Ladies and gentlemen, welcome to the conference call of PKN Orlin. At our customer's request, this conference will be recorded. As a reminder, all participants will be in listen only mode. After the presentation, there will be an opportunity to ask I will now hand over to Mr. Konrad Ludaasik, IR Director.
Sir, you may begin.
Thank you, operator. Good morning, ladies and gentlemen. Welcome to the conference call regarding PKN Northern Consolidated Financial Results for the Q4 2020. The presentation that was mailed to you and is available on our web page I will be delivered by me and Michal Perlich, Executive Director for Finance Management. After the presentation, as usual, there will be a Q and A session.
And so during which several directors from PK and Orland will be ready to take your questions. And as usual, I may We may say that 2020 was definitely tough and challenging, yes? So COVID had a significant negative impact on the Downstream margin, which decreased by roughly speaking 32% year on year to the level of US7.3 dollars per Lower demand for fuels had a direct impact on the crude oil throughput, which decreased by 4 4,000,000 tons compared to the last year to the level of 29,500,000 tons, which means that we utilize Our facilities at the level of 84%. Sales amounted to 38,300,000 also decreased by, roughly speaking, 12% year on year. Despite this, EBITDA LIFO for the whole year amounted to the level of PLN 12,100,000,000.
And of course, this is the result before impairment of assets. And this result includes also profit on the bargain purchase of Energa shares in the amount of PLN 4,100,000,000. So it means that all in all, it's quite good result, which shows that only integrated and diversified concept is strong And resistant to macro fluctuations, retail and energy generated record high results, and petchem significantly We By Moody's Agency, raising its rating outlook from negative to positive and maintaining the rating at BAA We generated EUR 7,600,000,000 cash flow from operations. We realized CapEx at the plant level of PLN 9,000,000,000. Our net debt at the end of Q4 was PLN 13,100,000,000 which means that gearing was slightly above 30% and the covenant Net debt to EBITDA is 1.3 Holding credit facility agreement up to €1,750,000,000 and issuing 5 year corporate bonds in the amount of PLN 1,000,000,000 Additionally, as usually every that we have already started.
In terms of lot of, we are involved in talks with potential partners to It's renegotiated with European Commission. In terms of Energa Group, we took over almost The 91% of capital, we are working on concentration application to the European Commission, and we are simultaneously carrying out due diligence Process in PG and IG. And we also acquired 65% of ROV shares and initiated The acquisition of Polska Press. We have completed 100% of plant level of CapEx. We have started construction of this breaking unit.
We started modernization of And we also selected a designer for an offshore wind farm on the Baltic Sea and at the beginning of this year, Also industry partner. Start of this investment is planned in 2023 and commissioning is scheduled for 2020 Additionally, we signed a letter of intent with PG and IG regarding potential cooperation in the construction of CCGT plant in Ostravenka And development of biogas plants, we also started process of selecting a contractor for hydrogen hub in Vodouvik. In retail, as you remember, we introduced Olin brand at foreign stations of the concern, increased the availability of alternative fuels on our stations, and we are further developing the network of fuel stations in all our markets. In 2020, market definitely appreciated our actions. So the chosen direction regarding of carbon dioxide emission by 2,030 as well as our aspiration to achieve emission neutrality in 2,050.
PKN Orland was appreciated by the Sustain Analytics Agency, which raised the ESG rating for PKN Orland. We took 5th place out of 86 companies from oil and gas, refining and marketing sector. PKN Orland won The first place among certified employees in Poland. The company has been at the for the front of this prestigious ranking for 10 years. And this year, we also received the Top Employer Polska 2021 award from the experts and independent top employers institute for meeting the highest global standard in the field For the next time in Rome, we also awarded the best Integrated report and we received Politica Goldem CSR leave.
Now I will go into the details of Q4 results starting from the macro environment. So let's move to Slide number 5. Macro environment remained Demanding, I may say so, in Q4, similarly as it was in Q3, downstream margin was at the level of 5.4 U. S. Dollar per barrel, so lower by US3.7 dollars per barrel comparing to the previous year.
This was mainly the effect of significant decline in the refining margin due to lower fuel demand, So COVID impact and lower BU differential. As a result of crude oil price decreased by US19 dollars per barrel year on year, we lower cost of our own consumption. Diesel and gasoline crack decreased by 71% and 44%, respectively, at increasing trucks on heavy fuel oil by 68% year on year. Operating results were supported Next slide, Slide 6 shows GDP and fuel consumption. So we may say that in Q4, we expect lower fuel consumption year on year, definitely, And it will be visible in all domestic markets, which is a consequence of restrictions in movement related to the ongoing pandemic in Europe.
And lower fuel consumption is reflected in lower GDP dynamics, which is clearly visible on the graph. Next slide, Slide 8. Financial results. In Q4, We recorded a decrease in revenues by 16%, mainly due to a lower quotation of refining and petchem products resulting from Crude oil price decrease and also lower sales volumes. We achieved over PLN 2,400,000,000 EBITDA LIFO, which means increased by PLN 1,200,000,000 year on year, mainly as a result of positive impact of higher retail margins, of CO2 contracts.
Above effects were partially limited by negative macro impact, lower sales volumes and higher Fixed and labor costs. Positive impact of naturalizable value in Q4 amounted to the level of PLN 3 The impact of changes in crude oil prices on the valuation of inventories in Q4, so LIFO effect amounted to minus PLN0.1 billion, which caused a decrease in reported EBITDA to the level of Impact of net FX differences, net settlements and valuation of derivative financial instruments and interest So taking all into account, in Q4, we achieved almost PLN 600,000,000 Net results, so comparable results year on year. Next slide, Slide number 9 presents split of EBITDA LIFO by segment. Refining generated minus NOK 145 5,000,000 so decreased by PLN 400,000,000 year on year due to negative effect of macro deterioration and lower sales volumes, Created in Q4 2019. Petchem, 0.5000000000, so increased by PLN 331,000,000 year on year, mainly The positive impact of macro and higher sales volumes energy, PLN 1,100,000,000, so increased by penalty from GE and positive impact of macro and sales volumes.
