Year on year to the level of 9.8 dollars per barrel and higher fuel consumption as a result of losing COVID restrictions translated into increase in sales volumes by 9% year on year and 10% quarter on quarter. In Q2, we processed 6,800,000 tons of crude oil, so 10% more than in the previous year, which is 78% utilization ratio. Crude oil throughput was adjusted to the fuel demand as usual and also to the maintenance shutdowns that we had in our Petrochemical segment. Our financial situation is still very strong. In Q2, we generated PLN5.1 billion cash flow from operations that I mentioned at the beginning.
We realized CapEx at the level of PLN2.4 billion. And as a result, we reduced our net debt by PLN2 1,000,000,000 compared to Q1 to the level of PLN11.5 billion. Covenant net debt to EBITDA remains at the safe level of 0.87. In May, PK Air Onlen, as the 1st company in Poland, issued 7 year bonds worth €500,000,000 with 1.125 percent coupon. The issue of green bonds met with really great interest from investors, yes.
So the subscriptions were made for a total amount of nearly €3,000,000,000 which means that demand was 6 times higher than the volume of assumed issue. Funds from the issue, of course, will be source of financing investments in renewable energy sources, including offshore and onshore wind farms as well as charging infrastructure for electric and hydrogen cars and waste recycling installations. In May as well, Annual General Meeting of PK and Orland approved the dividend payment for 2020, recommended by the management board at the level of PLN 3.5 per share. The dividend will be paid on the 5th August. Additionally, in the Q2, state treasury with PKN Orland, PG and IG and LOTUS Group considered non cash structure of the merger, and it was positively assessed by Fitch Rating Agency.
European Commission extended deadline to select the partner for remedies within acquisition of locals group till 14th November this year. PK and Orlin applies to anti monopoly bodies for Constance to acquire PG and IG. We opened a brand new R and D center in Post. We commenced expansion of Olefin complex in Post, the largest petrochemical investment in Europe. Just to remind you, total value of the investment is estimated at the level of PLN 13,500,000,000.
Orlan became the most valuable Polish brand worth PLN 10,000,000,000. Orlynytuba took control over the only railway terminal at the Polish Lithuanian border, which is used for reloading petroleum products manufactured in Moshekyo to be delivered to Polish and Ukrainian markets. We opened the first store with a wide gastronomic offer format on the brand name Orland Vroco, which means Orland in Motion in Warsaw. By the end of the year, another 40 points will be opened in the largest poly cities, and there will be a total of 900 of them. We also actively support the development of innovation in Poland.
We launched Poland Skylight Accelerator, the 1st corporate accelerator program in Poland for technology startups with an international range address to young innovative companies from around the world with ready made products and services with the purpose of which is to support the further dynamic growth of PK and Orland Business, IES like petrochemical production, energy and retail sales. As a part of sustainable development, So ESG, we launched Hydrogen Eagle program, assuming the construction of international network hydrogen hubs powered by renewable energy sources and construction of over 100 hydrogen refueling stations for regional clients, public and also cargo transport. Orland Pausnier is finalizing investment in ecological glycos and together with PG and IG is developing career of biomethan production. As the largest sponsor of Polish Sports and Culture, we published the 1st sponsorship report. It's worth to underline also that the 7th time in row we received CSR Gordon lead by Politica, which confirms that we consistently implement the ideas of social responsibility and sustainable development.
And in June, the 4th edition of My Place on a Worth program was launched, under which Oren Foundation will donate another $2,000,000 polyzlotted to support local communities. And during last three additions, dollars 8 in the amount of $7,000,000 was granted to nearly 900 organizations all over the Poland. Now I will go into the details of the Q2. So let's move to Slide number 5. Macro environment.
In Q2, modeled upstream margin increased by US2.5 dollars per barrel compared to the last year to the level of US9.8 dollars per barrel, and it was mainly the effect of increase of petrochemical margin by 74 year on year to the record high level of almost €1500 per ton and also higher BU differential by US1.9 dollars per barrel. Refining margin was still under the pressure as a result of lower kraft on diesel by minus 40%, heavy fuel oil by minus 100 and 45% and higher cost of own consumption due to increase in crude oil prices by more than 130%, with a simultaneous increase in gasoline crack by 148%. Operating results were supported by weaker polyzlote versus euro as negative impact of stronger zlotle versus dollar. Next slide, Slide 6 shows GDP and fuel consumption. So we may say that we expect higher fuel consumption year on year on all domestic markets as a result of losing restrictions in movement related to COVID, which, of course, translates into higher GDP.
In Q3, we expect fuel consumption dynamics to flatten compared to the last year, which is already shown in July data on fuel sales. Now I will present financial and meeting results. So let's start from Slide 8. But one comment from my side before I go into the details for better comparability, operating results for the Q2 and also 6 months 2020 were cleansed from one off gain on the Bargain purchase of Energa shares recognized in the 2nd quarter at the level of over PLN 4,000,000,000. And also, for your convenience, we added a few slides in the supporting section.
So, slide number 30, split off EBITDA LIFO by segments, including impact of naturalizable value hedged in total, including CO2 hedge and also Slide 31 and 30 fully dedicated to the issue of valuation and settlement of CO2 contracts. So, it's worth to dig in and have a look on this because this is summary what we presented in the whole presentation. In the Q2, we recorded revenues increased by 73% year on year due to higher quotations of refining and petrochemical products resulting from crude oil price increase by 39 per barrel and also higher sales volumes by 9%. We achieved PLN3.2 billion EBITDA LIFO, which is higher by $1,200,000,000 compared to the previous year, mainly due to, first of all, positive macro impact, higher sales volume, higher trade margins in wholesale and nonfuel margins in retail, usage of historical layers of inventories as a result of maintenance shutdowns and also higher Energa Group results. Those effects were partly offset by negative impact of inventories revaluation as well as lower fuel margins in retail and higher costs.
