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

Executive Director for M&A stock and IR department as well as by Karol Wolff, Head of Strategy. After the presentation, as usual, there will be a Q&A session. So with no further delay, I give floor to Robert Sleszynski. Robert, floor is yours.

Thank you very much, Konrad. Good afternoon, everyone. A lot has already been said about this transaction yet still like a lot ahead of us. Nevertheless, today, we are facing a very significant milestone with regards to the merger between PKN ORLEN and Grupa LOTOS. Today, the management teams of both PKN ORLEN and Grupa LOTOS agreed and executed the merger plan, which has already been published in a public domain. In terms of the merger plan, the management teams already actually agreed on a share swap parity, which is the crucial part of the document. The agreed share swap parity is at the level of 1. 075. What actually means that the shareholder -- actually, next slide, apologies because I forgot. Can you move to the next slide? Next slide. Yes, yes. apologies because it's [indiscernible] everyone could see it. So referring to the share swap parity again. What the management team agreed is 1.075. What actually means that every 1 share of LOTOS, the shareholder will get 1.075 sales of PKN ORLEN. I think that the management team believes that, that constitutes an attractive opportunity for the shareholders of both companies given the fact that it implies a premium for LOTOS of more than 12% over the years response, more than 26% of 3 months to view up and more than 30% at 6 months view up. That constitutes a significant premium to the current and average trading of LOTOS company. On top of that, the various synergies has been analyzed during the process of last couple of months, and they have already been analyzed [indiscernible] actually because the teams of PKN ORLEN and Grupa LOTOS. And we think that the synergies are significantly above the every single cost of remedies imposed by European Commission on both PKN ORLEN and Grupa LOTOS. On top of that, I would like to underline also that we strongly believe that there is a strong strategic rationale behind the transaction and the exchange stock parity reflects the value of both companies and actually anticipate the performance of both companies going forward. So deep dive into that because as I can imagine, there will be a lot of questions about the parity. I would like to refer a bit more to the methodology applied to the valuation. So the two management looked among others, trading multiples as some of the parts of each areas of businesses of both companies, the broker target prices, and we also referred as I mentioned at the beginning to the current trading and the average trading for the last couple of months, 6 months view up since 3 months on view up. Both management teams were supported by global investor banks when negotiating the parity when discussing the approach towards the performance of the company, the expectations you think of EBITDA generated as of now and the expectations going forward. So actually, the management came to the conclusion that the parity presented to the public domain is providing the fair value and the approach towards both shareholders of our PKN ORLEN and Grupa LOTOS. Maybe just one comment with regards to the conditions precedent. I will elaborate a little bit more on the following slides, but we still expect that antitrust approval from the European Commission. But here, maybe I would refer to one of our advisers, Professor [ Marci ] because he's the head of our legal team supporting us in the process of clearance from European Commission. [ Marci ], if you can comment on that. But maybe the general statement from our side is that we would not expect any difficulties with regards obtaining the antitrust approval. But please give that comment.

Yes. Thank you very much. Can you hear me?

Yes.

Okay. So thank you very much, Robert. Indeed, as you all know because we've discussed it during previous calls, merger between PKN ORLEN and Grupa LOTOS was in the jurisdiction of European Commission, and we had to receive firstly consent for this transaction. But now especially, we had to receive the -- it's called suitable purchaser approval. So approval of both purchaser. So the partners at whom we have concluded divestment remedies, divestment contracts and the terms of contracts. And as we have already conveyed to the commission, all the materials, all the contracts and we are in the position of formally coming to an end of this process. There are no further questions from European Commission. They now a period of 2 to 3 weeks at maximum that we hope, but we have reasons to hope that we'll be closed by June 20. So commission is preparing the decision, and we look forward to acceptance of both purchasers and conditions of contracts. Of course, formal decision will only be issued at that time. But as I say, I mean all the remaining doubts were solved. So this is it. Thank you.

