetheless, as I have just said, from the formal perspective, it's very difficult to comment whether we are taking part in the specific process or not. In terms of other acquisitions, of course, we are analyzing many of them. Nonetheless, our top priority right now is to have to finalize the mergers which we're talking about. But if you take a look at our past, I mean, recently, we acquired 2 wind farms, we created the JV in the offshore wind. And actually, we are looking at additional perspectives of growth in retail, petrochemicals and renewables, also in the recycling of products. So this is exactly what I can say right now. But as I said, our main priority as of today is to finalize the mergers which we are talking about.

Great. And just as a follow-up, so when you talk about your priorities, we also see that you now get a sizable upstream contribution from the 2 mergers, impending mergers. So what can the future look like for those assets under the PKN umbrella?

Yes. Well, you are right. The -- I would say the division of the upstream business will become quite significant for the new company -- I mean, new entity. Of course, there is a space for [ 2 things ], to analyze the growth and optimization of portfolio. But what I can say as of today is that we will utilize the -- all of the best practices coming out from all of the portfolios which are right now in 3 companies. And actually, the largest one is in PGNiG. And we will utilize the competencies and experience to analyze the possible scenarios with regards to upstream. But as of today, we can say that it will be a kind of significant part of the business going forward based on today's perspective.

Next question is from Oleg Galbur from Raiffeisen Bank International.

Yes. I have actually 2 rather clarification -- I'd like to ask for 2 clarifications. The first one is regarding the thresholds that you require in order to get the shareholders' approval. It was mentioned, and I just want to make sure that I got it right, that this threshold of 66% and 80%, they refer to -- or they are calculated based on the number of votes present at the shareholders meeting, not on the number of total outstanding shares. Is that correct?

Yes. It's correct with respect to every voting. Because always, the threshold is -- the number of votes is with respect to the votes given at the given shareholder meeting. So it's -- I confirm it. It's -- there are no separate requirements. So it's 2/3 in PKN and in PGNiG, and it's 4/5 due to the separate statutory regulation in LOTOS.

Understood. And the second clarification, you mentioned that a number of assets that could be part of the asset swap, like petchem, retail and midstream. If I got it right, these were the assets in which PKN would be interested to acquire stakes or participations in exchange for assets from LOTOS, which are part of the remedies package. Please confirm that. And also, could you please detail what exactly do you mean by midstream assets?

Yes. First answer is yes. Midstream, we mean mainly logistics.

There is no more question for the moment. [Operator Instructions] There is no more question, back to you for the conclusion.

Thank you, operator. If there are no more questions, I would like to thank you all for participating in today's conference call. If you have any follow-up questions, feel free to contact our IR team. So thank you, and goodbye.

Thank you. This concludes the conference call. Thank you all for your participation. You may now disconnect.