Positive impact of changes in crude oil prices on valuation of inventories in the Q2. So LIFO effect amounted to PLN 1,000,000,000. What cost an increase in the reported EBITDA to the level of PLN4.2 billion. Net financials amount to PLN0.1 billion. So as a result of the surplus of positive equity differences at negative interest cost and net impact of settlement and valuation of derivative financial instruments.
And taking all into account, in the Q2, we achieved PLN2.3 billion net profit, which is record high 1 in the quarterly results. Next slide, Slide 9, presents speed of EBITDA LIFO by sector. So starting from the refining, It generated almost PLN 300,000,000 EBITDA, like so, results lower by PL 316,000,000 PLN year on year due to negative macro impacts and revaluation of inventories, naturalizable value at positive impact of higher sales volumes, higher trade margins and usage of historical layer of inventories. PetGen generated over PLN 1,000,000,000, so higher by PLN 770,000,000 year on year due to positive macro impact and usage of historical layers of inventories at negative hint of lower sales volume. Energy generated over PLN1.2 billion or higher by PLN475 1,000,000 year on year due to positive macro impact and higher Energa Group results at negative impact of lower sales volume.
Retail generated PLN 8 128,000,000, which is higher by PLN 102,000,000 year on year. And here, we have a positive impact of higher sales volumes, higher nonfuel margins and negative impact of lower fewer margins and higher cost of running the business. Upstream generated PLN 60,000,000 of higher result by PLN 50,000,000 year on year due to positive macro impact, that's negative impact of lower sales volumes and cash flow hedging transactions. And corporate functions, here we've got lower cost by PLN 100 and million and this includes mainly donations and expenses on COVID, which we spent last year. So now let's go into the details, slide number 10.
In the Q2, refining, as I said, recorded almost PLN 300,000,000 Polish standing behind the weaker performance of the refining segment year on year. This is due to decrease in cracks on diesel and heavy fractions, strengthening of polyzlota versus U. S. Dollar, negative impact of cash flow, hedging transactions and higher cost of internal usage resulting from higher crude oil price. And these negative effects were partially compensated by positive impact of higher BU differential, higher Gavel and the jet cracks and valuation and settlement of CO2 contract as a part of transaction portfolio in the amount of 216,000,000, but it's not a year on year.
So this is shown in the supporting slides, as I said, number 30, 31 and 32. Positive volume effect, fully compensated negative macro effects. So sales volumes in the Q2 increased by 11% year on year to the level of 5,800,000 tons. We recorded higher gasoline sales by 15%, diesel by 12%, jet by almost 120% at lower sales of LPG by 6%, HSFO by 5%. Others include mainly minus PLN1.2 billion, so lack of a positive impact of inventory valuation, net realizable value from the Q2 last year.
So this quarter, net realizable value is not material and is equal to just PLN 14,000,000. And also PLN 500,000,000 is a usage of historical layers of inventories, higher trade margins at higher cost of CO2 emission. So now Slide 11 shows operating data of Refining segment, Starting from crude oil throughput. Crude oil throughput was adjusted to the fuel demand and the maintenance shutdowns in Petrochemical segment. So, in the Q2, we processed 6,800,000 tons of crude oil, so 10% more than in the previous year, mainly due to significant increase in unitpetrol utilization ratio.
So, doppot in uni petro increased by 0,800,000 tons year on year due to low base from Q2 2020. We had cyclical shutdown of refining and petchem in Litvinov. And we also had a delayed start of refinery in Kralopak after the shutdown from March last year. And currently, also, this is the impact of higher demand for fuel. In petchem, shutdown of steam cracker, PE2 and PE3 installations due to lack of the feedstock and also plant maintenance shutdown.
PK in Orland recorded decreased by 0,200,000 tonnes year on year due to maintenance shutdown of CDU units, hydrogen plant and metathesis and utilization ratio in the second quarter was adjusted to olefin shutdown and last year ago, of course, the limited demand for fuel as COVID impact. And in Orlan Itova, throughput was at comparable level at lower utilization by minus 1 percentage point year on year. As for sales volumes, sales amounted to 5,800,000 tons, so increased by 11%, of which Poland by 11% Czech Republic, 34% Lithuania by 1 percent. So higher sales in all the markets was the result of losing COVID restrictions. Now let's move to Slide number 12.
In the Q2, Petchem delivered over PLN 1,000,000,000 of EBITDA Life, also 4x higher than a year ago. This is the effect of record high petrochemical margin, valuation of settlement of CO2 contracts as a part of transactional portfolio in the amount of 287,000,000 polysilot year on year and weakening of polysilot versus euro. Margins increased on all the petrochemical products. But despite record high margins, of course, we were not able to take the full advantage of the market situation due to realization of plant maintenance shutdown of Olafin unit in Porsk, and we recorded a decrease in sales volumes in Poland by minus 27% year on year at higher sales in Czech Republic by 58% and Lithuania by 367%. Total petchem sales in the second quarter amounted to 1,000,000 tons and was lower by 4% year on year, of which lower sales of Olefins by minus 69%, PVC minus 22% at higher sales of polyolefins by 23%, fertilizer by 12% and PTA by 3%.