Yes. So coming back to the valuations, maybe a couple of dispensation comments before we move on. As I said, the management teams were supported by the global investment banks. But at the same time, the investment banks were supported by 4 companies, which were conducting the so-called bending due diligence in different areas, the financial area, tax area and the legal area. All of the conclusions coming from vendor due diligence processes when big 4 companies and also, I would say, well-known legal company, international company. They were used during the evaluation processes and they were utilized during the negotiation processes. So that both teams of ORLEN and Grupa LOTOS had a strong support from big international companies. And with regards to the ultimate number, they were supported by many different perspectives as of today, the perspective with regards to the actual market conditions and the expectations going forward. And the underlying data with regards to the many different areas of businesses like petrochemicals, refining business, retail power generation sector and all of the perspectives, which were discussed. Actually, they are reflected at the end in terms of the future performance of the company through the proposed exchange so [ far ]. Next slide, please. What you have -- what you can see is the illustrative shareholding structure pre and post the merger. But what is important here is the combined shareholding, which we are presenting on the right-hand side. So first of all, we expect that the shareholder structure will be as follows: Around 36% of State Treasury and some significant minority shareholders will rise their shares comparing to the actual stake, respectively, in PKN ORLEN and LOTOS. What is important here to underline because -- if you take a look at the structure, you will see that both entities are very similar and the shareholdings are very aligned. So at the end, we believe that the great quality benefits to both shareholder basis actually. And this is the key takeaway coming from this slide. Next slide, please. transaction time line. There's a history on the left-hand side. But as of today, we are having the signing of the merger plan second of June. What are the next steps? As Professor [indiscernible] said, we are expecting the antitrust approval, which should take place within more or less 10 weeks, but we can't see any obstacles in the next week in terms of getting that approval. So it should be in a public domain within not less than week as we have just said. After that, we will convene the general assembly, which should take place at the end of next month. And our expectation is that the general meeting adopting the resolutions of the merger will take place in a further decade of July. That's our goal. And the general meetings will the organized PKN ORLEN and LOTOS Group within more or less the same time slots. Afterwards, we are expecting the registration from the respective parts. We expect that the ultimate registration will take place at the end of August this year. And what is next? Next, the divestment processes going forward. So what we are doing then is we are preparing our assets, which are subject of the remedies to be divested. And we think that it will take like maybe 4 months to finalize all the transactions. At the same time, we will be buying the retail participations from all on the respective markets, actually in Calgary and Slovakia. At the same time, what is not presented here, we will be aiming at announcing the margin plan for margin between PKN ORLEN and PGNiG. And our goal is to have all of the mergers finalized by the end of the year. Next slide, please. On Slide # -- next slide. On this slide, there's a brief summary of strategic rationality behind the transaction. As I said at the beginning, on a general basis, a lot has already been set. But on the next slide, we'll elaborate a bit more given that actual macro environment and how see the merger between ORLEN and LOTOS on the basis of the strategy going forward because this is one of the key important pillars behind the transaction, how to address the long-term strategy of large 2 companies between LOTOS and PKN ORLEN. And I'll give a floor to Karol Wolff who will deep dive a bit more in the strategic rationale.

