Good afternoon. 12:02 P.M., so it is already afternoon. My name is Jakub Frejlich. You just dial in for the ORLEN Group Q4 2024 investor presentation. Let me introduce to the speakers today, Magda Bartoś, Company CFO, myself, Jakub Frejlich, Head of IR, Konrad Włodarczyk, Marcin Piechota, Tomek Rawicki, and we have Przemek Wasilewski, who dialed in offshore, let's put it that way. Without further ado, we had a media meeting today in the morning, and some of you, I believe, had the chance to see that. We will review the presentation shortly with some additions, with some more details in operations and financials, and then we'll give the floor smoothly to yourself for you to ask questions. We shall be kicking off, Magda. The floor is yours.
Thank you, Kuba. Hello, everyone. Good afternoon. It is my pleasure to welcome you again, in our quarterly update call. This time, we will review not only the quarterly results, but also year-to-date, full year, results of 2024. Let's kick it off then, with the first content page for our presentation. I'll start with the very general message, that we are really pleased with the operational results of 2024. It hasn't been easy, or it wasn't an easy year. The regulatory environment, the macroeconomic environment, and all the challenges that we spoke about during our update calls throughout the year.
And just to mention the key impacts, be it model refining margin down by a strong double digits, moving in a completely different territory of low teens, or for the last quarters of the year, in high single digits. Be it gas prices or electricity prices, those two moved by a strong double digits down as well. But all in all, we delivered almost PLN 36 billion of EBITDA LIFO. And that is also supported by the high quality of operational cash flow. Cash flow from operations exceeded PLN 36 billion for the year, and allowed us to finance, among others, our investment plan of PLN 32.4 billion. Leverage remains very modest, I would say, increasing, but still quite immaterial.
But it was a very busy year when it comes to us working on the diversification of funding. And just to mention a few of the most critical transactions that we worked on, that was the European Investment Bank loan and loan from BGK, from respective European funding, both to support distribution grid of electricity. We also closed an RCF deal earlier in the year, and most recently, but the one that we are probably most proud of, we issued bonds in the U.S. dollar market of $1.25 billion.
Both Fitch and Moody's confirmed our financial standing, and with strong operations, strong cash flow generation, strong financial standing, we felt confident today to propose a dividend of PLN 6 per share that we will put forward to the supervisory board and the general shareholders' meeting later in the year to approve. Let's move on and take a look about general composition of our results for the year. Still, we remain in the full year results. And while you see the composition of EBITDA on the left-hand side of the page, with all of our segments contributing solidly to the results for the year, but two segments particularly impacted: Petrochemicals by macroeconomic environment, and Upstream by regulatory gas write-offs. I will rather focus on the right-hand side of the page.
Here, we would like to discuss with you a bridge from last year's or 2023 EBITDA LIFO to 2024 EBITDA LIFO. There are three buckets of impacts that are worth noting and discussing and of non-operational nature. So obviously, first is the macroeconomic environment, and we spoke about it on the earlier page. That impact our financial results went down, and as such, impacted our top line and bottom line as well. But then we also, 2024 was the second year of the regulatory regime related to gas write-offs and compensations for limited gas and electricity prices. But what is truly worth noting is that the difference was PLN 16 billion year-over-year.
So we had more compensations of PLN 16 billion in 2023 than in 2024. And lastly, it is the so-called PPA, so purchase price allocation related to the acquisition of PGNiG, and more than PLN 7 billion of an adjustment in 2023 supporting the results. So a positive adjustment, obviously missing, in 2024 as we move on, and the impact gets less and less material. There's one more amount, but I will discuss that on the next page, that relates to the results. But one more thing to mention on this page, those three negative impacts were largely compensated by the operational, we call it excellence, but in fact, these are simply our commercial efforts and margins realized both on wholesale, retail, and sales, and also volumes.
Volumes in particular related to gas, with Upstream & Supply. Upstream delivered almost PLN 3 billion of positive volume impact and gas trading PLN 1 billion. All that together had significant positive impact to a full year's EBITDA. What we especially value about that is that those are results of our operational activities, decisions, and the efforts of our teams. Let's move on. I mentioned that there is one more number to discuss. On the full year, we adjusted our EBITDA by those either non-operational or non-comparable amounts. One more amount that was accounted for in the last quarter of 2023 was PLN 7 billion of change in the valuation of hedges related to LNG imports.