Retail, almost 8.30 Increased by CHF242,000,000 year on year due to positive effects of higher fuel margins limited by lower Sales volumes and lower non fuel margins. Upstream, PLN 50,000,000 increased by PLN 17,000,000 year on year as a result of lack Provisions for tax liabilities created in Q4 2019 and savings in overhead and negative macro effect and lower Sales volumes. Corporate functions, higher by $267,000,000 year on year, mainly due to one off effect settlement of CO2 contracts in the amount of PLN382,000,000 at higher labor costs Now let's go deeper into the details. So Slide number 10, refining. Refining in Q4 was in reds minus 145 EBITDA LIFO, which is lower by PLN 412,000,000 year on year.
As you can see at the bottom of the slide, the main reason for this was negative macro effect of 9 30,000,000 polysilot due to decrease in cracks on light and the medium distillates, lower BU differential by US1.4 dollars Per barrel, strengthening of polyglot against U. S. Dollar and negative impact of hedging transactions made on crude oil purchases The above mentioned effects were partially limited by the positive impact of higher cracks on heavy refining fractions And lower cost of own consumption as a result of a decrease in crude oil price by 19 U. S. Dollar per barrel.
Volume effect was circa 19,000,000. We recorded a decrease in sales in the refining segment by 12% year on year due to lower sales of gasoline, diesel, LPG Jet and Heavy Fuel Oil. Others include mainly PLN 400,000,000 effect of Inventory revaluation and PLN 0.2 billion lack of provision for Shortages created in Q4 2019. Slide number 11 shows operating data of Refining segment. So in Q4, PK Northern processed 7,400,000 tonnes of crude oil, which is 1,000,000 tonne Less than in comparable results last year, mainly due to the fact that we had More maintenance shutdowns and we had also lower utilization of all refineries due to macro and also lower demand for fuels due to restrictions against COVID.
In ports, lower capacity utilization by 7 Percentage points year on year mainly as a result of maintenance shutdown of TDU. You need hydrocracking hydrogen plant and H oil and reduction of capacity utilization of some other installations. In UniPetrol, lower capacity utilization by 11 percentage points as a result of lower demand for middle displays and maintenance shutdown of the CDU unit, Vist breaking, FCC and PE3 installation. In Orlenitova, lower by 13 Going into sales split market by market, In Poland, lower sales by 7% year on year, including lower diesel sales by 2%, Gasoline, minus 6% jet fuel, minus 68% and LPG, minus 30% year on year as a result of lower sales of LPG, minus 25 percent diesel, minus 16 percent Gasoline minus 24% and Jet minus 90%. In order to make volumes decreased by 15% That's the result of lower sales of Gasoline by 18%, jet minus 64%, Diesel, minus 10% and bitumen, minus 32%.
Next slide, Slide number 12, Petchem. In Q4, Petchem segment delivered over CHF 500,000,000 Polish DOT EBITDA LIFO, which is almost 3x higher comparing to the previous year. Positive impact of macro is circa SEK 190,000,000. So the effect of higher margins on polyolefins and propylene as well as weakening of polysilot against euro, partially limited by lower margins on ethylene and negative impact of hedging transactions. Positive effect of Volumes, roughly speaking, EUR 160,000,000 Polish,000,000 due to higher Sales volumes by 17% year on year, including increase in sales of polyolefins by 47% fertilizers, 12% PVC, more than 100% at comparable sales of olefins.
30% of Petchem results was Made by Anvil, CHF 85,000,000 EBITDA and the result On the sale of PTA in the amount of almost PLN 100,000,000. Slide number 13 shows operational data in Petrochemical segment. In Q4, there was a higher utilization of PVC and PPA units in Vodouvek and higher olefin production, In total by 6 percentage points and in unit petrol by 15 percentage points. So this translated into Increase in sales. In Poland, we had higher sales by 13% as a result of Higher sales of ethylene, PTA, Fertilizers and PVC in the Czech Republic by 22%, mainly as a result of higher sales of Polyethylene, launch of PE3, propylene and PVC, lead to Wania by 200% as a result of higher External sales of polypropylene.
Slide 14, Energy. In Q4, NRG generated over PLN 1,100,000,000 of EBITDA LIFO, which is nearly 3 times higher than In the previous year, mainly due to consolidation of Energa Group results in the amount of PLN 511,000,000 and faster growth In addition, despite the pandemic, we recorded Increase in electricity sales volumes in Orland Group. Others include above mentioned impact of consolidation of Energa results, which are described in the supporting section, Slide 37, and PLN0.2 billion of penalty from GE for not fulfilled contract obligations according CCGT in water back and lower variable costs, So cheaper natural gas. Let's move to selected energy Segment data, so Slide number 15. This slide confirms that We are focused on developing low and 0 emission energy sources.
In Q4, Orland Group, including acquired Energa Group, produced Conditions for gas fired units, hydropower and wind power. Total production amounted to 3.3 Terawatt hours, of which 70% comes from renewables and gas fired plants. Sales amounted to 7.5 and As a result of consolidation, Current Group's installed capacity is circa 3.2 Gigawatts Electrical, of which 1.8 Gigawatts in Orland Group and 1 amounted to 1,900,000 tons. Data does not include Energa figures. Slide 16, Retail generated over PLN 800,000,000, which is higher by 41% year on year.