Thank you. Thank you, Robert for the introduction. Yes, I would like to show you how ORLEN and LOTOS merger as part of strategic response of the group to the challenges, the leverage [indiscernible] in energy markets [ down to us ]. So ORLEN and LOTOS are occupant energy market in [indiscernible]. The markets are driven by metal cans that are changing the approach to hydrocarbons and energy supplies in [ Jamalco ]. The first [ method ] is technology that is keeping more and more advantageous position of renewables. And additionally, we see moving electrification of transport in industry special investor but in some time perspective, it will became important for [ Central Group ] as well. Additionally, we are impacted by changing customer preferences, customers are more and more conscious and looking for sustainable solutions. Finally, environmental concerns are shaping our regulations. And here, the regulations, both on national level and EU level are dramatically changing the environment that we are doing our business. [ 6455 ] active power and EU and in deal in [ Genoa ] are sets of regulations that are decreasing the position of hydrocarbons in the energy market. So we, as a group, need to change. And all the factors that I have mentioned imply the need for change and the transition of the group. And let me -- on the next slide, we can move. Yes. Let me briefly summarize our strategy, our group strategy that we have published actually in 2020 but I think it's still valid, it's still important. And after the brief summary of the strategy, I would like to show you how the merger fits into the strategic pillars. In response to the energy transition, we have [ port ] strategy that is based on 5 business segments or 5 pillars. We wanted to skip away from just refining the chemicals if we wanted to build multi-energy business, that is based both on old business lines like with the chemical -- like refining, for example. But it's developing the new business segment like renewable power. And here, you see 5 pillars of our business. So refining the chemicals, our demigration retail and upstream. And in each of the segment, we want to extend our position in existing business lines, but additionally, enter into new segments entered into new parts of the value chain especially with the important factor of or the important part of the sustainable business. So in refining we need to consolidate the assets, of course, but we want to drive the development of biofuels and alternative fuels. In petrochemicals, we want to focus on expansion of basic and advanced petrochemicals capacities. But as well, we want to develop in the [ refining ]. In power [ dramatization ], we plan to capitate about the renewable power, especially offer power at [indiscernible] but it should be together with development of gas power plants. In detail, of course, sales of fewer detail but also new comprehensive services and formats and up scheme, both upstream should -- upstream, we should keep our sustainable portfolio up. We are going to the next slide, I wanted to show how we apply the strategic portfolio management logic to our multi-business approach. We want to maximize performance of the, as I said, of the old business lines, existing business lines and that should foster our ability to realize strategic development projects in petrochemical and renewable power. So we want to excellence our refining obligations, both of ORLEN and LOTOS in order to have the capacities to develop petrochemical projects and renewable power project. And -- going on the next slide. Next slide shows the picture of our group after merger of PKN and LOTOS and defining, which will be the general champion with significant presence in Europe will be top producers in Europe and champion in front [ creditor]. Our capacity should be over 45 million tonnes per year. In petrochemicals, we will be a strategic supplier for chemical industry, but we will have as well space for further development of petrochemical projects. In low carbon or in power generation, we already will have over 3 gigawatts of installed capacity, which is for the group a significant store of revenue and revenue diversification. But here as well, we will have a base for additional development. In retail, we have the largest retail pure network in Poland combined over [ Pinault ] fuel station. And our upstream activity, our upstream figures will amount to over 240 million [indiscernible] with diversified portfolio of standing from North America to the North Sea. Next slide, please. Here, we show a few operational indicators of the combined group. And as I said in refining, top European refining producer with very complex past refineries in [ port ] to over 7 refineries in Eastern Europe of capacity over 45 million tonnes per annum. In [ 8 years ] the network of over 3,000 stations with over 35% of markets share in Poland and significant position in upstream. However, the position in Upstream should include even better after the PGNiG merger. And now a few words about the remedies. So Robert?

