Good morning, ladies and gentlemen, and welcome to MOL's Q4 2023 results conference call. My name is Márton Terner , Head of Investor Relations, and we have a strong lineup of management to discuss recent developments. Dr. György Bacsa, Executive Vice President, Group Strategy, Operations and Corporate Development, Mr. József Simola, Group Chief Financial Officer, Mr. Zsombor Marton, Executive Vice President of Upstream, Mr. Gabriel Szabó, Executive Vice President of Downstream, and Mr. Péter Ratatics, Executive Vice President of Consumer Services. We continue to use Microsoft Teams as a platform to hold our conference call. The presentation can be downloaded from our website at molgroup.info, and we will be sharing the slides in Teams, too. After the presentation, we will move to a Q&A session, where you will have the chance to ask questions by using the Raise Your Hand function on Teams.
Please keep yourself muted throughout the call, except when asking a question. Before we start, I would like to draw your attention to the cautionary statement on slide number 2. Now, let me hand over to György Bacsa, who will take us through the highlights of the Q4 .
Sorry, colleagues, we cannot hear anything.
Yes, there is a technical difficulty. Sorry for the delay. My apologies, ladies and gentlemen, there's a technical problem, so Mr. Bacsa cannot connect currently. Let me start with the summary for the highlights.
Márton, do you hear me now?
Yes, yes, we can hear you now. Please go on.
Okay. Sorry for that. So regarding the 2023 summary, I think there are definitely good news that despite all the challenges, we managed to deliver all our guidances, even exceeded certain elements of it, especially the EBITDA target that we revised during the year. It was a very volatile year. The first half of the year was still affected by the energy crisis. The second half was normalized, but it also meant that it was calmer and little bit under the expectation or under the predictions in certain segments. It has feared with the recession, it was also affected by geopolitical tensions, and in certain segments, depressed margins. The regulatory environment was volatile throughout the entire year. CapEx, we delivered under the guidance, mainly because of the slow start of the year.
The rest of the elements are all in line to our guidance, and I also would like to draw your attention to a strong financial balance sheet that even after record dividend and the record cash tax payments, our net debt to EBITDA is very strong. If you go to the next slide. Some highlights regarding the Q4 results and more looking closely. Q4 , we delivered $992 million clean CCS EBITDA, which practically meant that by the Q1 , we surprised the $2.1 billion operating cash flow after working capital adjustment. Segment performance, upstream was definitely one which picked up, both in terms of production and profitability in the Q4 . Production was successful, and definitely also helped us that as of September, extra royalty disappeared from the Hungarian system, regulatory system.
Downstream was in the Q1 a 3% decrease quarter-on-quarter. There was a normalization in the refining margin, seasonally lower volumes, changes in taxation, including CO2 taxes, which were introduced during the year. But also, we have to mention that the petchem was struggling throughout the entire year. Consumer services fell by 42% in Q4 to $144 million, mainly because of very strong base and seasonal effect. And so some operational highlights, we started our geothermal productions or geothermal projects, mainly in Croatia, but we also pursuing such opportunities in Hungary as well. In geothermal, we would like to build new upstream presence and capabilities. And after long preparatory period, we reached first gas in Kazakhstan in December. The production inputs or in the production results, you will mainly see second half of this year.
Finally, Moody's gave positive outlook to all the investment grades and its rating. If you go to the next slide. Regarding the TRR, despite of many unfortunate accidents and attacks, mainly in our far east of Pakistan production, we stayed below our guidance. The TRR full year 2023 value around 1.3, which is below our 1.4 guidance. We continuously committed to improve the safety of our people, of our facilities, and we are running simultaneous programs in all segments to enhance HSE awareness and protective actions. We implemented important change in our short-term incentive scheme and ESG factors, so sustainability and HSE factors are now weighted in our bonus system for the managers. So practically, now, we also adjusted our bonus scheme to have a direct impact on TRR and ESG results.
Regarding the sustainability part, we received an update from CDP, and MOL managed to retain its overall B rating at climate change, and we managed to improve in several other segments as well. So if you go to the next slide. Waste management performance. Throughout the entire year, we talked about waste management, but not separately. Here, I would like to first say that as of 2024, we will report circular economy services segment separately. Similarly, like others, we will practically EBITDA, CapEx, free cash flow, profit before tax, we will all post these figures for the segment. I think this will be the first full year and last year, because we started the middle of the year, it was really about preparation.