In Q4, we recorded increase in fuel margins, especially in Polish and German markets Margins in the Czech and Lithuanian markets. Retailer sales volumes decreased by 14% Year on year, of which Gasoline, minus 13%, diesel minus 14% and LPG minus 21%. Non fuel margin in Q4 was lower year on year on Polish market, especially in sales of hot snacks and beverages And Czech market at higher margins in German and comparable margins in the Lithuanian market. We Our fuel stations network to increase availability of alternative fuels. Currently, we have 2 And 12 points with alternative fuels, which means nearly 2 times more than last year.
It's also Worth to remind you that we are constantly support Polish economy through cooperation with Polish producers. Currently, around 85% of products available at Orland Fuel Stations were produced in Poland domestically. Next slide, Slide 17, shows operating data of Retail segment. At the end of Q4, we were running 2,855 fuel stations of which over 80 percent were equipped with non fuel concept stop cafe. Number of fuel stations increased by 19 Year on year, we opened new stations on all markets we operate in except Germany.
Due to drop in fuel consumption as a result Copied retail recorded sales volumes decreased by roughly speaking 14% year on year. So lower sales was observed on all our markets. Market share increased in Czech and Slovak market We're open. At the end of Q4, we were running 2,290 coffee corners, which means increased by 145 year on year, and this includes 6 62 convenience stores. We do not forget definitely about the future trends.
We have just connected 29 new fast chargers to the network and launching next 140 in Poland, 23 in Czech Republic and 7 in Germany, which means higher by 72 charges year on year. We have also 2 hydrogen storage stations located in Germany and 43 CNG stations in the Czech Republic, which gives us in total 2 twelve locations that I've mentioned previously. Slide number 18, In Q4, Upstream delivered EUR 50,000,000 polyglot EBITDA LIFO, which is higher by 52 This is mainly due to positive hedging transactions at negative macro impact resulting from The decrease of crude oil price NGLs at higher natural gas prices year on year. Moreover, we recorded Minus 12% sales volume decrease as a result of dropping average production by 2,500 BOE per day year on year, of which minus 0.2 in Poland And minus 2,300 BOE per day in Canada. Slide number 19, some details regarding Upstream segment, we have circa 190,000,000 BOE 2P reserves of crude oil and gas.
Average production in Q4 was slightly above 16,000 BOE per day. CapEx in Upstream spent in Q4 amounted to 135 €1,000,000 and were split 1 third in Poland, 2 thirds in Canada. When it comes to operating activities realized in Q4, in Poland among others, we continued works related to Jotun, Edge and Plotsky projects at the end of December, first fully operated by oil and of file engines, so Podksey projects are continued. In Canada, in Q4, There were resumed further development of the core production assets and related investment activities, including Drilling of 3 wells in Ferrier and 1 well in Cakwarya, technical consolidation of It's conducted to reduce the greenhouse emission and meet all environmental requirements introduced by the federal and provincial Now I hand over to Michal to describe cash flow and financials. So Michal, floor is yours.
Thank you very much. So let's go to Slide 21. The group has generated EUR 1 point Excluding Life, our effect was contributing 2.3. We recorded increase of working capital over this quarter by NOK 0.9 billion. It was mainly related to decrease of Payables, which was driven mainly by lower purchase of crude oil at the end of the year.
Partially, it was offset by decrease of receivables, mainly driven by prepayments from our from our business partners as of the end of the year. Net outflow from investment For the Q4 was PLN 3,500,000,000. It was Offset by €1,100,000,000 lots of total amount, including of Acquisition of Energa Shares, 0,400,000,000 lots net flows from loans, 0 200,000,000 Lots recognition of rights to use of PLN 500,000,000, this is mainly related to leasing agreements for And change in investment liabilities, EUR 0.6 billion. The net debt brought altogether minus 9.3 to net debt, out of which 3.1 was related to payment for the shares. And we also consolidating 6.2 net debt related to consolidation of Energa Group on Our consolidated balance sheet.
We spent €9,000,000,000 on CapEx in 2020 in a moment, Konrad will give you more details on this position. On the other hand, we generated And due to lower prices of crude oil and the products, we Decrease working capital by €2,200,000,000 lots over the 12 months or as compared end of December 2019. On the next slide, we are showing more details about Our debt structure will slightly change this presentation. Net debt to EBITDA, Leila, this is exactly how we are calculating this for the banks, for the covenants. At the end of last quarter, this ratio was at the level of 1.3 As you might remember, the maximum bank covenant we have in our RCF facility 3.3 and the maximum level set in our strategy is 2.5.
So we still have Sufficient space in terms of indebtedness. We also slightly changed the A chart showing total net debt due to the fact that for the calculation of the covenant, we are not taking into Product Limited Records, Product Finance and Hybrid Bonds. We are showing here the split for Hybrid bonds and the rest of net financial liabilities, as you can see, end of 2020, we have altogether 13.1 €1,000,000,000 of net debt, out of which €1,100,000,000 was related to hybrid bonds. In Q4, we issue ESG rating linked bonds domestically on the Polish market, denominated in Zlote for $1,000,000,000 Zlote
value is 5 years
tenure. This transaction It was very positively met by the market. We have over 2 times subscription, and we achieved The lowest margin since 2,008, 90 basis points over 6 months. VIBOR, no substantial change in terms of Debt structure and maturity, we are still working on our EMTN program establishment, and we expect according What we have announced in our strategy to finish this process by the end of Q1. That's all from my side.
Thank you very much. I'll give voice back to Karl.