Yes. So the next slide, please. It is just a brief reminder of the remedies imposted for European Commission on the merge companies, just a summary as every one already know it's perfectly because everything is already in public domain. So I think that we can move smoothly to the next slide. And here, referring to what Karol has just said, I also underline a couple of additional things. The even broader strategic perspective and the energy security in terms of Poland, in terms of both companies and in terms of region. As of today, what we are facing within the macro environment and all of the geopolitical activities around us is the safety of supplies and the stability of supplies. Actually, PKN ORLEN have diversified the portfolio of crudes, which are being supplied to the company, but it look couple of years. Actually, ORLEN started to diversify its portfolio of crude in 2015, '16. And it took like 6, 7 years to get to the number which we are having out now. And of course, the war in Ukraine accelerated the process. And as of today, the diversification of crude oils around 70%, [ 30% ], which means that the 50% of crude delivered by PKN ORLEN is coming from Russia and the other part is from the other directions where the significant part of it is coming from Saudi Aramco. If you take a look from the broader perspective, in PKN ORLEN, our strategy in terms of the actual macro environment is as follows: we are looking at the short-term strategy and the mid-term strategy. Short-term and midterm strategy from my perspective is the answer to the question, how do you address -- how to, I would say, to respond to the negative effects of war actually. So what we are doing is we are switching from the standard suppliers like Russia to the other suppliers like Saudi Aramco and other companies from northern part of Europe and for example, United States. And this is exactly to address the economy needs because we are responsible both ORLEN and LOTOS for delivering to Polish economy, stable sources of energy resources, yes, because at the end everything boils down to the effectiveness and the competitiveness of the economy in which we are working. And this is the short-term perspective. From the long-term perspective is to how to address the climate changes and how to align the strategy of the coming tenders. And this is exactly what Karol has just said. And this is exactly what we will do going forward. We haven't set up at the beginning of our presentation, but our goal following the merger is to present to the public demands of the strategy. Our goal is to update the strategy of all merged companies by the end of the year and present the new operational model. How we would run the merged company going forward in a more effective way and an efficient way to respond the midterm, short-term and long-term perspective, which we are discussing right now. And given the strategic rationale and the actual economics surrounding and given the refining business in which we are in the petrochemical business, what is extremely important? the stability of crude oil supplies. There is no stable business with the refining and petrochemicals without a stable partnership. By now, we had a long-term relationship with Russian providers of crude. And actually, all of the investment projects. And all of that business optimization processes that were based on Russian crude oil, on the Russian [indiscernible]. As you are fully aware, the situation changes [ massively ]. So in the mid and short term, we need to switch the other partners and raise the volumes delivered from different directions to Polish companies. Because at the end, if we are to invest in petrochemical business and the finance businesses to some extent, in new technologies, we need to base our supplies on a strong partnership because we need a serious partner where the quality of crude provided to the company on a long-term basis with predictable partnership in terms of providing the expected volumes because one may say that there is a lot of crude around the world. Yes, that's the truth. But please find someone who can guarantee you the significant volumes for the next 5, 10 and 15 years with stable quality with stable logistics. We will not find it. We need to find a partner who has access to his own production and at the end, he sees you as a long-term partner. This is exactly what we are doing in that transaction. And actually, this is a paradox, but the remedies imposed on the companies by European Commission, they provided the possibility to leverage our merger on the partnership with Saudi Aramco. What we have signed so far with Saudi Aramco is, of course, the initial agreement on divesting the shares to the 30% stake in the refinery and part of the wholesale dispersal business. But what we have already signed is the crude oil supply agreement, which is of significant importance for the Polish companies going forward. Because that gives the stability which I'm referring to because at the end, based on the stable supplies with a strong partnership, you can build your strategy in terms of investment in petrochemicals and so on. And on the right-hand side, what you can say on the slide is at the end where our goal is, our goal is petrochemical technology, the advanced technology, renewables and sustainable business, actually. So you cannot do it through the stable partner. Because as I said, for many years, for many decades, our businesses were based on the Russian crude oil. There is no Russian crude oil. Our thinking is that both the European Union and the Polish state will aim at getting rid of Russian hydrocarbonates in the long run. So actually, we would expect that following next year, our going our goal and Polish state goal and the European Union will be to eliminate the access to the Russian crude oil. And this is the short term and the long term, our advanced products, our investments in high tech and in renewables. And all of these should be connected to the strong partnership with whom you may share the knowledge, with whom you may share the capital and you may invest together. And that's the strategic rationale behind because our perspective is that specifically for LOTOS the partner like Aramco is something which gives to the company a long-term stability and the long-term perspectives going forward. Because on the other hand, what are the [indiscernible]? That's the major question, which we may rise. But what I wanted to underline is that at the end there is now energy security. There is no significant growth for both ORLEN and LOTOS without a strong partnership with whom you might invest more, you may invest in more advanced technologies and you must share the knowledge in the long run. Next slide, please. And here, we have just summarized on a general level, the synergies coming from this merger. I will not go for this slide itself. Maybe what I will underline is the fact that all of the analysis behind the synergies, a number of people have worked. Number of people who've been in PKN and a number of people who have in Grupa LOTOS, and actually, significant part of these people, they have probably the highest experience in terms of oil and gas business in this region. And these synergies are based on the real operational strategies and real operational data and these guys really dedicated a lot of time to analyze a lot of the potential strategies, synergies within the logistics, within the refining business and some new product swaps and so on. And the key takeaway coming from this slide is that our perspective, and I think that the both management's perspective of LOTOS and PKN ORLEN is that these synergies are with major extent cover the gap coming from the sale of the assets, which were subject to the revenues imposed by European Commission. Next slide, please. And this is our strategic plan in terms of approaching the merger going forward. What we are doing right now -- actually, probably hundreds of people are involved, how to prepare both companies to the day 1 because what we need to focus on is to make the company working after the merger. This is a very common process in which, as I said, an engaged number of people, not only from the organizations itself, but also for being supported by big 4 companies and all the key consulting companies which are working in the region so that our goal is to be able to close the transactions with our potential investors and to be ready to smoothly start the operations after the merger. What we are approaching at the same time is we are building the strategic plan for value creation because at the end, we want to deliver the synergies. And this is one of the key aspects of our approach toward the merger going forward. And actually, we are working within ORLEN and within Grupa LOTOS on implementing the synergies because very dictating implementation plan is being right now prepared. And following the registration of the merger that will be right after the day 1 implemented. And the next stage is to close the big merger between all the key companies within the Polish state. Our goal is, as I said a couple of minutes ago, to close all of the mergers by the end of the year. Our goal to be given, I would say -- I forgot the one. But what I want to say is that we would like to call the mergers before the end of the year, like a couple of months, like 2 months before the end of the year. just to be able to provide to the public domain the updated strategy, which should respond to midterm, short-term and the long-term perspective, as I said, and we will be ready to implement new operational plan. How we would see the business going forward, how we will manage the business because our goal is to create a very effective concern for the next decades. This is it. So thank you very much for listening to the presentation and now I open the floor for Q&A session. Yes.