The result on PTA sales was over 30% higher year on year at comparable annual results to the Q2 2020. Slide number 13 shows operational data of petrochemical segment. And we may say that the utilization of petro chemical installations in the Q2 was lower in Poland and Lithuania due to realization of plant maintenance shutdowns in Plotsk and Watsover due to shutdown of Olafin unit and in Orlinito as a result of wider scope of works during the pink maintenance shutdown comparing to the last year. In the Czech Republic, utilization ratio increased by 69 percentage point year on year as a result of low base in Kyoto 2020. To remind you, last year, Unipero had a cyclical shutdown of Lidfino refinery.
Now let's move to Slide 14. Energy generated over PLN 1,200,000,000 EBITDA LIFO in the second quarter. So, more than 60% comparing to the previous year, mainly due to Energa Group result being higher by $537,000,000 year on year and the valuation of CO2 contract settlements within transactional portfolio in the amount of PLN217 1,000,000. Positive effects were limited by negative impact of margin on electricity due to higher gas prices percent also CO2 prices year on year by minus NOK 142,000,000 and also lower volumes by minus 114,000,000 pottys. Sales of electricity decreased by 6% year on year, mainly due to 1.5 month shutdown of CCGT in Torsk.
So now let's move to operational data of Energy segment. So Slide 15. And this definitely confirms that we focus on developing low and 0 emission energy sources. So in the Q2, Olin Group produced less electricity by 7%, mainly due to CCGT plus shutdown production increase in conventional energy in Ostrovanka, following, of course, the higher demand from state owned grid operator. Total production amounted to 2.6 terawatt hours, of which 70% was from renewable sources and gas fired power plants.
Current installed capacity of Orland Group is 3.4 gigawatts of electricity, of which 2 gigawatts in Orland Group over 1.4 Gigawatts in Energy Group Energa Group, sorry. Compared to the previous quarter, new Renewable sources capacity was added at the level of 0.1 gigawatts of electricity, so new plants, Kanin and Novotna. Electricity sales decreased by 6% year on year to the level of 6.6 hours, and this is mainly due to lower sales in wholesale aimed at portfolio optimizations and also drop off electricity usage by business clients at higher usage by households during COVID period Electricity distribution, which is fully realized via Energa operator, increased by 16% due to the level of 5.8 terawatt hours, and this is mainly due to low base from previous year economic recovery and also higher number of energy connection points. CO2 emission in energy segment in the 2nd quarter amounted to 1,900,000 tons, which is over 50 percent of Orland Group emission that is amounted to 3,700,000 tons in the Q2. Now Slide 16, retail.
Retail generated in the Q2 EBITDA LIFO in the amount of PLN 828 million, which is higher by 14% year on year. In the Q2, we recorded decrease in fewer margins mainly on Polish, Czech and German markets at comparable level of margins In Lithuania, year on year, retail sales volumes increased by 13%, of which Gasoline by 19%, diesel by 11% and LPG by 13%. Non fuel margin in the 2nd quarter was higher year on year in all markets, especially sales of hot snacks and hot beverages. We expand also availability of alternative fuels. So currently, we have 278 points of alternative fueling, which is more by 104 comparing to the last year.
Slide 17 shows operating data of retail segment. And at the end of the second quarter, we were running 2,854 fuel stations, of which circa 80% was equipped with non fuel concept StopTuffer and StarConnect. Number of fuel stations increased by 22 year on year. We also opened new stations on all of the markets we operate except Germany. And due to losing COVID restrictions, retail recorded sales volumes increased by 13% year on year.
And the higher sales, we may say, it was observed in all of the markets. Market share increase in the Czech Republic and Slovakia, a drop on other markets. We consequently the Valencio sales in 2nd quarter and other 2 locations were opened. And at the end of the quarter, we were running 2,239 coffee corners, which is more by 77 locations year on year in Warsaw, as I've mentioned at the beginning, we have launched the first Orland Rocco concept. We are expanding portfolio of alternative fuel stations.
At the end of second quarter, we had two seventy eight, which means increased by 104 locations, of which 89 in Poland, 15 in Czech Republic, a comparable number in Germany. And our clients can use 232 EV chargers, 191 in Poland, 30 4 in Czech Republic, 7 in Germany. We have also 2 hydrogen stations located in Germany and 44 CNG stations in the Czech Republic. Slide 18. So Upstream in the Q2 delivered PLN 60,000,000 EBITDA LIFO, which is higher by PLN 50,000,000 polyzote year on year.
This is the effect of rising prices of all hydrocrabones. So margins impact was higher by roughly speaking, PL100,000,000 compared to the previous year, at negative impact of hedging transactions at the level of minus SEK40 1,000,000. Moreover, what I see, we recorded sales volumes decreased by 9% year on year as a result of drop in average production by minus 0.9 1000 BOE per day year on year, of which in Canada by minus 1,000 BOE per day at higher production in Poland by 0.1,000 BOE per day. And Slide 19, operational data of Upstream segment, we may say that we have 174,000,000 BOE of top reserves of crude oil and gas, so this was at the end of last year. Average production in the 2nd quarter reached 17,900 BOE per day.
CapEx in the 2nd quarter amounted to circa PLN52 PLN2 million, of which 35% in Poland and 65% in Canada. In Poland, within development of existing vessels, we conducted works on Neoten, H and also projects realized with PG and IG. Drilling works included construction of drilling sites for Bruknek well on the Neoten project as well as design and preparatory works for drilling future wells. On Plotk project, Within seismic activity works, we completed processing of seismic data of Corteva, Miasco 3 d and started in the presentation. This is the edge plot and we completed seismic interpretation of 2 data to the data on the Carpathi project.