Thank you, Michal. So now we are going to Slide 23. CapEx. In 2020, we realized CapEx at the level of PLN 9,000,000,000 according to the plan of which Energa Group spent PLN 1,300,000,000 over 30% of CapEx It was dedicated to the refining segment and 20% for petchem and energy each, 50% for retail and 5% for upstream. Main growth projects realized in Q4 are in the refining, construction of this breaking unit in Plotsk, Construction of propylene glycol in Orlandpovnia in petchem segment Construction of units under petrochemical development program and extension of fertilizers production in Anvil.
In energy, Preparation for construction of offshore wind farm on the Baltic Sea, modernization of TG-one turbines set in CHP in Poz And the 2nd projects in Energa Group focused on production and distribution. In retail, we opened 26 new stations, 11 closed and 6 modernized. And we also opened 109 Stop Cafe The last section describe market environment. So Slide 25. Downstream margin in Q1 increased by 0.5 US dollar per barrel to the level of $5,900,000 as a result of BU differential increase in Higher Petrochemical Margin Crude oil price increased by US5 dollars per barrel quarter on quarter with an average US55 dollars per barrel, Mainly as a result of worldwide vaccination program against COVID, OPEC plus decision to extend the current reduction Include oil production to February March, so 7,100,000 barrels spent per day And additional reduction in crude oil supplies by Saudi Arabia in February March by 400,000 barrels per day.
Drop in U. S. Crude oil inventories to 480,000,000 barrels and also high Enthesias of investors for US2 $1,000,000,000,000 stimulus package. So all in all, this The crude oil prices I've mentioned at the beginning by US5 dollars per barrel. Diesel cracks increased by 3% quarter on quarter with an average 34 dollars per tonne, so many as a result of reduced imports to Europe from U.
S, Asia and the Middle East. Gasoline Cracks increased by, roughly speaking, 20% quarter on quarter, averaged USD 85 HSFO cracks decreased by roughly speaking 30% quarter on quarter average minus US106 dollars per ton, mainly as a result of lower demand for HSFO from Europe and U. S. And increasing inventories in our region due to Product inflow from Russia and Finland. BU differential increased by US0.5 dollars per barrel quarter on quarter with an average US0.6 dollars per barrel, mainly due to higher supply of Uralk crude oil in ports in January and Slow demand on the European market.
Petchem margin increased by €44 per tonne, average €889 per tonne mainly as a result of the increase in Polymer prices, Slide 26, so CapEx for this year. We're going to spend I think more than last year, so roughly speaking, PLN 9,500,000,000 of which PLN 7,700,000,000 In Orland Group and PLN 1,800,000,000 of Energa Group, the largest CapEx we plan to spend in petchem, Siirka, PLN 2,900,000,000 in the refining, PLN 2,600,000,000 in energy, PLN 2,300,000,000 in retail, PLN 1,000,000,000 And tiny CapEx in Upstream due to our cautious approach, PLN 0.3 billion this year. The main growth projects this year are in the refining segment, construction of wheat baking unit in Plotsk and construction of Plopren DRICO in Poland, Pavlovnia. So we are continuing the projects that we started in 2020. In petchem segment, extension of fertilizers production in Anvil and also project of extension of olefins production in Closk And construction of DCPD unit in UniPetro.
So this is the cyclopentadine, which is a feedstock for the production of specialized plastics such as raisins, rubbers, copolymers that are used In the Paint, Automotive and Shipbuilding Industries. In Energy, we're going to develop a project for construction of offshore wind farm On the Baltic Sea, construction of PV Farms in Energa Group, modernization of existing assets And connection of new customers in Energa Group and development of EV chargers network. So we're going to increase this network by additional 70 new chargers. In retail, We plan to open 50 fuel stations, of which 30 owned stations and further develop non fuel sales via 140 new Stop Cafe and StarConnect locations as well as launching new products and services like, for example, parcel lockers. Slide 27, so last slide.
This shows our expectation about the macro in 2021. In terms of crude oil, we expect that Brent crude oil to increase in comparison to average from 2020 2020 mainly due to effect of forecasted strong demand growth on fuels in the second half of this year as a result of vaccination program. From the beginning of the year, Saudi Arabia reduced significantly production Of crude oil by 1,000,000 barrels per day, limiting also crude oil excess on the market. Above mentioned factors translated into increase in price expectation by roughly speaking US10 dollars per barrel. So we expect that crude oil price in Q1 will be, roughly speaking, US55 dollars per barrel, increasing till the end up to the level of USD 60 per barrel.
As for margins in the refining, there There must be some adjustment to significantly lower demand, similarly to those that we saw On the crude oil market, so we expect increase of the refining margin comparing to the average from 2020. However, this increase will be slow until global production potential will be reduced by roughly speaking 3,700,000 barrels per day, Out of which, have a reduction in Europe, which may take, from our point of view, several quarters. We expect petrochemical margin to remain at circa €800 per ton. Petrochemicals, of course, depend on economic situation, which is under the pressure. However, in Europe, which is And the importance of many base petrochemicals, opportunities for local production have opened due to slump in the import.
On the demand side, we expect increase in fuel demand that I've mentioned at the beginning as a result of economic recovery after COVID. In terms of regulations, national index target is set for this year at the level of 8.7 Percent, however, PK and Northern will be able to take advantage of reduction of this ratio to the level of 5.7%. And moreover, it's worth to underline that since 1st January 2020, Retail tax was implemented. So that's all from my side. Thank you very much for the attention, and we are I'm ready to take the questions.
Thank you. We will now begin our question and answer session. We have the first question from Henri Patricot from UBS. The floor is yours.
Yes. Hello, everyone. Thank you for the presentation. I have three questions, please. 2 on investments and 1 on retail.