Preparation for the DRS, Deposit Refund System, managing to take over of all the activities, coordination of the collection, and so on and so on. The first half year figure is definitely a preliminary figure that you can see. It says, thirty-seven million dollar EBITDA, but, all the CapEx and heavy loaded, front-loaded CapEx, spendings, we think about free cash flow is negative, minus twenty-six million dollars. And of course, we are just at the beginning of our CapEx program, and of course, in the first years of the operation, it's just the start of our concession programs that we undertook in favor of the meeting the obligation, meeting the transformation, delivering the transformation of the waste management system in Hungary. So the DRS and biowaste collection started in January.
There is an interim period of six months for which the bottle producers has to also adjust to the DRS system, so it will be full functioning as of the second half of the year. If you go to the next slide. Some of the 2024 guidance, which you may have also a chance to question in details, if you are interested in the Q&A part. But definitely after the overall good and strong performance in 2023, we, we expect an overall continuation of this normalized trends, which we observed in the second half of the year. So we expect our operations and financials to overwhelmingly continue along the same path. So if you see at the 2024 guidance, we issue a $3 billion CCS EBITDA guidance. First time, we also issue profit before tax guidance, $1.68.
Regarding the metric targets, we also target to keep up the production, so to manage the decline of the upstream production, so keep the production level at 90,000 barrels a day, crude processing similarly, 12 million ton, group complex, 1.7 billion ton, and of course, the net debt to EBITDA, we just try our best to keep at the same level as we usually put as a guidance for our group operation. So please also note that the PBT and EBITDA guidance assume that there is no adverse change in the regulatory and taxation environment.
We issued PBT first time as a guidance, first of all, to help you to be able to calculate our liquidity position, cash position, especially if you are taking into consideration our CapEx type of expenses, and also taking into consideration our cash type of tax or similar tax government takes and other impacts that may affect operation. With this liquidity position, you can also calculate or estimate kind of dividend or profit per share type of metrics as well. We also would like to signal that 2024 is the year when we have the strategy revision. We are in the middle of our strategic planning, because we started a more 2030 transformation strategy, 2016, and so many things happened in the first half of this period, that this year we are-...
officially revising, revisiting all the strategic targets that we set for us, and we will come out with a new and revised update, strategy update, in the coming weeks. So practically, I think, we would like to contact you later on for our revised strategy presentation. Here, I would just like to, keep you posted with this, that there will be further updates coming out from us. Thank you very much. Here, I would like to pass to Mr. Simola.
Thank you, Mr. Bacsa . And, let me start on page 12- page 10, sorry, as usual, with the EBITDA overview, and, maybe just to start with that, last year was clearly not smooth sailing for us. I think it's pretty much choppy waters and strong headwinds, but all in all, with all of this, I think we could deliver strong financial performance, within the last quarter, the $992 million being somewhat higher than the previous quarter, and also on the yearly basis. Clearly that the $3.1 billion is significantly lower than the performance of the previous year, but if you look back at the last couple of years, I think overall, a good performance.
In this environment, I believe that we delivered strong results in all of our major business lines. As usual, you will hear a much more deeper coverage from the major business leaders. On this slide, just briefly on the gas midstream, somewhat lower quarter-on-quarter result, $62 million, but still, of course, the yearly number of $265 million is a very strong contribution, where I think the major impact of this is the much higher than usual demand for transmission volumes. As for 2024, I think it's, of course, very hard to predict, but generally, we expect kind of a normalization, i.e., lowering of this EBITDA number for the coming year.
And if you go to page 11, the CapEx spending, as expected and, as, predicted last quarter, a seasonally stronger spending of $605 million, organic CapEx, which is around 10% higher, on a year-on-year basis, but still, as a yearly number, the above $1.4 billion, remains below the last year's spending, and also is below the, around $1.7 billion guidance, again, as indicated earlier. Now, as for this year guidance, I think, you should expect a similar situation. The guidance is again, $1.7 billion, but I would expect us, as usual, ending up, on the conservative, side of this range when we look at this number in a year time.
