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

[indiscernible]. I'm the Chairman of the Supervisory Board of the -- of ORLEN Joint-Stock Company. I would like to welcome all of you. And thank you very much for your coming at this Extraordinary General Meeting of Shareholders of the Polish Oil Council, ORLEN Joint-Stock Company. The Supervisory Board here at today's meeting is represented by me, Wojciech Krynski; Andrzej Szumanski, Vice-Chairman of the Supervisory Board; Anna Sakowicz-Kacz; Barbara Jarzembowska; Jadwiga Lesisz; Andrzej Kapala; Michal Klimaszewski; and Roman Kusz. The members of the Supervisory Board. I would like to welcome all of you. And we have also the members of the Management Board. President, Madam Patrycja Klarecka, member of the Management Board for Retail Issues; Józef Wegrecki, for operational issues; Armen Artwich, member of the Management Board for corporate matters; Piotr Sabat, for development issues. So the protocol of today's meeting will be prepared by the notary, [indiscernible]. I would like to welcome you. And today, also we have the presence of the legal experts, the council, Mr. [indiscernible]. I would like to inform you that today's meeting will be translated into English. And the conduct of today's meeting is transmitted via Internet and the record of the transmission will be placed on the company's website, www.orlen.pl. And the -- we have also the representatives of media in the room. Therefore, if any one of you does not want his image to be filmed, so could you please raise your hand so that the camera operators know who they shouldn't film? Are there any such wishes? No, I can't see any. And the votes cast by you will be calculated and verified by the employees of Unicomp company, WZA S.A. Our registered office In Warsaw. So I would like to welcome all of you. And also, I would like to ask the representative of Unicomp company to explain the rules of the vote.

Good morning, ladies and gentlemen. I would like to tell you how to use the tablets you should receive when you enter the room. So the first screen, you have 2 buttons, Your Data and the Documents and after pressing Your Data, you can verify the data of the shareholder who you represent at today's meeting. After hitting the key, Your Documents, you have the list of the documents and the content of the documents relating to today's meeting, which was published on the company's website. As for the vote, when the [ vote ] is ordered by the Chairman of this meeting on the screens of your tablets, you have the 3 key decisions, Against, For, and Abstention, and the Split button if you would like to vote differently from your [ package ] of shares. But if you vote in the same way with your [ package ] of shares then you press the appropriate button, representing the decision that you would like to take. And after pressing this decision button, on the next screen you'll have the information which decision you have chosen. And below you will see also the Confirmed button, which you can use for confirming a decision, and cast your vote. So I think that this technique -- voting technique is easy and -- but if you have any technical problems, of course, please refer them to [indiscernible] and we will help you with solving these problems. Thank you very much for your attention. Thank you very much for this explanation. So I hope that everything will go smoothly as -- so we didn't have any problems with voting in -- during our previous meeting, so today we will not have any problems as well. So when you have come here to this place -- venue, some of your identity as shareholders was checked. Also the identity of proxies who are allowed to participate in this meeting. And here, we have the attendance of these persons who can participate in the meeting. Those persons who, 15 days prior to the date of the Extraordinary General Meeting of Shareholders, means before the [ 5th ] of July, were the shareholders of the company. So it means that in their securities account, their shares were posted and -- from the [ 23rd ] of June 2022 and the 6th of July 2022 in this period who submitted the request for the issuance of the personnel so as if you could confirming the right person to participate in the meeting. And the [ simplification ] will send to the entity running those securities account. The company also determined the list of shareholders who are authorized to participate in today's meeting on the basis of the lists sent to ORLEN by the National Depository of Securities and prepared on the basis of the issued certificates -- personal certificates confirming the right to participate in this meeting 3 days prior to the date of the general -- Extraordinary General Meeting of Shareholders. And the list was made available for viewing of the shareholders who are authorized to take part in this meeting in the accordance with Article 107, Paragraph 1 of the Commercial Companies Code. I would like also to emphasize that only these shareholders or their proxies who were on that list are authorized to take the floor and also to vote on the resolutions that are proposed. In the interest of the room, after registering yourselves, you will receive the tablets, by means of which it is possible to cast the votes as it was explained by the representative of the company, supervising the voting process. So the set of documents was also made available by the company's Management Board on the company's website. A full account of the documentation that is to be presented at this meeting could also be obtained at the headquarters of the company in [indiscernible] in -- at [ Chemików 7 ] and also in Warsaw at Bielanska 12 [indiscernible] prior to such -- prior to submitting such requests electronically in accordance with Article 120 of the Commercial Companies Code, the -- voting on the resolutions are open except for the appointment of the Chairman of this meeting and also the Ballot Committee -- Commercial Companies Code stipulates that each of the shareholders authorized to take part in the meeting, has the right to request a secret vote also in regard to other resolutions not requiring such mode of vote. And each person authorized to take part in this meeting can also demand from the representatives of the company, Unicomp, the printout of the result of the vote on a particular resolution. This printout will be made available after the closing of the meeting. So I would like to open the Extraordinary General Meeting of shareholders of the Polish Oil Council ORLEN Polish SA. And I move to the second point on the agenda regarding the appointment of the Chair of the Extraordinary General Meeting. Therefore, I would like to ask the shareholders for authorized to take part in this meeting for putting forward their candidates to chair today's meeting. You are welcome to cast your votes, please. [Voting]

