| Completion of works on implementation of remedies according to conditional decision of the European Commission on taking control by PKN ORLEN S.A. over Grupa LOTOS S.A.
Regulatory announcement no 2/2022 dated 12 January 2022
PKN ORLEN S.A. (“PKN ORLEN”, „Company”) informs that it has completed works on implementation of remedies according to conditional decision of the European Commission (“Commission”) as of 14 July 2020 on concentration of taking control by PKN ORLEN over Grupa LOTOS S.A. headquartered in Gdańsk (“Grupa LOTOS”), (“Remedies”).
In order to implement the Remedies there have been signed the below mentioned conditional agreements that will come into force under, among others, following conditions:
1. The Commission approves the purchasers of the assets that are being disposed during implementation of Remedies and provisions of agreements concluded with them;
2. Concentration between the Company and Grupa LOTOS is realized;
3. The below mentioned purchasers of the assets that are being disposed during implementation of Remedies obtain the approvals of the certain antitrust offices and other public administration organs for conclusion and realization of the below mentioned agreements by them;
4. The other consents of the certain institutions, required by law, for disposal of some parts of disposing assets are obtained.
In order to implement Remedies in fuels production market and fuels wholesales market area following agreements were concluded:
1. Preliminary agreement on sales of 30% of shares in LOTOS Asfalt sp. z o.o. headquartered in Gdańsk (“LOTOS Asfalt”) (“Preliminary Agreement on Sales of Shares in LOTOS Asfalt”) between Grupa LOTOS and Aramco Overseas Company B.V. („Aramco”), with following agreements attached:
a. a template of joint venture agreement between PKN ORLEN, Grupa LOTOS, LOTOS Asfalt and Aramco, realizing the requirement of divestment to the independent third party of 30% of the shares in the company, to which refinery located in Gdańsk was contributed as an in-kind contribution and granting guarantee to this third party of contractual rights in the scope of corporate governance,
b. a template of processing agreement and offtake agreement between Grupa LOTOS, LOTOS Asfalt and Wholesales Company (defined below), which will be concluded for contractual period of joint venture agreement, referred to in point a) above,
c. a template of a framework agreement on storage of obligatory inventories of crude oil between PKN ORLEN and Wholesales Company (defined below), which will be concluded for a period of 10 years from its entry into force,
d. a template of a framework agreement on railway logistics outsourcing between PKN ORLEN and Wholesales Company (defined below), which will be concluded for a period when the processing or offtake agreement are in force.
The agreements indicated above will be concluded on the day of concluding of promised agreement on sales of shares in LOTOS Asfalt.
The price specified in the Preliminary Agreement on Sales of Shares in LOTOS Asfalt will be calculated on the base of formula specified in the Preliminary Agreement on Sales of Shares in LOTOS Asfalt, which consists of fixed element in the amount of ca. PLN 1,15 bn and variable element, depending on the level of debt and working capital of LOTOS Asfalt on the day preceding the signing of the promised agreement.
The Preliminary Agreement on Sales of Shares in LOTOS Asfalt includes material adverse change clause entitling Aramco to withdraw the agreement in case of the certain events described in the agreement occurs.
2. Preliminary agreement on sales of 100% of shares in LOTOS SPV 1 sp. z o.o. headquartered in Gdańsk (“Wholesales Company”) between Grupa LOTOS and Aramco (“Preliminary Agreement on Sales of Shares in Wholesales Company”). Before concluding of the promised agreement on sales of shares in the Wholesales Company, to that company there will be separated an organised part of fuels wholesales enterprise that is currently conducted by LOTOS Paliwa sp. z o.o. headquartered in Gdańsk (“LOTOS Paliwa”), (‘Wholesales Business”).
The price specified in the Preliminary Agreement on Sales of Shares in Wholesales Company will be calculated on the base of formula specified in the Preliminary Agreement on Sales of Shares in Wholesales Company, which consists of fixed element in the amount of ca. PLN 1 bn and variable element, depending on the level of debt and working capital of Wholesales Company on the day preceding the signing of the promised agreement.
The Preliminary Agreement on Sales of Shares in Wholesales Company includes material adverse change clause entitling Aramco to withdraw the agreement in case of the certain events described in the agreement occurs.
In order to implement Remedies in biofuels market area following agreement was concluded:
1. Preliminary agreement on sales of 100% of shares in LOTOS Biopaliwa sp. z o.o. headquartered in Gdańsk (“LOTOS Biopaliwa”) between Grupa LOTOS and Rossi Biofuel Zrt. (“Preliminary Agreement on Sales of Shares in LOTOS Biopaliwa”).
An additional document to the Preliminary Agreement on Sales of Shares in LOTOS Biopaliwa is an agreement on sales of biocomponents between the Company and LOTOS Biopaliwa which will be concluded for a period of 4 years. The agreement on sales of biocomponents, indicated above, will be concluded on the day of concluding of promised agreement on sales of shares in LOTOS Biopaliwa.
In order to implement Remedies in fuels logistics market area following agreements, among others, were concluded:
1. Preliminary agreement on sales of 100% of shares in LOTOS Terminale S.A. headquartered in Czechowice Dziedzice (“LOTOS Terminale”) between Grupa LOTOS and Unimot Investments spółka z ograniczoną odpowiedzialnością („Unimot Investments”), to which a contribution agreement is attached on contribution of four PKN ORLEN fuels depots located in Gdańsk, Szczecin, Gutkowo and Bolesławiec to LOTOS Terminale.