[Operator Instructions] We have a question from Michal Kozak.

Okay. I have a couple of questions, if I may. Am I right that price of LOTOS assets that will be sold to Saudi Aramco is significantly lower than it's implied by proposed parity by ORLEN? Could you explain that approach? And could you compare EBITDA multiples of refining assets to Saudi Aramco and [indiscernible] to multiple of the whole Grupa LOTOS that is implied from proposed part?

So may be actually, it's extremely difficult to respond to that question. But firstly, our approach towards the exchange swap parity was that we are evaluating the stand-alone businesses, yes. So we wanted to reflect the value of the business going forward without remedies. And the goal of both management was to satisfy the expectations and to provide the fair value for both shareholders of both groups. So that's the general approach. If you ask me whether the 30% stake in the refinery as of today, is being divested for some discount, Yes. But on the other hand, you need to have a significantly broader perspective because what you are referring to is a short-term perspective. And the question is, what would be the value of the assets if the embargo in Russian crude oil is imposed right away, which may happen. And it doesn't have to be the situation that you will impose the embargo, but it may be the situation which happened with PGNiG that the Russians well impose embargo to Polish companies, which is being discussed in Russia as of today, it's not a secret at all. So this is the response to the question because you cannot answer that in a very direct way you need to have a broader perspective. First of all, the approach towards the actions for [indiscernible] between the companies, we evaluated stead alone. And the second is that you need to have a broader perspective, and that is also reflected in the exchange swap parity.

Maybe another question. Could you give a comment on the status in return for lower price for LOTOS assets that is sold to Saudi Aramco you'll get -- thanks to that some discounts for crude oil from Saudi Aramco?