So the first one, I want to clarify on the CapEx outlook for 2021 and the SEK 9,500,000,000. How much would you that to be in terms of cash CapEx for 2021 because I know this was quite a bit lower in 2020. I don't know to what extent Some of the cash CapEx is slipping into 2021. And then secondly on projects, I was wondering if you could Give us an update on the latest expectation for the start up of some of these projects such as the Davis breaking unit, The increase in fertilizers production and perhaps a sense of the increase in power generation capacity in 'twenty one. And then finally, just on retail, another very strong performance this quarter, primarily, I think, the higher To the margins, is that something that is sustainable in your view?
What should we expect for 2021 and the Q1 in particular? Thank you.
Okay. Thank you, Henry, for the questions. So mainly in terms In terms of trading margins, maybe just for your information from the beginning of 2021, we changed the pricing formula For fuel sales, so currently, we raised the whole sales of fuels on the spot transaction. So Currently, what we observe right now, trading margins are on the slightly higher levels comparing So the last year in terms of gasoline is 8%, in terms of diesel is 2%. How it will develop during the whole year is Hard to answer this question because we just finished January.
However, this is definitely our intention to In terms of CapEx, I confirm, PLN 9,500,000,000 Noted for this year, I don't know if I catch your question, if this, let's say, referred Also to the CapEx that we provided in our strategy, if yes, we said so that on the yearly basis, we're going to spend an average PLN 14,000,000,000 However, please bear in mind that the calculation is a little bit different because in strategy, we also include in this CapEx spending, Let's say, investments on M and A. So this, let's say, potential M and As are not included in the CapEx, Let's say, calculated here in the presentation. In terms of projects on the petchem site, you asked about the So everything is going according to the schedule. The project is advanced at the level of 30%. This year, we're going to And roughly speaking, PLN 0.3 billion.
And also in terms of petchem projects, we're going to, Let's say, kick off the project of extension of Olefins production in Plott. So this is one of element of this big petrochemical program development. So Up to PLN0.6 billion is going to be spent to this project.
Okay. And if I could follow-up there on the CapEx question, I was actually asking to compare with the cash outflow for CapEx Christine, in 2020, I think it was €7,600,000,000 to be compared to the number you mentioned of €9,000,000,000 So wondering what we should expect with regards to 2021 cash outflow for CapEx?
So, hopefully speaking, in 2021, we expect that the CapEx the cash flow Also from related to the CapEx, it can be even more that you just presented on the chart due to some advanced payments Related to newly started investments that we are planning this year.
Okay. So more than EUR 9,500,000,000 by how you currently? Yes. Okay. Thank you.
The next question is from Michal Josek from Trigon, the floor is yours.
Thank you. Good morning. I have 2 questions. The first one, Could you refer to your recent move to change wholesale formula in refining? How should it for your regards in the segment.
And the next question, based on other M and A transactions within media segments, what is your ambition? Thank
you. We changed the pricing For MOLA, due to the fact that, let's say, the previous formula, which was based on Platts quotation Plattspremia Due to, let's say, high fluctuations on the crude oil market, well, hard to predict. So on the spot prices, We have, let's say, better control on the sales purchase all the sales prices. And in terms of MEDIA?
We're not buying such acquisitions in the other months.
Michal, are you online?
Yes. I asked, do you plan other M and A transactions within media? What is your ambition?
No, we just confirmed that we are not planning such acquisitions.
Thank you.
The next question comes from Ildur Hasinev, HSBC. The floor is yours.
Thank you. Hi, everyone. Just a quick question on the gain which you booked on the And basically also remind us How does it affect the financials? Is it part of the operating cash flows or it's also affecting CapEx management? Thank you.
Hello, Igor. Michal speaking. So let me try to answer these questions.
So Generally, we are using CO2
forward contracts for CO2 emission allowance for our own use To secure the CO2 allowance, which we used to build a provision, which is further remission in April every year. Last This year, we had around 15,000,000 CO2 allowances in contracts For our contracts with the delivery date end of 2022. In order to manage our Liquidity position, our debt position, we decided to postpone the delivery of these contracts, partially till end of March 2021. It was related to Around €10,000,000 CO2 allowances, which we need to create a provision, which we need to remission in April this year. And the remaining €5,000,000 we decided to postpone till December 21, it will be dedicated to redeem in 2022, in April 2022.
So far, because we were using this forward contract for CO2 emission allowance for our On use, we were able to use, let's call it, MSSF9 release or extension, Allowing us not to value the contracts on every reporting period, But due to the fact that this time, we decided not to purchase The allowances on the settlement date, we have to treat This particular forward contract as a regular derivative and settlement it and present the result in our P and L. We recognize it as a one off, let's call it one off transaction. It doesn't have And influence on our cash flows because anyway we recognize the same cash flow on this instrument. It doesn't matter whether we use this MSSS9 exemptions or not. The main difference is that we didn't spend cash on purchase of this CO2 emission allowance end of 2020.
Instead of this, we will buy them. We'll purchase them partially end of March 2021 and partially end of December 2021. So we simply postpone spending of cash for this $15,000,000 allowances. And due to the fact That postponing this purchase with closing this contract and opening new position, Opening new contract was cheaper than the interest rate that we would pay when taking additional debt for purchasing this We simply make this decision. It will also have one more effect in the first Quarter in terms of our P and L, when purchasing the because we did not purchase The contracts in December, we did not have a trigger to recalculate our CO2 provision with new weighted average cost We will do it in March this year, and we estimate that this Recalculation will be around €350,000,000 slots.
So from the accounting perspective, we should offset Both elements, I mean, the profits recognized this quarter and the increase of CO2 provision next quarter. We are not planning to in the future to further postpone The contracts that we have currently open, we are in the discussion with Our auditor whether we can still continue to use this extension, MSSF exemption. If yes, then we will not recognize such results related to forward Settlement CO2 forward settlements in the future.
