Poland's PKN Orlen to shift to clean energy from oil refining

WARSAW (Reuters) - Poland’s biggest oil refiner PKN Orlen expects to invest around 140 billion zlotys (28.13 billion pounds) over the next 10 years as it shifts to clean energy sources rather than oil refining, it said in its strategy update on Monday.

FILE PHOTO: The logo of PKN Orlen, Poland's top oil refiner, is pictured at petrol station in Warsaw, Poland April 25, 2019. REUTERS/Kacper Pempel

Shares in PKN jumped by 5% by 1422 GMT after the strategy update, which also said that the company wants to pay out a dividend of at least 3.5 zlotys per share, starting from 2020 profit, more than from last year’s earnings. The shares had fallen 38% this year.

The company said in September that it plans to become climate neutral in the next 30 years, although Poland is the only European Union state which has not pledged to cut emissions to zero by 2050.

“We are preparing for changes, especially that oil refining will be becoming less significant,” PKN Orlen Chief Executive Daniel Obajtek said.

He added that he expects traditional crude oil refining in Poland to continue for the next 10-15 years.

“We have to squeeze out what we can from the old segments,” Obajtek said. “The time of crude oil and refining crude to traditional fuels will be coming to an end”.

The collapse in oil demand from the COVID-19 pandemic is hastening the reckoning for those refiners already struggling as new capacity overtakes demand, posing an existential threat to many, particularly Europe’s ageing plants.

PKN Orlen wants to have 2.5 gigawatts of installed capacity in clean energy sources by 2030, including 1.7 GW in offshore wind in the Baltic Sea. The group will cut carbon emissions from its refining and petrochemical assets by 20% and in its energy segment by 33% over the period.

The group plans to more than double EBITDA, or earnings before interest, tax, depreciation and amortisation, to around 26 billion zlotys in 2030. It sees its capital needs at around 205 billion zlotys over the period.

Obajtek said that the strategy includes PKN’s plans to take over smaller rival Lotos, but does not take into account the planned acquisition of gas company PGNiG, as PKN needs EU approval for the deal first.

PKN Orlen plans to formally ask the EU to approve the PGNIG deal in the first quarter of 2021, Obajtek said, later than initially planned.

Obajtek declined to comment when asked if PKN Orlen should take over the Polska Press media group, which owns local and regional newspapers. Earlier this year The Economist said that PKN was in talks with Germany’s Verlagsgruppe over a potential purchase of the Polish unit as part of the government’s plan to gain more control over the media.

($1 = 3.7383 zlotys)

Reporting by Agnieszka Barteczko; Editing by Kirsten Donovan, Louise Heavens and Susan Fenton