In Canada, investment works regarding development of Ferrier and Kakwa assets were continued. 2 wells were fracked and added to the production in Cakfa. Drilling of 1 well was started in Ferrier. So currently, works to prepare locations for further wells are in progress. The process of acquiring new concessions right in the highly prospective part of low end assets was completed.
So That's all from my side. Now I hand over to Michal. Thank you.
Thank you, Konrad. Good morning, everyone. Let's start with Slide 21. Cash flow looks very strong in this quarter. We have recorded historical high net income from operations in 2nd quarter of PLN 5,100,000,000.
Of course, EBITDA, including LIFO, Lipo effect, was contributing the most with €4,200,000,000 but also categories were positively to operating cash flow. We have improved our working capital by PLN0.4 billion, mainly driven by the strict control of payables and receivables. Also, we have recorded a positive cash flow from settlement of deposits, mainly related to CO2 hedging activity. Net outflow from investment reached PLN2.9 billion in 2nd quarter, out of which €2,400,000,000 lots was CapEx. Altogether, over the last 6 months, we have recorded €7,700,000,000 EBITDA.
Working capital actually stays at very similar level to end of 20 20, we have spent PLN4.2 billion on CapEx and additional PLN1.4 €4,000,000,000 on purchase of CO2 emission rights in March this year. This purchase was partially offset by cash inflow from settlement of deposits of DKK1 1,000,000,000, altogether over the last six I would just I would like to recall that we have currently, we have over $14,000,000 contracts for CO2 in our portfolio. Other position covers mainly cash spendings on acquisitions, advanced payments to our contractors, income tax paid, the leasing payments, interest paid and dividends received. In total, we have decreased our net debt by €1,600,000,000 versus end of 2020. The improvement of debt over the last quarter is even stronger.
You can see it on Slide 22. So we decreased that by 2,000,000,000 slots versus end of March 2021, even though we have recorded 244 for a million lots of project finance nonrecourse related to acquisition of onshore wind farms in Kvaerneitza, Subcovo and Noronha. Due to a very strong EBITDA and decrease of debt, we recorded lower net debt to EBITDA ratio of 0 0.87%. I would love to mention that this quarter, we are not taking calculation profit on the Pergan purchase of Energa, which was recognized in Q2 of 2020 for calculation of this ratio. So this ratio is purely calculated now based on the EBITDA result this one off and on the net that level, of course, excluding hybrid and project finance, nonrecourse finance.
As Konrad mentioned, we have issued in Q2 our inaugural green eurogreen bond of €500,000,000 The profits coming from this issuance will be used mainly for development of renewables, hydrogen fueling and EV charging infrastructure and recycling installations. Currently, over 30% of our outstanding debt is sustainable or green debt. In May, Fitch place our ratings on the positive watch list for announcements, new announcements and more details on the merger with PG and IG and LOTUS on the noncash base. This is all from my side. Thank you very much.
I hand over to And Marek will give you more on CapEx.
Thank you, Michal. So let's move to the Slide 23, which CapEx. And as a reminder, planned CapEx for 2021 amounts to PLN 9,500,000,000 of which PLN 7.7 is accountable to Orlin Group and PLN 1,800,000,000 for Energa Group. We plan to spend over 50% of expenditures on growth. And after 6 months, we realized CapEx the realized CapEx amounts to PLN 4,200,000,000 of which PLN 0.9 billion was spent in Energa Group.
The biggest share attributed to Pet Chem segment, it's PLN 1,400,000,000. And to Energy segment, that's PLN 1,200,000,000. In the Refining segment, the capital expenditures amounted to PLN 0.9 billion. In retail, it was €500,000,000 and in Upstream, it was roughly PLN 100,000,000. CapEx is in line with the schedule.
And at the moment, we are confident that it will reach the annual target that we set at the beginning of the year. Main growth projects realized in the Q2 are as follows: so in refining, the construction of this breaking unit in Plotsk the construction of propylene glycol installation in Srebrena, in Petchem as a part of Petchem development program the extension of olefin unit capacity in Potsk and in Anvil, the extension of fertilizers production Energy segment and the project for construction of offshore wind farm on the Baltic Sea, modernization of current assets and connection of new clients in Enerco Group and development of EV chargers network. In retail, we opened 6 stations, 6 were closed, and we opened 10 Montfield Stop Cafe or StarConnect points altogether. The last section, Slide 25, describes current macro environment. So this data is up for 23rd July.
And in the first quarter 2021 till the date, we observed a fall. So the downstream margin decreased by US1.2 dollars per barrel quarter to quarter to the level of US8.6 dollars per barrel due to lower petchem margin and lower refining mine at higher BU differential. Crude oil price increased by US6 dollars per barrel quarter on quarter to the level of average to the average level of US5 dollars per barrel due to positive growth prospects for global oil demand, such as increased demand for jet fuel, economic recovery in the U. S. And European countries and another week of reducing U.
S. Crude oil inventories by 7,900,000 barrels to the level of 437,000,000 barrels. The information about the increase in crude oil production in OpEx plus by 400,000 barrels a day from August had a negative effect on oil prices as well. In terms of diesel trucks, those decreased by minus 16% quarter on quarter with an average of $31 per tonne. But in the last week, we observed a rebound in diesel crack to the level of $39 per tonne, and those are due to increasing demand related to the easing of restrictions and increasing mobility, disruptions in the fuel supply chain in Europe.
Those were caused by heavy rains and floods, labor shortages in the U. K. Transport industry and the decline in inventories in the U. S. And our region.