Thank you very much For the explanation, just one question. When you purchase the allowances, is that going to be part of the pricing pressure?
Yes, because this is the moment where we are paying for the allowances. Of course, based on the price, which was set at the opening of the contract.
Thank you. Thank you.
Thank you.
Before we start with the next question, The next question comes from Alexandra from Renaissance Capital. The floor is yours.
Yes. Good morning and thank you very much for the presentation. I have two questions. So first on CapEx, I was wondering if you could Put the next year's guidance somewhat in the context of your 2030 strategy that was recently presented. You had an average CapEx spend of around $14,000,000,000 policy lots in that Strategy presentation.
And so your current guidance for the next year is substantially below that average estimate. So Can you perhaps talk a little bit about the profile of that 2030 strategy? Did you always expect to have a low start to CapEx and sort of increase that CapEx spend over the years? Or is this a change? Did you reduce your estimates in the last few months, maybe because of the effects of the pandemic or any other reason?
So if you could just talk a little bit about that, please. And also maybe also mention what your current plans are For the hydrocracking units at Lithuania refinery, we haven't heard about that for a while. And another question that I had is on the market performance in January. So obviously, in the Q4, there was a slowdown in the market demand Due to reduced mobility, as you said in your presentation, I was wondering if you could explain to us what trends you saw in January and whether the markets improved somewhat over the trends continued. Thank you very much.
Okay. So maybe I will start from the market and how it looks like and how much Crude oil we're going to spend. So as I said during the conference call, the macro is still challenging. So definitely, we will adjust the throughput to the demand and the macro. In Q1, we're going to process, roughly speaking, 6,700,000 tonnes of crude oil, which is equivalent of 78% of utilization ratio, including 87% in PK and Ireland, Slightly above 60% in Lithuania and almost 80% in UniPetrol.
Beside that of, we've got some plant maintenance shutdowns of refining facilities, especially in PK and Orland, like hydrocracking maintenance shutdown in February. In terms of volume, so definitely high number of COVID cases in Poland and which means, let's say, Reintroduction of some of restrictions makes still huge pressure on Sales volumes of fuels. So we may say that sales drop in Q1 year on year is Comparable in terms of dynamics that we observed in Q4. So in January, Sales of fuels in Poland is lower by roughly speaking 15% year on year, including Wholesale dropped by 13%, where we observed drop on the gas line, minus 9%, diesel, minus 5% and the jet Fuel minus 80%. And in retail, we have got Dynamics minus 18% year on year, Lower sales of gasoline, minus 15% and the diesel, minus 20%.
In terms of petrochemicals, we may say that sales is on the at comparable level. Now first question. So CapEx spendings that we presented Today, so PLN 9,500,000,000 comparing to average that you calculated from the strategy at the level
of PLN
14,000,000,000. So we confirm our target strategic targets at this level. However, as I've mentioned during the conference call, the calculation is A little bit different, yes. So the CapEx in strategy includes M and As, yes, potential M and As. However, the CapEx that we present in strategy is based on the memory also.
It does not include any investment in terms of potential M and A is therefore, there could be mismatch in the numbers. And of course, also we were preparing the Strategy from the mid of last year, yes. So currently, we've got a better knowledge and we postponed a little bit some of the projects. However, everything Still, it's going according to the schedule. So we do not change, let's say, our ambitious target of spending CHF 140 billion lots of CapEx during next 10 years.
And if I may add something, please also bear in mind that The 2 big investments, which will substantially contribute to the CapEx in the near future, I mean, offshore wind farms and Our petrochemical development plant, olefins, including olefins are in the preparation plan, the phase still in 2021. So they will, for sure, contribute substantial amount, but Probably in 2022, 2022 starting 2022, 2023.
The biggest projects We've mentioned on the slide, so as you see on the Slide number 26, you've got the main growth projects in 2021. So you see that we're going to spend NIS 9,500,000,000 out of which NIS 5,000,000,000 is going to be spent for growth projects. So in the refining, we selected 2 projects. So all the projects that you see on the slide Has a value above PLN 100,000,000 or they are strategic from, let's say, our point of view like, Let's say project for construction of offshore wind parcel development of EV chargers. So this is a very, let's say, initial stage.
However, they are very important from the strategic view. So in the refining, if you look, you may say that both construction of this breaking unit So roughly speaking, CHF 500,000,000 PET Chem Projects, so Extension of Olefins, extension of fertilizers and this new project, DCPD in Uni Petrol, roughly Speaking PLN 1,000,000,000. Energy, the biggest chunk, of course, is for the modernization of existing assets and connection of new customers In Energa Group, so roughly speaking, PLN 1,400,000,000 retail, 0.5 and up in PLN 0.3 So if you sum it up, you've got PLN 2,800,000,000 out of, let's say, PLN 5,000,000,000 growth CapEx for this year. So roughly speaking, 60% It's clearly explained.
Thank you very much. And the question on the Lithuania hydrocracker, When do you plan to take a final investment decision on that one?
We are still analyzing this project. No final investment decision has been made But this is still under the NACAnalysis.
Thank you very much.
Said, first question is in regards to the timing of the potential completion of the Lotus and PGNG transactions. Are We still sort of potentially looking into the end of 2021 or has that sort of timing expectation around this timing evolved or changed? So that's question number 1. Second question is, I apologize if I missed it. What sort of utilization rates In the refining and petrochemical segments, do you expect this year?