Let's go to page 12, the below EBITDA items, where we will go through in detail in the next pages. I'd like to point out one item here, which is the special EBITDA item, a positive one of $73 million, essentially coming from the decrease in the decommissioning liabilities at our onshore fields. And that's very much connected to the positive reserve revision of the year and what to place this year. Now, if we go on page 13, the further details, CCS impact of minus $100 million in Q4. Crude, the closing crude prices decreased from $96 to $78 in the last quarter, and that's the driver of this negative CCS elimination impact.
EBITDA of $499 million for the last quarter, containing $175 million impairment for the Polish retail asset. The two major reasons for this impairment were the increasing bank on the back of the increasing interest rates, and also a contributor to this number was the kind of unexpectedly turbulent retail market environment in Poland last year. Without this number, the total is $324 million, which is somewhat higher than the kind of usual going rate in the last quarter, coming mainly from an accounting impact that the accounting closing of the Slovenian and Polish acquisition was finalized in the last quarter.
And so the impairment, the depreciation for those assets was booked before the whole year was booked in the last quarter. Total financial expense is -$40 million, which means $40 million dollar gain on this line. Essentially, the reason for this is the strengthening of the forint 2% to the euro, 6% to the dollar in the last quarter, resulting in an FX gain and at the end of the quarter, resulting in a positive number, a financial gain. Income from the associate, a $40 million loss for the quarter, and overall, a positive zero for the year.
Two major contributors in last quarter, we had a delay in the dividend from Pearl, which impacted last quarter number, and also we had to account for some impairment. Also the losses from UOG, our Kazakhstan company, are included here. Here, I'd like to point out that though we announced first gas and production at the very end of last year, that had practically no positive impact on the last year numbers and had loss for last year. Page 14, continuing the below EBITDA items, income tax expense of $136 million for last quarter, and $345 million for the year.
Now, looking on a yearly basis, the reason for the decrease is that clearly we have a much lower EBD and overall, profitability level, this year, resulting in lower corporate income tax base and, lower corporate income tax. We have a negative number of minus $98 million deferred tax, for the year. The main contributor to this was the impact of the Polyol tax break, which we booked, and also other changes in the Robin Hood calculation and other, technical impacts. Intersegment EBD of minus $60 million, for the last quarter. This is the impact of the inventory elimination in a decreasing, price environment. And finally, the C&O EBD of minus $19 million.
As George mentioned, that this number contains positive contribution from the waste management business. And that's why actually the major decrease in the negative number on a year-on-year basis, and also in the increase on a quarterly basis, because the waste management EBD was lower in the Q4 than in the Q3. So let's go to page 15, the operating cash flow. DD&A, we covered earlier. Income taxes paid $1.3 billion. As discussed in the last quarter, that this number contains several special taxes accrued in 2022, but paid in 2023. So that's why the relatively large number.
Maybe just briefly, changing working capital, a positive contribution of close to $300 million for the year, and $101 million dollar inventory decrease in the year, essentially realizing the lower, or realizing or seeing the lower crude prices throughout the quarter in the inventory release number. With this, the operating cash cash flow about 1.21 billion dollar, slightly higher than the PBT and conveniently covering the organic CapEx spending for the year. Page 16, a quick overview of the balance sheet. I think essentially, the major message is that we remained flat in the last quarter and kept and preserved the strong balance sheet and financing capability for the next year.
Technically, we had a small increase in the net debt in dollar, but because of the exchange rates, I mentioned we had actually a small decrease in the same number measured in forints. That's why the small fluctuation around flat in the numbers. But overall, I think we start with a very strong balance sheet the year of 2024. And with this, I'd like to hand over to Gabriel Szabó to cover the downstream results.
Thank you, Mr. Simola. Thank you very much, Joska. Good morning, ladies and gentlemen. Let me present, as mentioned, the results of the Q4 downstream results. In the reported period, we delivered fair results, as you can see on the chart, $456 million, which is better by 19% than last year. But as I mentioned several times before, during my comments to our downstream performance, it is rather difficult to make an apple-to-apple comparison because of the complex set of governmental takes, and I will mention those during my presentation later. Generally, the performance of the downstream was driven by a strong refining marketing segment, while the petchem remains still negative due to there is a bit improved, but still weak pet, petrochemical margins.