And as for gasoline cracks, those increased by 11% quarter on quarter with an average at the level of USD160 per tonne, currently reaching even almost USD 180 per tonne. And those are mine, which is the same reasons as for diesel trucks rebound and more than that, the possibility of introducing a ban on gasoline sports in Russia, following a record increase in Russian gasoline prices. As for HSFO products, dollars decreased by minus 15% quarter on quarter with an average of minus $175 per ton. Those were mainly due to higher crude oil price and limited demand for bunker fuel And up for Brent Euro differential, that one increased by $0.5 per barrel quarter on with an average of $2,500,000 per barrel, mainly due to the drop in demand for Europe crude oil in Baltic ports. About petchem margin, this one is based on Sorry, guys, for the interruption.
I'll just make sure it won't happen again. So as for the petchem margin, this one decreased by minus €110 per tonne quarter on quarter with an average of €13.63 per tonne. Currently, we're observing the levels of €1300 per tonne, and those were cost minor due to the decreases in polymers quotations last week and rising crude oil prices. Although petchem is very strong due to low supply related to the accumulation of postponed shutdowns from 2020, low imports to Europe production problems in Europe, which is in Germany and slower feedstock costs such as NAFTA and LSVGO. Okay.
So Now let's move to the next slide, Slide 26. It's a slide where we describe market environment, And let's start with the Brent crude oil prices, which increased due to the OPEC plus pricing policy, mainly because of Saudi Arabia resistance to increased production so that it would not keep up with the dynamic growth in demand that we currently observe. In mid July, OPEC plus overcame internal divisions and agreed to increase production, which caused fears of an oil surplus as COVID-nineteen infections continue to rise in many countries. In the coming weeks, we expect oil prices to fall and stay at the average price below $70 per barrel till the end of 2021. The fall in oil prices will not be smooth as currently over 60% of crude oil production is able to flexibly react changes in the market situation.
For example, in case of OpEx plus it's actually possible immediately and in U. S. After 1 or 2 quarters. So the shortening of the price cycles in this crude oil market from several years to several quarters will be accompanied by increased price volatility. As for refining margins, the strong increase in demand for crude oil and liquid fuels, which we have been dealing with since the beginning of Q2 of 2021, combined with the seasonal effect, have improved refining margins, relieving the pressure to reduce refining capacity.
So the improvement in margins was limited by the dynamic increasing oil prices to nearly $80 per barrel. Current perspective of the decline in crude prices may temporarily improve refining margins, but in the long term, the global excess of refining capacity will continue to keep the margins under pressure. The latest projections indicate that in 2,050, oil will need 7,000,000 barrels per day of crude, oil and liquid fuels less than it was expected before the pandemic prognostic. So the reason behind the reduction in demand forecast is the dynamic development of EVs and alternative fuels. And so overall, in the short term, we expect margins to improve temporarily as crude oil prices decline.
However, in the longer term, margins will be under pressure as the excess capacity the global refining industry has increased, as we mentioned before. As for the petchem margin, because This one might be crucial for the Q3 in our case. The increasing demand as supply constraints pushed margins to the record high levels in Q2 2021. Actually, margins were never seen before at these high levels. And in the following quarters, we expect margins to deteriorate.
However, GDP, which is currently growing strongly following a deep decline last year. Out of the gas, current natural gas both prices in Europe are the highest since up to 2,008. And the reason for such high fixed prices are in our opinion as follows. This is due to limited gas supply, which is low level of stock in Europe and limited availability of LNG loads going to Asia, increased demand for natural gas in the world overall, so split it by regions. In Europe, it is built by high prices of coal and CO2 emissions, power ounces, which make the production of electricity from gas gas fired plants more effective and the need to replenish gas before the winter period.
Those are the in fact, we see in Europe. In Asia, it is a consequence of the high demand for gas. For energy purposes, it's an effect of high temperatures that are being noted in Asia. And in Brazil, drought limits the possibility of energy production from hydro sources and forces the replacement with gas power plants. And also, if level of stocks will not increase before the winter season to the level observed in previous years that may support gas prices as well as in the coming winter quarters.
As for the electricity, the fundamental components electricity prices have recently been a problem of nature. From the beginning of the year, the base Y22 contract prices increased from around PLN 2.50 to a maximum of over PLN 3.60, which translates into an increase of approximately 30%. Due to the structure of the Polish energy market, a strong correlation with CO2 allowances is of great importance as it is now an unquestionable support factor for energy prices with the prospect of further growth. The prices of coal on the global market have recently reached new heights despite the active European policy, which is, in the long run, should limit the profitability of using fossil fuels and strive to move away from coal. However, the changes may be delayed in the near future by the perspective of a cold winter and weather extremes.
Currently, strong demand throughout Asia and limited supply from Indonesia and South Africa are also a nature, which also directly affects coal prices in Europe and indirectly also in our domestic market. The stop ups from high gas prices and the general high demand for electricity are also important. And this, in turn, results from a relatively warm summer, low in generation and high temperatures. In the coming months, energy prices should also be supported by, among others, the situation in the gas market, relatively low levels of stocks in Europe and an uncertain price perspective for the coming months with limited supply and high LNG prices will be a weaker constraint on rising coal prices and another factor supporting energy prices. The perspective of a coal winter high demand may be another factor causing an increase in electricity prices.
So as a result of easing the restrictions, we an economic recovery and an increase in fuel demand, which should be sustained in our opinion. And in terms of regulation, nothing has changed since the last quarter, and that will be all on my part. So thank you for your attention. And now we will move the Q and A session. So we are open for your questions.