Ladies and gentlemen, comrades, all other shareholder, I would like to propose Radoslaw Kwasnicki to the council to chair today's meeting. So the question is to the candidate whether the candidate, whether the candidate agrees. Yes, there was a confirmation. So any further candidates proposed to participate in the meeting. So I put under vote -- under secret vote, the resolution regarding the appointment of the Chair of the Extraordinary General Meeting. Mr. Radoslaw Kwasnicki. And I propose to take the following resolution. Pertinent to Article 109, Paragraph 1, Sentence 1 of the Commercial Companies Code in conjunction with Section 5 of the [indiscernible] procedure for the General Meeting of Polish Oil Council, ORLEN S.A. the Extraordinary General Meeting of Polish Oil Council and ORLEN S.A. hereby appoints Radoslaw Kwasnicki as Chair of the General Meeting. So we -- we -- now we vote in secret mode. I open this vote. [Voting]

Has everyone cast their votes? I would like to read the result of the vote now. Thank you very much, ladies and gentlemen, in this secret vote. [ 305,813,553 ] were for yes. There were votes against, 36. And the total number of votes cast represent 71.5% of the share capital. That is the number of votes is 305,813,489. There were no abstentions. Well, for yes, 305,813,453. Against, 36. And no abstentions. So I would like to confirm that this meeting, Extraordinary Meeting, appointed Radoslaw Kwasnicki to Chair today's meeting. So I would like to ask the Chair to take the seat and to chair today's meeting. Congratulations to you on your appointment.

Good morning, ladies and gentlemen. Thank you very much for appointing me as the Chair of this meeting. So the majority resembles -- the majority that was gained by the large resolution because it's supported by all the shareholders. So I -- then thank you very much -- and I appreciate it. But before we move to the next point on the agenda, a couple of technical issues. And I would like to say that the General Meeting of Shareholders was convening accordance with the commonly binding regulations of the law and also the corporate documents, in particular, the company's statute that took place in report [ 27/2022 ], dated the 23rd of June this year. So in accordance of the appropriate requirements -- relevant requirements at least 26 days prior to the date of the holding of the meeting. Could I have -- could I ask for the information about the share capital and the shareholders. So we have [ found ] 27 million -- so this is -- today, we have found [ 5,000,013,090 ] shares represented, which constitute 71.5% of the share capital. So the number of shares present in terms of the same number of votes at today's General Meeting of Shareholders. So taking into account all the circumstances, I would like to confirm that this meeting was convened properly and is capable of adapting by the resolutions on the matters put on the agenda. And also, I would like to draw your attention to the fact that the materials are properly published and announced and are still displayed on the company's website. They're also available on your tablets that you received. So if there are any questions or doubts regarding any particular -- the draft, so the resolutions, so I would like to ask you to direct such questions that, in accordance with the rules and practice, I will refer the draft that were displayed on the company's website, which are available in Internet and also available only on your tablets. So -- But if there are any motions of course, could you please direct them to me. I can't see any [ votes ] in technical questions. So I would like to say that if you have such technical questions, could you please address them to me. So the rest of the votes are open. So I move to point number 4, namely we put under vote the draft of the resolution number 2 regarding the adoption of the agenda of the Extraordinary General Meeting. So I open a discussion on this point. whether there are any comments on such formulated point? I can't see any observations so I put under vote the resolution number 2 regarding the adoption of the agenda of the Extraordinary General Meeting. [Voting]