Sales covered by our own production, as you can see on the chart, was higher compared to base, as we had a turnaround period back in 2022 in our refinery in Arad, Romania. Also, as you can see, the fuel sales is matching the seasonality of the market as well. In the segment of polymer, there was no significant improvement in the demand last year. In terms of our major projects, the Polyol project in Tiszaújváros is mechanically ready. Currently, there is a handover ongoing and also challenging cold and hot commissioning works there. The DCU project in Rijeka, so formally, we did not get any information from the contractor about any delay, but on the other side, my colleagues recognized weaker mobilization of workforce than expected. Now, let's get to the next slide, please. Thank you very much.
So in terms of the macro, there is a change. First time, there is another Brent-Euro differential curve there, which I will explain in a few seconds. But, back to the refining margins, they got below $10 after the peak of roughly $13 in the Q3 , but there is also some improvement recorded recently. The Brent-Euro spread narrowed in the last quarter of 2023, and as I mentioned, there is the new benchmark price for Urals, which is DAP India, as roughly 80% of Urals export have been rerouted to Asian markets. Oil markets reacted, and in January last year, new index was introduced by major reporting agencies, Platts and Argus, namely the beforementioned DAP West Coast India Urals.
I believe, we believe that this benchmark gives more clarity to the financial predictions of the performance, so it should be help for you, and, for this reason, we decided to present it. In terms of the petchem margin, there is a slight improvement there, at the end, at the very end of the last year and even in this period, but still this is weak to fully cover our production cost. Now, let's get to my last slide, to the waterfall chart, please. So here you can see the description of the impact of several factors to our performance. So, on the quarterly comparison, we clearly see the impact of the weaker macro environment, which I mentioned before, which was partly compensated by better volumes, so better refinery utilizations and fuel sales.
There is also a column of other, which covers the extra taxes, so that you can see that there is a $26 million booked as an CO2 quota in the last quarter, last year. Having a look on the year-on-year comparison, we see the impact of similar factors, so worsened macro environment, both in refining and petchem. And in the category of other, there is an impact of governmental takes and also the impact of high inflationary environments to our performance. In terms of tax, there is mention on the slide that there is $95 million as a CO2 tax. There is a $193 million as a revenue tax. Beside of that, there is also a Brent oil tax in the amount of $70 million.
There is also of the impact of the high inflation, which I mentioned, and mainly to our personal cost and logistic cost. So all in all, my evaluation of the last year is that we delivered a good performance, and thanks to my colleagues in downstream management and also on shop floor, we were able to seize the market opportunity last year. And with this, let me hand over to Mr... Sorry, to consumer services, Mr. Ratatics. Thank you.
Thank you, Gabriel, and good morning to everyone. But first of all, let's talk about the Q4 and then just a few sentences about the full year. In the Q4 , the EBITDA grew by 61% compared to the last year, same period, and actually we reached $144 million. To compare the Q4 with the Q3 , that's not really meaningful because of the significant seasonality impact during the summer period in the Q3 . So that's why actually it's worth to compare it with the same period last year. And compared to that, obviously, you can... To the release of the regulation on the Hungarian market, the fuel sales volume increased by 10%. However, the impact was several.
On the Hungarian market, we suffered 20% decrease due to the abolishment of the retail price. However, on the neighboring market, we gained it back, especially on the Croatian market, on the Slovakian market, and also on the Czech market. The fuel margin considerably higher, all in all, as a quantum, because of the higher or more healthier unit margin on the Hungarian market. Also, the non-fuel margin continued to expand, 32% increase year-on-year in the Q4 , while the volumes also were supported by the inorganic service stations in Poland and also in Slovenia. Regarding the acquisition, also let me highlight and confirm what Mr. Simola said about the impairment sizing in the Polish operation.