We have a first first question is from Ekaterina Smack of Bank of America. The line is now open for you.
Yes, good morning. Thank you very much for the presentation. I have three questions. The first one is on the ongoing LOTUS, PG and AG, Nordea, sorry, the preliminary works. Appreciate the state treasury approved the non cash structure of the transaction.
So what is the current status of it and when do you expect to announce to get the final sort of proposal for the shares of parity? The second question is on your volumes outlook for the Q3 or the second half of the year. How your maintenance looks like and whether you expect to recover volumes significantly compared to the first half, which was affected by maintenance? And the third question is on the offshore wind project. So this is basically the first call since news on the contract for different awards for the project, what are the next sort of steps you need to achieve to get this project to the construction phase and sort of what are the utilization rates you expect to achieve at the project?
And what is the IRR you currently look for given the known level of the subsidy at this stage? Thank you.
Okay. So as for the questions regarding the merger with Lotus and PG and AG. I'll just start with the PG and AG one. And In this transaction, we are currently we filed a petition to the Polish Anti Monopolity Trust. So walk it.
We are waiting for the decision. And after that, we'll be able to start the whole procedure. So as for the state treasury confirmed that they accept the non cash solution for this transaction, it stays viable, so nothing has changed. And as for the share swap parity, we have not comment yet on that. We'll be more than ready when we receive information from Wokie and we'll be ready to go through all this process altogether.
Still, we think that this transaction could be finished in this year. So we are currently waiting for the decision of work. As for the locals, as you know and as we informed before, we postponed or prolonged the date to present our buyers or contractors to the EU Commission. And the new date that is set as for now is 14th of November. So that's the new date for the participants in this participants will take the remedies from us, but also it doesn't mean that it will prolong the whole transaction for another 4 months.
We are pretty ready with all the formal steps afterwards. So I just say that the bad thing to do for now is to wait for the 14th November, maybe sooner, when we present who and on what terms we'll take the remedies and realize the remedies in that transaction. And of course, as for parity swap, this is too early to discuss on that topic.
Okay. So, Carlos Basche speaking. I take the second question about the volumes perspective on the second half of this year. So definitely, we may say that the second half of this year will be definitely less packed with maintenance shutdowns comparing to H1 this year. In the Q1, we are planning to process 8,400,000 tons of crude oil, which is roughly speaking 95% utilization ratio, and this is also higher comparing to Q3 2020.
In Plotsk, we're going to have maximum utilization rates Despite the fact that in September, we had some plant maintenance shutdowns on the refining part, we have reforming and oil maintenance, roughly speaking, 30 days. On the petrochemical side, we have maintenance shutdowns of PX PTA unit up to 30 days. In Orlanitova and Uni Petrol utilization will be at the level of roughly speaking 85%, of course, adjusted to the market situation. In Orla, Netova in September, we are planning to conduct maintenance shutdowns of vacuum flasher, rough fitting 2 weeks. And in unit petro, we have plant maintenance shutdowns of PE3 unit almost the whole month and also polypropylene unit slightly above 10 days.
In terms of volumes, volumes, we may say that the demand, first of all, is very sound, yes. However, in the Q1, We are expecting to mitigate the dynamics in the consumption of fuels in Poland comparing year on year due to the fact that we do not have any restrictions in movement, but this is the similar situation that we had last year. So Q3 'twenty last year was also free from any restrictions. So those a significant double digit dynamics as we observed in the Q2 definitely is not applicable to Q3. Total sales in Poland in July, what we see right now is on the comparable level to the July last year.
On the wholesale level, sales of fuels is roughly speaking higher by 1% year on year. So this is the effect of higher sales of gasoline by roughly speaking 10%, jets by more than 130% at lower sales of diesel by roughly speaking minus 3%. On the retail side, we observe currently lower sales by 3% year on year due to the fact that we observe lower demand for the gasoline and also diesel year on year. In terms of petrochemicals, we may say that petrochemical sales is currently on the comparable level year on year. So all the, let's say, planned maintenance shutdowns of petrochemical units realized in the Q2 has already finished in June, and it was, of course, according to the plan.
In terms of Maybe the market, the margins, trading margins, yes, because, let's say, macro from quotations, you follow. However, in terms of trading margins, so IP spot on the wholesale level, in Poland, we may say that
it's on the record high in terms of the gas line.
So we observe increase by roughly speaking, high in terms of the gas lines. So we observe increase by roughly speaking 35% year on year. So this is the effect of high demand at lower supply. So we have summer season. We have maintenance shutdowns of Leuna Refinery and some logistic constraints on the Germany at lower IP on the diesel at the level of minus 15% comparing to the last year.
In terms of retail margins, they are quite sound. In Czech Republic, so 10% increase. We have comparable margins currently in German at lower margins on the Polish market by 6%. And of course, the pressure definitely is from crude oil price, which is higher by, roughly speaking, 75% year on year. So higher crude oil prices, I always underline means higher prices of final product.
So it's hard to, let's say, spread the margins in such, let's say, challenging environment of crude oil price. So now question number 3, if I may ask Justyna to answer this question, please. The floor is yours.
Yes. Thank you. So with regard to the back power project, We expect target contractions in 2023. So we still got 2 years of hard work of us before we'll be ready to start the construction. So there's still a lot of things to be done.
You ask what needs to be done before we start the construction. So right now we are running the Jo, take your first question. Yes, from that we will be able to prepare the design environmental decision, we expect to receive based on the environmental decision for the Offshore wind farm, but it will not include the cable. So we need to report the decision also for the table and this is a separate process. Then we need to recognize the financing.