Could you -- so to avoid any doubts, the vote is in progress. This is this agenda that was announced, and there have been no modifications in the agenda. It is still available on your tablets and also on the company's website. The question is whether everyone has voted. I think, yes. So I close the vote and I will read the result of the vote. So there were 305,813,453 votes, 0 votes against, and 36 votes abstained. So I would like to confirm that this resolution has been adopted. So we move further in compliance with the announced agenda. I move to point number 5. And in accordance with the rules of procedure of this meeting, I would like to propose 3 candidates to the Ballot Committee. So I would like to read the data of these persons. So could you please give me the information whether the candidates agree? [indiscernible] agrees. [indiscernible] agrees. [indiscernible] agrees. So thank you very much. So the candidates agreed to be the members of the Ballot Committee. So I put under the voting resolution. So we'll vote on block on this resolution. This is the resolution on the appointment of the Ballot Committee appointing [indiscernible], [indiscernible], and [indiscernible] to be the members of the Ballot Committee. I can't see any questions regarding this draft resolution, and I hold a -- the secret vote on that because this is the personal matter that we vote on. And could you please cast your votes? [Voting]

As I have said, the substantive resolutions will be voted on in a secret mode. Has everyone voted? Yes, I can see that everyone has voted, so I close the vote and I will read the result of this vote. So the resolution has been adopted unanimously. And there were 305,013,488 votes for yes. Congratulations, all the votes were for the resolution. And I would like the members of the Ballot Committee to start their work. And moving further, I move to point number 6 on the agenda. And I would like to confirm that the company and also LOTOS S.A. company on the second of June, they agreed in writing the merger plan. And it published on the company's website together with the appendices in report number [ 24/2022 ], dated the 2nd of June this year. On the basis of Article [ 591 ] of the Commercial Companies Code, the Management Board prepared the financial statement justifying the merger. And [ analogous ] statement was also prepared by the Management Board of LOTOS S.A. Both statements were made available in accordance of Article 105 of the Commercial Companies Code on the Internet website of the company under the Investor Relations. And also in both companies in ORLEN and also in LOTOS, there is this link to the Investor Relations. On the basis of Commercial Companies code, the auditor within the deadline prescribed by the court prepared also the opinion on examining the merger plan, which was submitted together with the merger plan to the court in which 20 of the commercial department of the court to register and the company also published the auditor's opinion. This merger [indiscernible] so all the documents published by the company in accordance of Article 501 of the Commercial Companies Code from the moment of -- ending today's debate, they are still available, continually on the company's website under the Investor Relations link. And in accordance of Article 504 of the Commercial Companies Code, on the Internet website, the company published the first announcement of the shareholders about the intention of merger. And the second notification about this intention was published on the company's website by current report number 29, dated the 4th of July. And in accordance of Article 106 of the Commercial Companies Code, the resolution of the General Meeting of Shareholders requires the majority of 2/3 votes as for the public company unless the statute provides stricter terms. The statute of PKN ORLEN does not stipulate on stricter terms. So that is why for this resolution, we need a qualified majority of 2/3. And the formal issuance, it was mentioned by the Chair when opening today's Extraordinary General Meeting of Shareholders, the items you see in the authorization to participation of the shareholders and the proxies has been checked prior to this meeting and also I signed the checked and verified list. And it is available throughout this meeting. So I would like to give the floor to the management board of the company.