And finally, I think It would be good to sort of understand whether your sort of thinking evolved in regards to the upstream assets in Canada. I mean, now that the commodities prices are higher, I mean, maybe it's a favorable moment to Thinking about maybe disposing this as this sort of given that you're changing the strategy, but maybe not. Just wanted to check
Hello, the CEO of the Online and A department. Thank you for the question regarding the Rotors Group and PCNG. Maybe let me remind you that in July 2020, we obtained the positive, but still conditional decision of the European Commission on taking control over the group of Lotus. And during next 2020 Maersk, we would like to work with the requirements regarding the remedies approved by commission. And during next 6 months, We should be ready to finalize the takeover.
So we still believe that it will be possible to Final answer, we need to transaction on group orders by the end of this year. And with regard to PG and G, the first That we have to do with this process is to obtain the similar decision. We
assume
that we will be able to deliver the notification to the European Commission in the Q1 of 2021. And it is likely
That the
commission will pass this decision to Polish Office of Competition and Consumer Protection. And in such a case, We believe that we will be able to complete also this transition by the end of this year.
In terms of utilization, it's hard to answer this question precisely. So we may say that in terms Refining assets, it depends on the market situation, yes? So how the situation will develop. It means demand for fuels, margins, etcetera. So as I said, in Q1, when we've got such a harsh environment, the throughput is even below 7,000,000 tons of crude oil, which is roughly speaking below 80% Of utilization, last year, we processed 29,500,000 tons, which was 84% of the utilization.
So if there will be, let's say, expected rebound in the fuel demand from the, Let's say, second half of this year, definitely, we will adjust accordingly the utilization of refining facilities. In terms of petrochemicals utilization, we may expect that the utilization of petchem assets will be Slightly lower year on year because in the Q2, we are planning a big maintenance shutdowns Of PK and Orlan Petrochemical assets, including olefins, metathesis, polyethylene units And polypropylene in BOP PVC, so all this will last almost Whole quarter and definitely significantly decreased the utilization of petchem. Petchem units, of course, we also have some Plant maintenance shutdown of PXPTA Unit in the mid of Q3 and Q4. So From this point of view, you should expect that utilization of petchem units should be lower than in 2020. And regarding your question
on upstream here, protocol strategy. Regarding our strategy, one of our goals So in upstream, it's maximizing value from upstream assets and upstream production. And especially regarding Canada, We assume that production in line with the financing logic. So In this area, we face A significant change of our portfolio after the merger with LOTOS and potentially with PGN and IG. And our strategic logic behind any move portfolio moving portfolio asking portfolio Our gather after acquisition of LOTUS and G and A.
So We first want to merge Upstream portfolio of our key companies And then decide whether to divest something or not.
Thank you very much. Very helpful.
We have the next question from Piotr from Citi.
So the first one would be on offshore. When do you expect to find out the price you will be getting for these assets? And what is the condition of your partner If he doesn't like the price that he can negotiate with the government, how does this look like from the perspective of the partner? And second, on the pricing, I would like to go back a little bit to this changing of a formula that you apply for the Kind of a pricing in based on the spot market. If you were to backtrack it, what would be the impact on the segment or the results for the last year?
Basically, what are you trying like which way it will ship the result? I still don't get it based on the assets you provided. And the third question, I wanted to ask you about the parcel package program. We've just In the IPO of imports, valuing the simple parcel at very significant amount of money. And What is your ambition to make in this space?
How many points you already have? And can you provide any financials as to how much this And as a last, last question, on this acquisition of EMEBIA, can you provide any numbers, how much you paid for it, How much it makes? How many people are employed? Anything on this, whether it is really business or politics would be helpful. Thank you.
Hi, Piotr, Konrad Vlastik speaking. So in terms of trading margins, So as I said at the beginning, all the yearly contracts with our key customers are currently based on the Spot formula instead of, let's say, quotations plus premium that We've got in the previous years. Of course, as I said, this definitely mitigates the risk of big Fluctuation include oil prices. And of course, our main goal is to maximize the margin As usual, so definitely, it should be better reflected in the results of the refining segment.
Okay. And can we talk about the soft shore project? Yes. What is the price do you expect for And when we will find out what is the conditions and we can then try to get the view on what is the IRR you achieve And what is your partner view on the potential IRR? Is he just A side party or he has something to say so at certain level of return, he will not participate in the project?
Okay. So right now, the discussions regarding the price, the CST price I'll be in the government. And so we are, of course, part of the Public information from the government. With respect to the IRR expected by our partner, This is confidential information. However, you should note that we are going to develop the project and But we cannot reveal the expectations of the IR for theft.
Okay. Is there anything else?
I wanted to ask you about this parcel package business. How big is it at the moment for you? I know you can pick up a parcel in any of your locations, but Are you including RUK in it as well? Will you combine it? And how many parcel boxes you will put in?
And what kind of traffic can you generate on the back of it? Any details would be helpful.
Yes, of course. Yes, as you already said, We offer parcel pickup possibilities at our stations already At all of Korsa station, retail network in Poland, as well, RYO offers the same possibility as RYOQ outlet. So the missing element of this offer It's part of our machines network, which we plan in our At SGL, we plan to develop in next quarter. As we announced, we plan to put about 2000 parcel machines in the network at the locations Either at our Fristock stations or close to group outlet or in other first party stations. We already negotiate corporations With e commerce platforms or e commerce E commerce specialist, but at the same time, we work on developing Our own e commerce platform connected With our offers and with offer of BdEchoK.
So I think that's it. We can share today. We will update you about the progress of the project, why.
Okay.
We now I received another question. It is from Robert Mihai of Epopemath Securities. Please go ahead. Your line is now open.