Are underway in the process of doing so. You mentioned that we received the decision of the regulator regarding the and this is correct. The project regulator issued the decision for Party Power, but this isn't the final decision. We still need to apply to the European Commission to confirm the support for our project. And after the opinion for the lease consummation decisions, we will need to come back to the positive grades So again, we confirm the level of support.
So as you can see, there's still a lot of work. Our schedule is quite ambitious, but we expect that we'll be ready in the middle of 2023 to make the final decision and then start the contractions. This is about the There are a lot of analysis and study undergoing. And we'll be probably ready With the numbers in a year or 1.5 years,
Yes. Basically, I think that's pretty much answered. I mean, my entire question, that's very detailed. Thank you very much to all of you.
Our next question is by Mikhail
I have a question about CG and IG exploration licensing in upstream in Solent after merger With Orland, will these licenses automatically move to merged PKN? Or you will need to buy it in a separate public tender, paid additional cash for it. Will PG and IE the slices first before merger or just give it back without getting cash? So the question relates to general succession and current flow.
Thanks for the management of Class Geopeka and Nordland. We are aware of the challenges you have described and we are now working about the best solution for both Pekka and Hovland and PG and IG to solve this problem. And we'll have an internal answer for this question in roughly 1.5 months from now.
Thank you.
So the second question from my side, Lot of will put refineries in off case to a general meeting vote soon. Will you present proposed share swap ratio and chosen company for LOTUS refinery before that the booking?
Hi,
Michael. So regarding the share flow pressure, it will be too early to the swap ratio at this general meeting regarding the total of the OXX refinery. So there won't be it won't be disclosed yet.
Thank you. So my first question, do you need to get additional approval to Lotus transaction from European mission due to changing structure of the transaction to full merger with Flotas?
Yes. So the decision of EU Commission does not include the transaction structure itself. So it could be as well be made with the cash or noncash on the same decision. It's only for the acquisition itself, not the structure.
So you don't need any additional activity,
Correct.
Okay. So my last question, thank you. My last question, There is some media speculation that you are interested in acquisition of Ahema fertilizer company in Lithuania. Could you give us any comment on this? And could you also refer to potential acquisitions in media sector like CECO, and are you interested in such moves?
Okay. We have Jarek from M and A department on the line. So Jarek, if you could answer The question and I have to add the comment to the previous one as well. So go ahead.
Maybe I will start from Regarding the decision of the European Commission. European Commission has to approve our final So we will deliver our proposals regarding rare remedies And then they have the right to confirm that they were fulfilling their To add to the situation that is now and there are but it has changed
So you are interested in that target or not?
Yes, I guess, Yarek.
Yes, if you could.
And so are you interested in acquisition of fertilizer companies in Poland?
There's no such products. Yes. So, Michal, I think that The best answer to your question will be that we know that you like to send on set us some ideas what could be great for us for M and As throughout history. But basically, we did not disclose any information regarding any activities M and A activities regarding fertilizers acquisitions in Poland or Lithuania. Of course, M and A our M and A is very active in Poland and abroad.
And if there will be any transaction to be realized, It will be all first to know about the situation because we're basically public. So as for now, I would just assume that our M and A guys make a lot of ideas and valuations, but there are no projects ongoing regarding those assets you mentioned.
Our next question is by Mr. Patrizio of UBS. The line is now for you.
Yes. Laurent Petrico from UBS. Thank you for the presentation and thank you for the couple of slides around CO2. I have Two questions on that topic and then this one on petchem. So just on CO2, I was wondering whether you could give us some guidance for the Q3 around CO2 hedging, what we should expect in terms of both the P and L and cash flow impact?
And Secondly, in the longer term, given the EU's EU Commission's proposals around EU ETS and accelerated decline of free allowances in the next few years. I'm wondering if that changes your hedging policy would you be looking to hedge and more aggressively? And finally, just on petchem and the Q3, because we're seeing very high still very high margins. You mentioned that you should have volumes back to normal. I was Wondering whether you can fully capture this high level of margins or whether it's actually kind of a bit difficult to pass on these very high prices to customers or if there is maybe some delay and then we see the benefit more in the late part of the year?
Thank you.
Okay. So taking the questions of Petchem Margins. So as Marek said during the conference Coal, the margins are still very high. Of course, they are quite lower comparing to the historical levels that we observed in the Q2. But despite the fact that margins deteriorated, these still remain at high levels, much higher than in the previous year.
In terms of the volume, volumes definitely should be also better comparing, of course, to the Q2 because we finalized all the petchem maintenance shutdowns that we have planned. So you may expect that if macro will not deteriorate severely and we do not expect such a situation, we are assuming that it may go down, but down to €1200 per tonne. So Q3 should be really a good one for Petco division.
And in terms of your question on CO2, Michal Pazik Speaking, well, the impact of CO2 on the results in the next quarters will depend mainly on the price of CO2, assuming that the price will stay at the comparable level we have at the moment, so €50, €55, then we will not recognize any substantial result on the settlement and valuation of CO2 futures. So there should be around 0. And on the other hand, we will recognize pretty the same results on the creation and revaluation of the provision for CO2 settlement of subsidies for C1 to receive. So the net effect would be around €500,000,000 quarterly. Of course, if the prices are going up, then we are recognizing profits on our contracts on our CO2 contracts, but also the provisions are going up proportionally.
And I understand your second question was about free allowance that will be granted to us over the next few years, correct? Yes?