Ladies and gentlemen, I have the pleasure of presenting the -- important elements of the merger prepared for the purposes of merger of the PKN S.A. -- ORLEN S.A and the LOTOS, and the report of the Management Board for the purposes of merger and the auditor's opinion on any issues of importance, the developments of importance that took place between the date when it was taken up under the Article 504. And important elements of the merger. It was prepared on the basis of Article 499 of the Commercial Companies Code in relation to the plan of the merger of PKN and LOTOS. And the merger plan was agreed in writing on the second of 2nd of June this year by the signatures of the 2 companies' Management Board. And it was provided on the dedicated merger site on the website of the [ company ]. And it would be carried out in accordance with the Article 499 by moving -- transferring all the assets and liabilities to the PKN ORLEN as the receiving company and also -- and by raising the share capital on the basis of the issuance on the part of the ORLEN company. And also in accordance with the statute of the 2 companies, and the General Meeting of the company was presented with the documents relating to the margin and that is the consent for the merger and also a consent for the changes to the statutes of the company in relation to the Item 2 of the merger plan. And also the General Meeting of the ORLEN company was present with the resolution to amend the new -- to amend the existing statutes of the company. And it would be -- the share capital would be raised for the 534,636,376.25 basically to [ 783,081,906.25 ] by issuing 198,738,860, each of the ordinary shares with a nominal value of PLN 1.5 each, with a total value of [ 248,423,580 ], which then will be allocated to the shareholders of the of the LOTOS company in accordance with Item 5 of the merger plan. And the PKN ORLEN will make sure that these shares are traded on the market -- on the Stock Exchange. And this will be a public offering. So as a result, there won't be -- issue a prospectus. And PKN ORLEN has prepared and published on the [ 20th ] of July of this year, and the document on the dedicated ORLEN website. And we do not provide for the all LOTOS shareholders to be given any additional rights or those within the LOTOS Group. And the merger depends on satisfaction of the requirements under the law and also other -- the activities that are required by law. In particular, preparing and making available for PKN ORLEN document mentioned above for the purposes of merger. So it's been satisfied. Also the consent of the European Union as regards the measures that need to be taken as that were adopted in the decision of the 14th of July regarding this issue, that is -- its consent to the merger. And also the consent of the Council of Ministers, which is required under the act of 16 December around the managing of state treasury. And also the lack of objection from the supervisory authority that is related to the exceeding the 33% of the share capital, as mentioned in the act of the control of certain investments. And this requirement has also been met. And then as of the date of today's -- this meeting, the PKN ORLEN is the [ super factory ] of the land -- farm land. And in this connection, the [indiscernible] is -- has the right to this land. So [indiscernible] will be notified that it has the right to take over certain -- proper -- certain -- it can [ buy ] some merger rights. So when -- after the -- so the -- all the liabilities and assets will be transferred to PKN ORLEN on the day when the courts competent for the registration of the company. The new company intent is that they should in accordance with the Commercial Companies Code. This will be so-called universal succession, particularly in Article 494, Paragraph 1 and Paragraph 5 of this Commercial Companies Code, PKN ORLEN will take over all the concessions and release that were enjoyed by the LOTOS unless the concession provisions provide otherwise. In accordance with the Commercial Companies Code, on the date of the merger, the LOTOS shareholders will become PKN ORLEN shareholders, and they will have the right to revenues, profits of the -- on the date that the -- on the first of January 2022. This means that the merger shows -- in accordance with Article 498 of the Commercial Companies -- that they will enjoy the profits for the year beginning on the 1st of January, 2022 and ending on the 31st December. In accordance with Article 493, the LOTOS Group will be sold without carrying out liquidation procedure on the day that it is deleted from the register of enterprises, but this will not happen before the shared capital is raised and the new company is entered into the -- and it will -- the new company will operate under name PKN ORLEN S.A. And LOTOS shareholders will receive the