2. Conditional fuels depot agreement between PKN ORLEN and Unimot Investments which allows PKN ORLEN to use the warehouses in fuels depots located in Gdańsk, Szczecin, Gutkowo and Bolesławiec after the shares in LOTOS Terminale are disposed to Unimot Investments, concluded for a period of 10 years starting from the date of its entry into force;
3. Conditional preliminary agreement between PKN ORLEN and Unimot Investments and Unimot S.A. on renting and settlements of expenditures which describes the obligation of the Company, Unimot Investments and Unimot S.A. to conclude a promised agreement on conditions of realization of the investment of building a fuels depot located in Szczecin, that will be owned and operated by LOTOS Terminale.
The contribution agreement, indicated above, will be concluded between PKN ORLEN and LOTOS Terminale after concentration between the Company and Grupa LOTOS is realized.
In order to implement Remedies in retail market area following agreements were concluded:
1. Preliminary agreement of sales of shares in LOTOS Paliwa between Grupa LOTOS and MOL Hungarian Oil and Gas Public Limited Company („MOL”) (“Preliminary Agreement of Sales of Shares in LOTOS Paliwa”), from which, before concluding of promised agreement of sales of shares in LOTOS Paliwa, Wholesales Business will be separated, consisting of in total 417 fuel stations of LOTOS retail network, located in Poland.
Additional document to the Preliminary Agreement of Sales of Shares in LOTOS Paliwa is a conditional agreement on sales of fuels to MOL Group, between PKN ORLEN and MOL, which will be concluded for a period of up to 8 years.
The price specified in the Preliminary Agreement of Sales of Shares in LOTOS Paliwa will be calculated on the base of formula specified in the Preliminary Agreement of Sales of Shares in LOTOS Paliwa, which consist of fixed element in the amount of ca. USD 610 m and variable element, depending on the level of debt and working capital of LOTOS Paliwa on the last day of the month preceding the month in which the promised agreement will be signed.
The Preliminary Agreement of Sales of Shares in LOTOS Paliwa includes a material adverse change clause, according to which, in case of occurrence of the events strictly defined in the agreement the price for shares in LOTOS Paliwa will be reduced accordingly based on agreed formula.
In order to implement Remedies in aviation fuels market area following agreements were concluded:
1. Preliminary agreement on sales of all shares owned by Grupa LOTOS in LOTOS-Air BP Polska sp. z o.o. headquartered in Gdańsk (“LOTOS-Air BP”) between Grupa LOTOS and Aramco;
2. Conditional agreement on sales of aviation fuel to LOTOS-Air BP, between PKN ORLEN and LOTOS-Air BP concluded for a period of 15 years from the date of its entry into force;
3. Conditional agreement on LOTOS-Air BP aviation fuel storage in Olszanica between PKN ORLEN and LOTOS-Air BP concluded for a period of 15 years from the date of its entry into force;
4. Conditional agreement on providing services of operating activity support in case of force majeure, between PKN ORLEN, ORLEN Aviation sp. z o.o. headquartered in Warsaw and LOTOS-Air BP, concluded for a period of 15 years from the date of its entry into force.
In order to implement Remedies in bitumen market area following agreements, among others, were concluded:
1. Preliminary agreement on sales of 100% of shares in LOTOS Terminale, which, before concluding of promised agreement of sales of shares will acquire 100% of shares in LOTOS SPV 2 sp. z o.o. (“Bitumen Company”), between PKN ORLEN and Unimot Investments. Beforehand, Bitumen Business will be separated to Bitumen Company.
2. Conditional bitumen sales agreement between Grupa LOTOS, PKN ORLEN and Unimot Investments, which will be concluded for a period of 10 years from its entry into force with option to extend this period by another two 5 years periods on terms previously agreed between parties.
Within 7 days from the conclusion of the above mentioned agreements the Company will submit to the Commission a motion for approval of proposed buyers of assets that are being disposed to implement Remedies and of concluded preliminary agreements and conditional agreements with attachments.
Additionally PKN ORLEN has concluded a conditional framework sales and purchase agreement with MOL (“Framework Agreement”) as a result of which companies belonging to the ORLEN Capital Group will purchase from MOL 144 fuel stations located in Hungary and 41 fuel stations located in Slovakia for the total price amounting to ca. EUR 229 m (“Transactions”). The price is subject to be corrected as of the Transaction settlement day due to changes in the level of net debt and working capital of the acquiring assets in relation to their reference values.
The Transactions shall be closed in 12 months from the day of signing of the Framework Agreement, however the actual acceptance of all acquiring assets shall be made in 18 months from the day of the Transactions closing.
Closing of the Transaction subjects to, among others, obtaining a certain approval of the Commission and the former purchase of 100% of shares in LOTOS Paliwa by MOL.
Additionally PKN ORLEN concluded with Saudi Arabian Oil Company a long term agreement on crude oil deliveries to the ORLEN Capital Group companies. On the base of the agreement, in case of finalization of the concentration with Grupa LOTOS, PKN ORLEN will secure deliveries of the crude oil from Saudi Arabian Oil Company to ORLEN Capital Group in the amount from 200 to 337 thousand barrels daily.
PKN ORLEN also concluded with Saudi Arabian Oil Company and Saudi Basic Industries Corporation a memorandum of understanding on cooperation to analyze, prepare and realize common investments in petrochemical segment. As potential areas of cooperation there will be analysed, among others, development projects in olefins and olefin derivatives, including aroma derivatives, in Poland and in Central and Eastern Europe.
PKN ORLEN also signed with Saudi Arabian Oil Company a memorandum of understanding on cooperation for the common analyzes, preparation and realization of research and development projects, as well within the sustainable development technology.
See also: regulatory announcement no 26/2018 as of 27 February 2018, no 106/2018 as of 30 November 2018, no 31/2019 as of 3 July 2019, no 34/2019 as of 26 August 2019, no 42/2020 as of 14 July 2020, no 43/2020 as of 14 July 2020, no 45/2021 as of 12 November 2021 and no 1/2022 as of 12 January 2022.
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