Yes. That's right.
And So we already yes. So we already know that under the at S4 EBS4 for the next 4 years, we will get approximately the same number of free AOIs as we get previously. So nothing is changing here. Of course, we are gradually opening new position, new contracts to secure our position in 2023 2024.
Understood. Thank you.
Our next question is by Oleg Gower of Raiffeisen. Your line is now open for you.
Yes, hello and thank you for the presentation and congratulations on the strong quarterly results. I have three questions and if you don't The first question refers to the Slide 30, from which I have calculated that the refining segment saw a negative impact of hedges, excluding CO2, of some PLN370 1,000,000. And I'm a bit puzzled by this high level of hedging losses, especially with the recent level of product cracks including gasoline and diesel remaining at, let's say, level below the peak COVID. So if you could comment on this.
Excuse me, I understand your question was about hedging on the crude oil deliveries via Vazalore sales?
Well, my question is, first
of all, refers to Slide 30, where you provided a split by segment of EBITDA, Life EBITDA. And when looking at the refining segment, I see that hedges, yes, had a net impact of minus $170,000,000 including the CO2 of plus 2.60 which means that the product hedges had a negative impact of €370,000,000 And I was wondering whether you can explain this high level of losses?
Yes. This is mainly related to our hedging strategy on the timing mismatch of the risk of crude oil, which is coming to us via vessels. So we are basically hedging all the vessels that we are importing to Polano, Newenia, and this is the result which is pretty related to sharp increase of oil prices over the last quarter and also over the last half of the year because the same effect you can see I think Q1 this year.
Okay. I see. And the impact is mainly on the P and L, not so much on the cash flow. Is that correct?
Actually,
when considering this position, you should also remember that on the other side, we have crude oil, which is offsetting physical crude oil, which is offsetting our hedging position. So the hedging strategy on the time mismatch deliveries always bring us 0 cash effect because we more expensive. So we earn on the we have a profit on the pure crude oil, physical barrel, but we have a loss on the hedging instruments or the opposite situation that we are buying crude oil on the with a higher price when it comes to us the price is lower, but it is offset by profit under hedging. And the strategy is set in a way that it's always 0. So we hedge the time between we buy the crude oil and between it is delivered to us.
The rest of the FX is visible in the margin. And the same story is with CO2 hedging. When the prices are going up, then we have a profit on the hedging instruments, but we have a higher provisions, higher reserves. And when the prices are going down, we have lower provisions, but we have also lower profits or losses on the hedging. So this is not trading, this is hedging and it's always offset by the physical position.
Yes. Thank you very much. And actually that was my 2nd my next question regarding the impact of this settlement, CO2 contract settlements on the cash flow, which in the Q2, as you presented on Slide 32, was almost PLN700 1,000,000. And Once again, if you can explain in more details, because I can understand the impact on the P and L, But actually, what is causing such a strong impact on the cash flow?
Yes. We have over we had over 12, almost 13,000,000 contracts open on the ICE exchange and there is a deposit behind. When the prices are going up, we are getting cash for the difference between the initial price when the contract was open and the current price on the market. You can see on the right hand chart that over the last So, I can see that we have not updated this slide. But over the last 3 months, the price went up from €42 to €55 so they went up by around 13 times the number of contracts we have opened and this is a pure cash income to us.
The prices will start going down, then we have to bring the cash to the deposit.
Understood. All clear. Thank you. And lastly, if you could share your view on the petchem market and more specifically from what you see, Which were the sectors driving the demand and margins of the petchem products? And why would you expect the petco margin to contract in the second half of this year?
Is it mainly because of the increasing supply? Or is the movement on the consumption side? So sharing your thoughts will be very helpful. Thank you.
Adam Chusevsky. While we expect contracted margins, the reason is that We expect a high demand for petchem products. This is related to high GDP growth. In general, petchem products are correlated with GDP because they are used in many applications. But last quarter, we had extraordinary margins because there was a lot of supply chain breaks and supply chain restrictions, which elevated margins.
Now like, for example, a lot of maintenance shutdowns, etcetera. And also, this was the strong winter in Texas, which closed down the petrochemical production. Now we expect that This extraordinary on one off events will not happen. This is and therefore, we have higher supply. And second thing is that we observe increase in feedstock prices, especially with petchem based on oil, which is caused by the increase in oil prices, but gas prices also
Our next question is by Mr. Gisle of Eng. Your line is now open for you.
Two questions. First, Energy segment, because of the EBITDA and the breakdown, I see some EUR112,000,000 impact from subsidiaries What is the subsidiary Accounting in this segment, the strategic profit or what is the source of this impact?
Where do you see this information? Is this from the presentation or from the
This actual spreadsheet, you delivered segment by segment, so In the detailed energy segment breakdown, you This line is showing profit from investments accounted for under equity method. So far it was under neutral
Okay, please check and I will return to you with the answer shortly.
Okay. And my second question refers to the PPA results this quarter because when I look at the normal benchmark margins on this product, They are not very impressive. And this quarter, you managed to improve your results quarter on quarter. Could you comment on this product a little bit?
If you look on PTA, what I see the margins were slightly higher on PTA comparing to the Q1, yes, because you relate Q2 to the Q1, yes, of this year. So what I see, the margins was slightly better than it was in the previous quarter and also volumes were higher. Okay.
I understand. Thank you very much. Welcome.
There are no further questions, and so I hand back.
Okay. Thank you, operator. If there are no more questions, I would like to thank you for the participation in the conference call. And of course, this concludes our presentation. So thank you, and have a nice day.
Thank you.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.