following merger shares at the rate 1.75 per 1 shares. This means that for 1 LOTOS share, the LOTOS shareholders will receive 1.75 shares of PKN ORLEN. And this will apply only to natural numbers. But in case of fractions, they will receive more -- they will be compensated for the fractions. And it will be -- the number of the shares will be determined by multiplying the number of LOTOS shares in accordance with the detailed provisions on the so-called reference date by the -- by rounding down to the nearest whole number, unless it is a full number anyway. So these are the important elements of the merger plan for the purposes of the merger. It was prepared on the basis of 501 of the Commercial Companies Code in relation to the merger. And it was made available on the website of the company dedicated to the merger. And also the principles of the merger and the principles of the exchange of the shares were not discussed -- described just now. And generally applied valuation methods were applied. And also -- so it -- also the potential synergies were not taken into account of the analysis. So market multipliers were applied and also the sum total of parts of the historic assets of the [indiscernible], also volume-weighted prices and also assessments of Stock Exchange analysts. The large market variability caused by the Russian invasion where the greatest challenge to the evaluation and caused the greatest problems. That's why most -- great attention is paid to the reports published after the 24th of February. And the parties decided on the way of reconciling the shares of the 2 companies. And this combined consent that would include both the assets of PKN ORLEN and LOTOS companies -- will generate the largest European companies in oil sector, able to face the challenges of the sector. And the integration of the 2 companies will result in the better performance in oil extraction, petrochemistry, retail sales or energy generation. And this merger would ensure stability of the economic operations in response to the changing conditions in the market and also allow them to -- allow the new company to focus on the better operations on the market. And also the merger will also ensure better -- more diversification and improve the negotiation position of the company and also will ensure better remedial measures to -- in consequence, the merger will ensure better energy security in Poland and the region, which is so important now in the current geopolitical situation. Also, it will produce a number of synergies, both in logistics, oil supplies and also retail sales. And the future -- potential future synergies from the merger exceed greatly the cost of remedial measures. Important measures -- important elements of the auditor's opinion. [indiscernible] the auditor was established by the [indiscernible] called on the 24th of June. And the auditor prepared in writing his assessment. And he concluded that the plan was prepared in accordance with Article 499 of the Commercial Companies Code, and that it includes all the necessary annexes, and also, it can meet all the requirements specified in Article 499, Paragraph 1 and 2 of the Commercial Company's Code. And the auditor indicated that attention should be paid to the extreme variability of the market conditions after the Russian invasion on the 24th of February. And the auditor's opinion was provided on the major dedicated website of the ORLEN. Taking into account the current financial data available to the Management Board, we indicate that from the date of the preparation of the merger plan, which was agreed in writing on the 22nd of June, 2022, we declare that there have been no significant changes in assets and liabilities. And also work is now underway on consolidated reports of PKN ORLEN for the first half of this year. This report will be presented on the 5th August of this year. Moreover, we indicate that PKN ORLEN has received information from the Management Board of LOTOS Company, that on the basis of data available to the Management Board, on the date of the adoption of the plan to the merger date, there have been no significant changes in the assets and liabilities of the -- of LOTOS company. On the 20th July, the resolution #3 was adopted to allow for the merger of the companies, including also amendments to the statutes of the company in relation to the merger. Also the Extraordinary Meeting on the -- with this Resolution 6 on the division of profits for 2021, in accordance with the resolution, provided at the General Meeting of the ORLEN and also the General Meeting of the LOTOS -- the profit in the amounting to [ PLN 647 million ] and the date of the dividend was established in July of this year. In light of the above, the Management Board of PKN ORLEN recommends that the General Meeting of the company adopts the resolution as proposed.