Altogether, we booked a $175 million dollar impairment amount. As a special item, the main driver for this impairment was actually twofold. The one is the increased discount rates, while the other one was the first year result, last year from the 2023 year's result. Actually, that was significantly lower than what we originally planned or expected. That was mainly due to the turbulent market operation on the Polish market, that not really affected exclusively just us, but entirely all of the market operators suffered significantly lower unit margins and business performance. So all in all, these two kind of large effect drive us to account it, this $175 million, but I have a positive outlook for the entire operation.
Last year, we finished 200 service station reconstruction or a change of the LBIs, and we will continue it in the first 2 quarters this year. Much probably we will finish it by the end of the year, the entire Polish operation. And with that, actually, I really hope that this year and also next year, we will have a much more stable operation and profitable operation on the Polish market as well. The retail tax increased, but actually due to the already very high base, actually the full year impact was... Sorry, the Q4 impact was $2.3 million compared to the base period.
While we still trying to mitigate the OpEx increase in every kind of item, the direct salary impact on the service stations, mainly due to the minimum wage increase, but also the high energy prices and the inflation boosted the OpEx. But we have initiated several actions to mitigate it. Now, if you turn the page to the Q4 on this next slide to analyze the fuel from the Q1 point of view, you can see that the volumes increased. Also, there is a large contribution from the inorganic, altogether 260 million liters.
But if we exclude the price cap impact in the Q4 on the Hungarian one, and also we exclude the inorganic effect, then regionally, we can say that a healthy 2%-3% market growth and operation growth were accounted. And with that, I think we not just maintain, but also slightly improved our market share position. All in all, the network size at the end of this period was 2,421 sites. That was practically 28 service stations lower than in the Q3 , because we started to hand over in Slovenia the remedy package to Shell. And also in Poland, we did not continue the cooperation with some franchise partners. All in all, actually seven franchise partners were discontinued.
The next slide, actually on the non-fuel. The non-fuel operation is probably the most resistant one against the government election measures and the regulations. The non-fuel margin increased by 32% in constant local currencies. But this year, and in 2023, all in all, we can say that the local currencies were stronger than the dollar. That's why we have a positive currency effect throughout the whole year. And the reported in currency terms, the non-fuel margin increased by 41%. Without the inorganic impact, the non-fuel margin increase was 14% year-on-year, so compared to the Q4 .
The non-fuel margin share, after the stabilization of the margin generation on the fuel side, we can say that the non-fuel represents 34% of the total margin. Which is, I think, a very solid result. And actually, our original target was the year 2025 to reach the 35%. So I think we are on the way to reach that. The number of the total non-fuel transaction increased by 27% year-on-year, mainly inorganic effects, and 3% without the inorganics. So actually, the sales increase or the turnover increase was due to mainly of the increased basket size.
Also, you know, as part of our strategy within the non-fuel operation, we are heavily focusing on the gastro items, that gives us some more healthier unit margin and margin improvement. And that's what you can see actually, if you compare, the turnover increase versus the margin increase. And last, the last slide, we prepared a kind of holistic overview, a bit deeper into the, into the non-fuel operation. While the fuel market has been hit by several one-off events, during the last, few years, the non-fuel market, was not really hit by those. That's why we are able to, kind of, draw some conclusion on the, on the trends, and the direction or the trajectories.
We have put a lot of emphasis on product developments in the past years, resulting in sharply increasing volumes in some of our offers. The underlying growth is organic, but also in the inorganic growth, the demand for our offers was very strong, and that gives us also a confirmation that this direction can be very beneficial for us. We can have the best products, and also if you combine it with a very good loyalty program, a reward-based digital loyalty program, then these both in the combination can boost the results.
All in all, you can see that 3.4 million active customers use that application in the kind of original network size without the inorganics, and with the inorganics, the number will increase significantly during this year as well. So altogether, we see that our Fresh Corner concept and product positioning strategy, supported by this digital loyalty program, has been paying off in all respects. Last but not least, the evaluation of the last year in one sentence is roughly or very close to $700 million. EBITDA number is an absolute record in the Consumer Services.
Actually, during our strategy revision, we just got the confirmation that this is a good direction, and what we need to kind of push further and just kind of increase the pace towards to the realization of all the potential what the market brings us. And with that, now let's listen to Zsombor , who will then present the upstream results. Thank you.