Actually, we cannot comment on the specific formulas and agreements with Saudi Aramco. What we can say is that this agreement is economically attractive. This is what we can say.

Okay. Could you give us a comment on synergies with LOTOS merger? Do you have this value they have established? And could you share with us?

Okay. So again, Robert speaking, of course, we expected that question. Of course, if you calculate synergies, the macro environment is also important and of course, the macro, it has a significant impact on the value of the synergies. Nonetheless, what I would say at that stage of the process is that the synergies, as I said, they are covering the [indiscernible] referred to the businesses divested. But at the same time, what I would say that within 10 years, we expect a couple of billions of these LOTOS of synergies coming from the operational activities.

Okay. Are you 100% sure that European Commission will accept all the purchasers -- all the buyers of the LOTOS assets. And the second question -- the same question regarding to State Treasury. Would they agree with parity and the size of the production during the General Meeting?

Yes. So actually, in this world, you cannot be 100% sure of anything. Nonetheless, I would say that the it is very, very probable that they will accept because informally, what we have had is that we should rather expect the positive decision rather than the negative form on the buyers and the documents subjected to the commission.

And the last question from my side, do you consider a potential change in proposed parity?

On State Treasury because I haven't commented. Actually, that has been independent process. So we know that we have independent advisers supporting them in taking the decision. So they will elaborate as every shareholder, the import -- the [indiscernible] parity proposed by ORLEN Group and LOTOS group. But we, as I said at the beginning, we find that this is a fair parity, which should give a fair value to the shareholders of both compounds. But we don't set a decision.

Okay. So last question. What is the valuation of control premium in percentage that you calculate in a LOTOS assets? Is it 10%, 30% in European?

Of course, this is a question whether we should discuss any control premium with regards to this transaction. Because a lot and probably everything has already been set with regards to this transaction for the last couple of years. Nonetheless, our approach is different. And I said that at the beginning, the parity, which we proposed that implies a premium for LOTOS of 3 months view up and the 6 months view up of respectively more than 26% and 30%. And actually, what is the control premium here? I don't want to discuss that. I would rather refer to the trading of the companies and this is our approach.

Our next question will be from Piotr Dzieciolowski.

I have a couple of questions. So can you please maybe share with us, have you done a valuation in absolute terms, like how you would see the EV fair value for equity in billion, probably just a lot there. That's the first question. And second question, can you then maybe you have a comparison of the multiples passed or anticipated for both companies as you go to the shares for deal because it feels to me there's quite a bit of a difference. And I also feel like when I think about the LOTOS assets just on the refining, they have a 1/3, and they will get 1/3 of the shares roughly. But then you have plenty of more businesses, which probably would weigh more than outweighed the upstream. So I just wanted to understand the absolute number of valuation, the relative multiples and how you feel from the perspective of PKN whether you make a good deal. And finally, I wanted to clarify on the synergies, you say couple of billion of zloty over a couple of years. How shall we think about it? So do you have like an annualized P&L benefit that you can generate and how you can achieve this, whether this is through the cost cutting or logistics or other elements that as a PKN shareholders, I understand what I get out of it?

Okay. I can start with the second or your last question about the synergies. And as Robert said, we have calculated the NPV of synergies on our 10-year period in amount of few billion Polish zloty. And of course, there is a time line of synergies that will end in particular time came after merger. And as we -- as you can see in the Slide #15 of the presentation. We see like 3 layers or groups of synergies. The first one -- the most clear one come from some obligational activity. And here, we see the biggest impact of fuel logistics and wholesale logistic. We see a large impact of optimization of refining processes and optimization of crude [ slides ] that may be used in all our refineries. We, of course, see impact of synergies in terms of procurement, working capital and other indicators. And additionally, on top of that, we see a layer of synergies that are coming from larger organizational setup. So we can distinct here come on know-how organizational improvements or cost of optimization. And we have, as ORLEN Group, we have experience in utilizing such kind of synergies, for example, in terms of [indiscernible] or have launched project of utilizing the synergies. And of course, in such type of uses there is further upside that may be potentially identified after merger and may gain benefits that we cannot identify at the moment. So that our synergies that will build the benefits of the merger in the future.