Yes. So I would like to follow-up on the offshore program. What kind of CapEx do you expect for For this 1 spot 2 gigawatts which you plan to build, recently, I guess, one of the representatives were saying that this will Above 10,000,000,000 slots. I just wonder whether this would be closer to €10,000,000,000 €15,000,000,000 or even higher. And coming back to The price per megawatt hour, what kind of price is it justified to cover all your costs and cost of capital, etcetera, to make the project economically viable.
And would you consider abandoning the project in case the Maximum price announced by the regulator ORA is not sufficient. Thank you.
Mr. Vedaci, we can't hear you at the moment. Maybe
The question, was it hearable for all of you guys?
It was, but maybe we have a problem in the Okay. So just a second, please. The conference will continue shortly.
Okay.
So, Piotr, we are not sure if you had all our answers because we went silent from some time. I did not hear
the answer. I had the answer about the parcel. And then you didn't answer the question about this Polish press Acquisition, whether you can provide any details on the amount of money you paid for this business, how many people it employs and what is the Financial position of this company.
Okay. So basically, the transaction hasn't been settled yet. So we're still in the process, so we cannot provide such information at this moment. If you ask about the conditions of this company, Well, we also can't share with you the results for the 'twenty one, but I for 2020. But their results for 2019 are available in KRS.
So you could probably already did Check it out. For example, the revenues of this company for the 2019 were almost From our perspective, it is a very healthy company. It fits perfectly with And our plans regarding the e commerce market and the improvement of retail customer satisfaction And development of nonfuel, new formats and sales, just what actually Strategy Director, Karl Wolf, told you about a question ago. This group portfolio includes Somewhere around 500 online sites, it will perfectly fit our needs. If we're trying to build it From the scratch, it would take a lot of time and money.
This was quite a bargain for us. We also identified many synergies Regarding this transaction, for example, we can Cut the cost of our Sigma based marketing activities. We can increase the attractiveness of this acquisition by using their printers and storage houses for our internal needs. Also, their client base is approximately 17,400,000 Internet users, and this perfectly fits our needs regarding the e commerce business that we are going to present in the future. We also plan to use this potential to promote the development of e commerce services, as I said, but Also increase the effectiveness of the marketing budget, cost savings, which means cost savings for For PK Norland, by, for example, being able to redirect some of the local advertising expenditures or reduce the printing by external entities, which generate some additional margin for us.
So all in all, we have I identified over 30 synergies. I just gave you a few main synergies. And as long as this transaction hasn't been settled, which we cannot actually provide with any more information.
So next quarter, I can ask you about the price.
Well, I'm not sure if you will be able to ask us about the price because the
Thank you. Then we now go to the next question of Robert Maynard of Bupovirao Securities. Please go ahead. Your line is now open.
Yes. Thank you. I'd like to come back to this offshore topic. What kind of price in megawatt per hour do you see to cover all your costs and the cost of capital to make it economically viable. And in case The price published by the government is not sufficient to consider a possibility of abandoning the project.
This is number 1. And number 2, one of your representatives were speaking over the media a few days ago about the CapEx and this was above 10,000,000,000 slots. Can you confirm the number whether this is closer to 10,000,000,000 or 15,000,000,000 What kind of number can we expect here? And do you are you going to pay also for the grid connectivity to PSC or are they going to buy it back from you?
Okay. So, with respect to the price, the CFT price for offshore, I believe that €80 per metallothesis number of chips going around the market, and We think that this is a reasonable price. However, it doesn't mean that if the price will be below €8, it won't continue in the project. You have to optimize the project. So this is the first question.
And the second question, what about CapEx? Is that right? Could you repeat the second question?
Yes. What kind of CapEx do you expect to spend on your offshore wind farm? This is 1 spot, 2 gigawatts. So what kind of numbers are we speaking about?
The CapEx will depend on the final capacity of the wind Because as you know, it's traffic now that 1.2 gigawatts is the maximum Capacity for the Linx Pharma, we are analyzing what should be the optimum capacity. This will also depend On the CFT side, so we are waiting for the CFT side to finally decide What will be the capacity? Another information still needed for Siding about the capacity are If the capacity is actually close to 1.2 gigawatts, then we expect the capacity above 10,000,000,000
Sure, understood. Just wonder if the capacity is really 1:2 and you mentioned it's above €10,000,000,000 Is it rather €15,000,000,000 or is it just above €10,000,000,000? Just what kind of range am I speaking about?
Just about $10,000,000,000
Just about $10,000,000,000 Okay. And What kind of way of financing of this project do you expect, I mean, in terms of debt to ratio Debt to equity ratio and PFR, you mentioned over media recently that PFR may Support this project, what kind of support could you really expect from, I don't know, PFR in this case?
This It will be discussed with our partners as soon as the partners On board, because we have signed an agreement with the partner last week. However, And all the discussions regarding financing the Rapture Wind Farm We will be then we will be done with the party, yes? And our partner has considerable experience in No recourse for the finance. And we think this is a good start for our
Maybe, Justyna Bizonmaier will let me help Alik speaking that also on our side, limited project finance is Probably a preferred way of financing this transaction. It's quite a common way of financing such investments. And Usually around 70% can be financed via debt. If we compare Other offshore investments financed with limited cost project finance.
Sure. Thank you. And one last question. When the majority of the CapEx What's the thought of this project? You mentioned recently that €290,000,000 would be spent in 2021.
And what is the what are the Next step. Ultimately, the wind farm is going to be ready closer to 2,030, right?
We expect to start the construction in 2023. So the biggest capacity is expected in 2024, 2025, yes?
Okay. Thank you very much.
Thank you. As there are no further questions, I would like to hand back to you.
Thank you, operator. Thank you for your kind assistance. If there are no more questions, I think that we can conclude and let's say end our call. Thank you very much for being with us.
All the best and
Goodbye.
Ladies and gentlemen, thank you for your attendance.