Morning, ladies and gentlemen. Regarding the upstream performance, a combination of three positive trends dominated our Q4 performance. Firstly, a strong and healthy production level for the upstream, especially with the meeting the production level commitment in Hungary, and this triggered the pre-2022 royalty regimes in Hungary, including royalty rates and the avoidance of penalty. These two previously mentioned effects, coupled with the slightly better hydrocarbon prices, resulted our quarter-on-quarter EBITDA performance up by 92%, standing at $375 million. It had also, of course, a positive impact on our annual performance as well, landing the division at $953 million for 2023.
So on the royalty, firstly, a more rational taxation regime in Hungary, which actually had a positive effect on our results, for reversal of two type, two items as well. The extra royalty levy recorded for September could be reversed because of the contract with the authority, came into effect starting from first of September, and it had also a positive result on our Q4 results. Secondly, the extra royalty-related penalties previously approved for 2022 and 2023 could also be reversed in light of the contract with the authorities because of the fact that the production level was delivered. However, let me also note that even without the taxation impact, the EBITDA growth was 10% higher quarter-on-quarter. Rise is mostly due to the production levels, rising by 5% compared to the Q3 .
But also need to say that the total year hydrocarbon prices also showed slight increase, and that helped our results. Let me also shortly add and clarify that the decommissioning liability revision, which was positively impacting our results, we handled it as a special item, the $73 million. So what I'm now analyzing on this slide and the following slides is this lower adjusted amount. If we move to the next slide, let's look at the unit profit and the free cashflow. In terms of the free cashflow realization ability of the division, you can see normalization. However, this normalization is very different if you look at our quarterly numbers or you look at our annual performance.
So in the quarterly analysis, you can see we capture $23 of free cashflow for each barrel oil equivalent we produced in the Q4 . This is a significant rise, both in absolute and also proportional terms, compared to the first three quarters. This normalization is driven by the pre-2022 taxation, largely. And this is what we can see in the quarterly numbers. Comparing, however, the full year with the previous years, also we see normalization, but in a very different kind of normalization. This is more global trend and reflects the supplying effects of energy crisis experienced in 2022, coupled with lower hydrocarbon prices and the return of the pre-2021 profitability margins.
If you move to the next page, the quarter-over-quarter bridge highlights positive price effect, price effects externally, although most of this is due to the accounting effect of the royalty regime. You can see that the Q3 EBITDA was still hit by extra royalty, which was about $80 million, while in the Q4 , there was also a positive effect of $63 million due to reverse of the previously mentioned items of the 2022, 2023 penalties and the September accrual. So apart from these extra tax effects, improving price environment and higher healthy production, both led into the EBITDA quarter-over-quarter.
If we compare that to the base, the drop in prices and effect reflects the normalization of the hydrocarbon prices in 2023, and this is partly offsetted by the extra royalty levy impacting the Q4 2023 and more than the Q4 of 2022. You can also see that the volumes are slightly lower in the last quarter of 2023 versus the last quarter of 2022, and that's mainly due to the export line closure between Kurdistan and Turkey, and then the lower production of our Kurdish operations. Now let's proceed to the detailed volume analysis.
So what we expected and committed in November, that the production will be back, and you can see an increase notably in the Q4 to 91.5 thousand barrels a day production, and that's significantly adding from Hungary, Croatia and also Kurdistan coming back in domestic production. Let me note also that the turnaround effects in the Q3 in Croatia was completed as planned, and we recapped our production level as well. Volumes in Hungary rose well above the average levels in Q4, and let me note that we have been able to deliver the production level we committed to the authorities for the year of 2023.
The Kurdistan situation between the governments of Iraq, Turkey, and the Kurdistan region of Iraq, which are resulting in the shutdown of the export pipeline of Turkey, has not been resolved yet. However, we see revamp on production and domestic sales, and that added 900 barrels to our production compared to Q3. The ACG entitlement increased in line with the PSA mechanism, also to 14.1 thousand barrel production today. So, short update on how we think about the year 2024 going to evolve. We believe that we will continue to be successful in slowing down and arresting the natural decline in the region.