Yes. And maybe just one comment with regards to the synergies before we come back to the approach to the valuation. Within that number of a few billion of Polish zloty, they are not included significant to cost-cutting, restructuring process. Yes. So one may expect that following the transaction we merge, the overlapping activities. For example, we have a LOTOS oil and ORLEN oil improving the [indiscernible] with base oils. And actually, there is a natural synergy coming from the corporate mergers, and we have not included with this couple of billion the corporate synergies. We think that should be included in the integration plan, and this is exactly what we are doing. And we think that we may deliver on top of that number additional synergies going forward. But as I said, this is not included yet because you would need to base your assumptions or some benchmarks, which are sometimes misleading. And our goal was to focus on real operational synergies, which can be found between our experts. Coming back to the valuation, actually. So as I started, we use the various methodologies of evaluated components. And we use, as you have just said, the trading parity tools, but not only on the all companies, but on specific areas of businesses because we have done some of the parts analysis. And here, you will have different multiples with regards to energy sector to petrochemical and chemical statement in the upstream and the refining of the [indiscernible]. My response, probably, unfortunately, to you is that we are not in the position to share the actual numbers. What is coming from this presented parity is the information that we think that both LOTOS and ORLEN are undervalued as of now comparing to its peers. But the most important is the relative value and represented share swap rather than the absolute number of the companies. And as I said at the beginning of our discussion, the number -- the ultimate number is coming from both of the analysis of both sides and the negotiation process. So that -- you can imagine that both company they challenge in terms of the approach towards the multiples, towards the EBITDA generation process. And here, we have the number which we presented, which we think is a fair value.

Just a quick follow-up on this one. So if you think your shares are undervalued, why do you give them away? Why don't you do a cash transaction to start with and create value for shareholders if you can get at 75 LOTOS shares, why do you want to dilute yourself?

[ What is ] perspective for ORLEN? I don't understood the question.

Well, if you think PKN is undervalued, then issuing new shares is quite dilutive to issue new shares at such a low valuation you can afford looking at your balance sheet to do the cash transaction so that the current shareholders of PKN would be -- you could basically take whatever you value that a lot of that LOTOS 14 billion zloty and payout in cash to the shareholders and then retain the benefits 100% to the shareholders of PKN not dilute themselves at a very low valuation. It's not good deal to swap a cheap share for a cheap share. It's a good deal to buy a cheap share at a low valuation.

So again, I think that both companies are valued with regards to the [indiscernible] proposed value for approach, which is sold for shareholder structure, which is the same or less for both companies. So actually, it's no used to approach the structure. The most optimal structure then is to merge the companies and pay with the shares, yes. If you think that at the end you value your own company at fair value and the other company is being valued at fair value. It provides the value of both stakeholders. Yes?

Our next question will be from [ Jon Andre ].

It's Tamas Pletser from Erste, but just -- this is my wife's actually Zoom so that's why there is a different name. So I just got one question actually, and that regards the -- your partner, Saudi Aramco, it seems that you had many ties with Saudi Aramco. Do you think about diversification of your partner for the future or do you believe that Saudi Aramco could be a reliable partner from commercial terms or [indiscernible] terms in the future? That will be my question.