So thank you very much, Mr. President, for discussing very important elements of the merger plan. Even before this presentation, we can open the discussion, there's a shareholder that wanted to take -- shareholder, Mr. [indiscernible].

I have taken part in general meetings shareholders after year 2000. Also, in 1993, I was in the team that prepared the first transformation into a single person company before at the previous meeting, I emphasize some things. When last year, the European Commission set some threshold requirements, I was afraid that the merger would not be -- would not take place. At the May General Meeting, I thank the President and -- that he has -- pioneers usually have it -- an uphill job, because pioneers usually have an uphill jobs. Not to make it too long, I would like to emphasize that pioneers have made it, and the merger has taken place. And I would like to thank the President and the Management Board, also the Management Board of LOTOS that they managed to do. And in the past, there have been some strange things at this meeting. For example, there was a period when somebody that held 5% of shares withdrew the company.

Thank you very much. The discussion is open. We can see someone who wants take the floor. So -- could you please share who you would like to represent.

And [indiscernible]. I will represent myself. And I would like to disagree with what has been said just a moment ago because my opinion about the merger process is such that I do not understand this process, taking into account the fact that involved company is the dominant entity. And the fact, though, the managing of -- is state treasury because in the supervisory board of ORLEN and then not supervisory more and they are the representatives which are proposed by the state treasury. So we can stay at the state treasury is governing kind of ORLEN and LOTOS. The minority shareholders can exercise their right for participation and the same as my colleague who took the floor before me, that, of course, the state treasury has the final decision. And what is the aim of this merger? So it will be like this, that in the moment the merged [ council ] will get rid of significant assets, which guarantee the energy safety of Poland. I didn't understand the situation when we are at war that we do not know what will happen tomorrow, a threat could be giving to foreign entities the asset and we not now control those entities to give away the official plans for a giveaway. So I would stop in this -- I would withhold such decision, especially the state treasury is dominant entity in the first. And then the second entity I can't see here any things that might improve the situation today. And the Supervisory Board of ORLEN, we have 10 members. And the resolution that is submitted, it is proposed 15 members on the composition. So more or less the same as in the merging companies. So I am addressing the representative of the state treasury because there is still a moment just to think longer. We can announce a break and we can consult the decision-makers whether in Poland at this moment, it is needed to take such a decision which will have unknown consequences. I will vote against the merger. And I am appealing also for this that we should utilize time for rethinking the whole merger.

Thank you very much for taking the floor in this decision. If [indiscernible] shortly, I would like to add only one sentence, and because I would like to say that if someone -- whether this goal will be achieved here. The goal has been achieved. And -- So we will disappear. So we would like to stop, watch, and if you invest your money, you can just request the [ Stock ] that -- so we had the discussion. I can't see any [ further ] contribution. So I put under vote the draft Resolution #4. This is the Resolution #4 dated the 21st of July 2022 on merger between the company and Grupa LOTOS Joint-Stock Company [indiscernible] LOTOS group, the increase of the company's share capital and the approval of the proposal and the company's statutes. So I order the open votes. [Voting]

Have everyone voted? So I would like to repeat the question. So has everyone voted? Yes, I can see that yes. So we require 2/3 of votes cast, and this revolution has been adopted. And this is -- this resolution has been supported by 98.2% of the shareholders. So the votes for yes, [ 300,032,064 ]. Against, [ 2 6 ]. And abstention, [ 5,280,889 ]. So ladies and gentlemen, we move to the 7th point on the agenda. So I would like to show that in accordance with Article [ 104 ] of the Commercial Companies Code, then the sale of the organized part of the business requires a majority of 3/4 of votes. So I open the discussion. I don't see any votes in the discussion. So I put under vote the draft Resolution #5. And I will read, it is dated 21st of July 2022, consent the transfer of [indiscernible] by the company, which as you remember is part of the enterprise of the company in the form of any kind contribution to cover shows in the increased share capital of LOTOS. [indiscernible] joins the company's registered office in [indiscernible]. Here we have the [ KRS ] number, which will remain a subsidiary of the company as a result of the merger of the company and Grupa LOTOS [indiscernible] is registered office in [indiscernible]. And also, we have KRS number. Persaunt to Article 192, Paragraph 1.1 of the Commercial Companies Code. So I order the vote on this resolution. Could you please cast your votes? [Voting]

Has everyone voted? I can see the -- yes. So again, I ask whether everyone has cast their votes. So I consider yes, and I close the vote, and I will read the result of the vote. So it was supported by [ 98.7% ] of the shareholders. So the votes for yes, [ 300,032,064 ]; against, 36; and abstentions, 5,380,889. Okay. So now I move to Point #8 on the agenda. And here, we will talk about the statute under Point 8 of the agenda. So I open the discussion as it is for each point on the agenda. There are no contributions to the discussion. So I put under vote Resolution #6 on the approval of the consolidated text of the company's Articles of Association. So this will be the open vote, which is now in progress. [Voting]

Has everyone voted? I can't see any objections, but I ask again whether everyone has cast their votes. I can't see any objections. So I would like to read now the result of the vote. So there were [ 300,032,164 ] votes for yes. 0 votes against. Abstentions, 5,280,975. Ladies and gentlemen, Point #8 has been delayed. So I move to Point #9 of the agenda and -- and here, I would like to congratulate to you all, all persons and entities who actively participated in this process of the achieved success. So I would like to wish all the best to both merging companies, the Supervisory Board members, to the Management Board members and also to the President, Mr. Daniel Obajtek, who carried out -- who went through this process. So I declare this meeting closed, and I would like to wish all of you good day and beautiful work. Thank you very much.