On the international portfolio, we foresee Kazakhstan field development to bring extra production barrels already in the second half of this year, after the first gas and the field start end of last year. Regarding the ACG in Azerbaijan, the seventh platform of the offshore field was put into operations in Q4 last year, and we expect also some production in 2024 from this operations as well. If you go to the unit OpEx, finally, let me give you an update on the developments of the OpEx and the CapEx. So as I indicated in the November call, the Q3 uptick in OpEx was only temporary because of the turnaround, and there was now a decrease quarter-on-quarter.
However, we need to say that the inflationary environment and the asset mix we have, and the expected energy mix in our portfolio, we don't expect the OpEx continue decreasing. However, we put, at the same time, a very strong pressure on decreasing cost, putting synergies and the bottlenecking projects into our operations, especially in the CEE region . With regards to the CapEx, that is a 2% year-on-year decrease registered in 2023, but we also see this CapEx slightly going up in 2024, because we will have an in- and heavy investment program in the CEE region to arrest the natural decline and also continue the field development in Kazakhstan, which I mentioned in the previous slide.
Last, let me highlight that we had two geothermal exploration licenses granted in Hungary after we got two in Croatia. We are very excited to have these geothermal projects kicking off, and we consider these as a good value chain extension of upstream, building on our current and existing knowledge and expertise. Thank you very much for your attention.
Thank you very much, gentlemen. So, that completes the formal part of our presentation. I would like to now open the floor for the Q&A session. So if you have a question, please raise your hand, Lisa, go ahead.
Good day. Thank you very much for your presentation. I have several questions, if I may. First will be on windfall tax in Slovakia. It looks like you didn't book the windfall tax in Q4 . Is there anything planned for next year? I think there was discussions there will be the windfall tax for 2023 as well. The second question would be on the outlook for waste management. Thank you for the update on the strategy plan. If you can give the guidance when it will be, it will be amazing, but also, if you can give some highlights of what EBITDA should we expect from waste management in 2024, that would be very helpful. And finally, one question on the upstream side.
With this production growth in Kazakhstan and ACG, what would you expect in terms of contribution 2024 from this project? Thank you.
Thank you. If I may start answering the questions. Regarding the first one, the Slovakian solidarity contribution, still there is the ongoing audit process, and that one is a formula-based solidarity tax. So until that professional process or project is not resolved, I think we are not ready to give any status update or any statements regarding that one. So please understand that this is practically part of the year-end audit processes. The other one, for the waste management, I think, as I mentioned, as of this year, we will come out with reporting the EBITDA figures and the CapEx, and also the cash flow. First, we would like we would start performance reporting.
As I mentioned, this is a starting business, so we are at the first phase. First, we have to consolidate the data regarding the entire management. We would like to report all the factual data more and more precisely, and taking also into account all the, the, as I mentioned, still little bit moving targets, when and how the certain elements will be introduced, and so on, and so on. So guidance, we will come out only later. So first we start reporting the performance. We don't plan to issue guidance for the waste management. After we set the reporting practice and we have the reporting figures for the future, of course, as a normal practice, guidance can be issued as well.
For the time being, there is no plan to issue guidance for waste management. For the rest of the questions, I would ask my colleagues to answer.
On the upstream part, the ACG production and the additional will help stabilize the production of the field to arrest natural decline. So, these are the things that we planned into our guidance. Also, the Kazakhstan increment you can see in our production plan. The first well is now producing with about a growth for 5,000 barrels, and we've been planning to add 4 more barrels into production this year. So, the production level will be about 5,000-6,000 net to oil for the half of the year.
Thank you very much. Just to follow up, if you can comment when the strategy update is planned? Is it like next month or later in the year? Any timeline?
Yeah, if I may say, because we still ahead of couple of internal alignment, but it's a matter of weeks, so few weeks, not several months. So it's in few weeks' time-
Thank you.
We finalizing this internal alignment processes.
Thank you very much.
Tamás Pletser, go ahead.
Yes, thanks very much. Good morning. I got two questions. First of all, can you give us an update on the discussion with JANAF? How do these negotiations look like? When do you expect any results with them? And my second question would be regarding your Rijeka and Polyol projects. You said some things already during the call, but when... What kind of profit contribution can we expect from these projects? When do you expect them to finish, and when do you expect them to generate some earnings to you? And finally, just kind of an interest. The current regulation in Hungary, this differential, it actually refers to the European oil prices.