Yes. So there are a couple of pillars behind that. First of all, what we said is we think that the Saudi Aramco will be supplier of crude oil at the level of 40%, 45%. And what is also important and based on our experience with Saudi Aramco they are reliable partners, stable partner, providing stable quality of crude oil which is a fundamental thing in terms of analyzing the investments going forward. And this is a key when you are analyzing the [indiscernible]. That's first. Secondly, what we experienced from Saudi Aramco is a positive approach towards broader composition going forward. What we are doing right now is we are implementing, I do not share the details but what we started in January this year, there are a couple of agreements in petrochemical corporation and [ evian ]. So actually, we see [indiscernible] tangible process R&D. And what we do expect is that we will announce in some time additional well next steps on the petrochemical growth projects. So we think that our corporation should be based on a couple of pillars. And one of this is a crude oil because if the growth will be both not only in crude oil, but on the petrochemical and chemical growth projects. So this is how we see Saudi Aramco. And actually, what I can say is that what is really supporting to the partnership, which we are having right now is that during this difficult times when there is sometimes the difficulty to get access to, for example, standard fuel like diesel and so on, we have very good cooperation with this partner who is supporting us in some cases. So yes, we think that this is a reliable partner. This is a reliable partner at the end, which can transform the merged companies into much more advanced companies. And we see no risk of having such a huge problem in our country because in such cases, if you take a look at the JVs in which Saudi Aramco has or had, they are building with the partner's long-lasting relationship, which is based on the business going forward.

So this means that you are not afraid that Saudi Aramco becomes such a -- like a too big partner for you or you would basically put too much, yes, too much bet on one partner. So you don't see that as a risk because you believe that Saudi Aramco will be always a reliable partner?

Yes. Yes. And we have very positive experience with them.

It appears there are no more questions at this time. And we do have a question from Piotr Dzieciolowski.

I thought there would be more questions from other people. So if I can ask you to remind us what is now the vote requirement to vote the shares for parity at AGM of both companies? What is the threshold you have to get to?

[ Michal ] are you on the line? It's a legal question. I know the answer, but I will involve the lawyer.

Yes. Yes. Thank you very much. So it's 80% on the shareholder meeting of LOTOS and 75% on the shareholder meeting of PKN ORLEN.

Of the present people or overall shares? Present people, right?

Yes, it's present.

It's present.

Okay. And do you have a comment already from the state to vote in favor of this transaction?

The state is working at the same time as other shareholders are working actually. So they are analyzing right now the parity proposed.

I understand. And the multiples because I asked previously about the multiples you're not going to provide like how you value, let's say, kind of based on the last year numbers or base on the current year numbers, what is the roughly multiple? Whatever multiple, I mean, like EBITDA or PE or...

As I said, the answer is unfortunate to you, but actually I have to say that we will not share the numbers, the multiple too.

Next question is from [ David Chopack ].

I got one question actually. I would like to ask you if you can disclose us more details or when you will disclose us more details. I mean, for example, we don't know many details in terms of prices, in terms of prices, for example, of LOTOS [ VP ] company, we still don't know.

Still the best valuation was among stand-alone basis. So the share swap parity does not include the remedies. So we assume that the whole businesses will work on a stand-alone basis. And secondly, in terms of the access to the data, we will stay with what have already been presented to the power domain, either by us or other partners like Unimat or [ Aramco ]. So we don't expect any additional numbers to be shared. But what we are approaching right now, we will organize the [indiscernible] for the stockholders actually. So we will have a lot more discussions and probably we can guide on [ regarding ] the bilateral discussions to come to our products, some things, but we will not share the numbers actually but I will say with what has already been presented to the [indiscernible].

Next question will be from [ Reata Sparaga ].

Yes, can you hear me?

Yes.

Yes, we can hear you.

I just wanted to double check. You mentioned that the required would be at your around -- meeting the required consent would be from 75% of votes present at the meeting. But according to the Polish law, in case of merger in Poland required consensus from 2/3 so that would be 66.6% of votes. So unless there are any special terms on your bylaws.

Yes. Sorry, that's me. In case of LOTOS, it's 80% because it's due to implementation of State Treasury voting requirements in the Articles of Association. And with respect to -- sorry, I missed out with respect to PKN ORLEN, indeed, it's 2/3. It was my mistake. So I agree.

[Operator Instructions] It appears there are no more questions at this point.

Okay. Thank you, operator. So if there are no more questions. So this concludes our con call. Thank you very much for attending, and have a nice evening. Good bye.