Am I correct with this assumption, or was there any other reason you mentioned the, let's say, the Indian Urals difference to the Brent? Thank you.
Yes. So thank you very much. Gabriel speaking. Thanks for the questions. So the first part regarding the JANAF, so as you can learn from the media, we are in a challenging negotiation with our partner. So you may know that this, pipeline is very important, mainly for our Slovnaft refinery in Bratislava. As to comply with the sanctions, we have to process also alternative crude beside of the Russian crude. And, yeah, we are rather concerned about the standpoint of JANAF, as we do not clearly see the, the basis of their, price offer, and, we believe that in long-term partnership, rather the, the, the cost structure should be, should be transparent. So currently, we do not have a contract with JANAF. We are still in negotiation.
It doesn't mean that alternative crudes will need supply to our refineries it is, but the commercial basis of this is still pending. In terms of the project, so I believe that this year this will be just the startup of the unit, so I would not count with an extra EBITDA delivery. So this-
... we will start up the plants, the Polyol. There will be a learning, as this is a new technology to the MOL Group, so it would be rather the kind of piloting and testing period this year. And your last question, yeah, last part, Tamás, once again, please.
Yes, this was the, so what was the reason you mentioned this discount?
Ah, yes.
in the prices?
Right. So this was like the help for you. So you can imagine in this volatile environment, it is rather complicated to negotiate the crude purchase for a long-term period. And as I mentioned, the Brent-Urals differential to Rotterdam-Mediterranean is not really liquid, so we do not believe that this is really reflecting the... Or there are just few close positions, we believe, and it's not really reflecting the real price of the Urals. So it's rather the help for you.
Thank you.
Sorry, how is the Hungarian law? Is it—does it say that the Urals should be the Mediterranean Urals price, or does it, or is it not, let's say, determine this Urals? So this is... How does it look like? Can you just tell us about that? Yeah, so in terms of the law, I'm not—I have to admit, I'm not fully in the picture on the Hungarian law, so we will—you will get contacted by my colleagues to explain what is the particular legal statement there. Or if my colleagues from finance are able to provide it, they can share that with you right now, but I'm not in this position, so I do not know the law in detail. Sorry.
Yeah, Tamás, this is, Edit Berkó , head of tax. The actual law compares the quoted Brent price to the actual cost of the Urals. So the Urals is not based on a quoted price in the acquisition.
Okay, so that's basically the cost you pay for the Urals?
Exactly. The actual cost.
Okay, good. Thanks so much.
Okay, thank you, Michelle, please go ahead.
Yes, hello. Good morning. My question is about this positive royalties effect within upstream division. Could you explain me how the mechanism works? If I understood correctly, you agreed with the regulator for some volume to explore, and if you fulfill it, you pay lower royalties, and if you fail to deliver it, you pay higher. Is it correct way of thinking? And eventually, is something changing in the royalties regime in fiscal year 2024? So the question is, is it this sustainable or is it rather one-off effect in Q4?
Okay, so on the regulation itself, this regulatory pressure on the higher royalty tax is valid by the end of this year. And by more committing to previous years production level, we are able to enjoy the pre-2022 royalty rates. However, we need to meet production levels. And if you meet, if you don't meet production level, we need to pay penalty. So what you see as $140 million positive effect on Q4, that $80 million is for the pre-2022 royalty rates, and $60 million is for the accrued penalty for the years of for the previous years.
Mm-hmm. Could you, quantify, say, what level you have to achieve?
We need to achieve 2021 production level for the Hungarian production in 2023, and 2022 production level in 2024, both oil and gas. And we are in talks with the government and with the authority on how to sort of what is going to be in the year 2025. But currently, there is no windfall levy applied for the year of 2025 because the current regulation expires.
Okay, thank you.
Okay, Anna, do you have a follow-up question?
No, no, thank you. That's all for myself.
Okay, thank you very much. With that, we'd like to end the Q4 2022 presentation. Thank you very much for your participation, and of course, you can reach out to IR anytime to seek some clarification. Thank you very much.
Thank you, Mike.