When adjusting our operational EBITDA for those, we end up presenting PLN 43.5 billion of adjusted operations related EBITDA in 2024, and that compares to almost PLN 40 billion a year the previous year, and as such, an increase of 2/3s, more than 2/3s even of our results in 2024. That adjusted result was delivered by Gas and Upstream segments. The diversification of our EBITDA generation is key for us going forward, but we already have got very strong and solid segments that support the results of the group. Another information to discuss or another piece of information to discuss is rationalization of CapEx versus the plans initially reported by the group at the start of 2024.
We already mentioned in the previous results presentations that we were working on the rationalization of our CapEx decisions. We already reported some decreases of forecasts, and today, I'm happy to share that we delivered on the forecast. We delivered PLN 32.4 billion of CapEx. That is PLN 6 billion less compared to the initially reported forecast. When thinking, I believe that's also of interest to you, what part of it is actually abandonment and what part is just simply phasing. We can figure out from some of the details that we presented here that definitely more than PLN 1 billion of that change in the development, in the growth CapEx, relates to or is simply a permanent decrease of investment.
The rest is probably more of a phasing nature. With CapEx, maintenance CapEx, we are down by 2.7 due to changes in scope, schedules, some abandonment of lower budget projects. When thinking about what's permanent, what's temporary, we would rather work not on the particular phasing, but an average of maintenance CapEx. In the strategy presentation, we mentioned PLN 8 billion-PLN 9 billion of maintenance CapEx as a regular recurring, exactly delivered in 2024. That's probably the best estimate for the future as well. Let's move on to the next page, which is yet another summary of our results, but puts more in a kind of tabulatory form for better comparison.
A few things to mention here. Fourth quarter of 2024 was the quarter with the highest adjusted EBITDA throughout the year. So that was the best performing quarter for the group, and we delivered more than PLN 12 billion of EBITDA, compared to PLN 9 billion the year earlier. There were obviously those one-off or non-operational nature transactions that we had discussed, so I'm not going to bother you with that anymore. We might discuss in the Q&A. But another element or another line here that I would like to draw your attention to is cash flow from operations. More than PLN 10 billion cash flow delivered in the fourth quarter of 2024. Very strong quarter in terms of cash flow generation, especially given seasonality.
And lastly, indebtedness and our financial standing, discussed that in the first page as well. But here, just for the sake of numbers, 0.3x net debt to EBITDA, still a very moderate, low indebtedness level. And let's move on to quarterly results. First, we will start with the general composition of the results. PLN 12.6 billion of EBITDA LIFO for the fourth quarter, and with all segments delivering strong and solid operational results. Petrochemicals is obviously still under pressure, and we'll take a look into more details here. We take some restructuring measures as well to make sure we respond to the macroeconomic environment.
But all of our other segments delivered in line with what we believe was the of best operational performance. Refining continues to adjust to the new normal in terms of refining margins. We also had a one-off benefit here of not having write-offs related to receivables, or prepayments, to be precise, related to the OTS. You might remember that was quite a well, a publicized event in the Q4 of 2023. Energy simply delivered a very strong operational result. I'll give you a brief overview of that in a moment. Upstream here is a very good exemplification of what Upstream segments of ORLEN actually can deliver in the quarter.
So we had a strong operational quarter, with strong volumes delivered and no regulatory burden that made it difficult to interpret the results in the past, in the previous quarters. And Gas segment here, again, or similarly to the Refining segment, we're searching for the new normal in terms of gas prices, but also in terms of spread being realized on those prices. We'll spend a moment discussing that a bit later. For a year-on-year comparison, what's critical to keep in mind is the PLN 7 billion related to LNG contract hedges that inflated the results of the previous quarter. So, that's the negative difference related to business would have been significantly smaller, if not for that transaction. And now details about the Refining segment.
And I think that there is no other way to start here than macroeconomic environment and the searching for the new normal, as I said. The Refining margins for the quarter, together with the differential, went down by a third, so it's a 30% drop, which represents global normalization of refining margins and cracks, but also increased supply of products related to the Dangote Refinery in Nigeria running live at capacity. Volumes, that's an interesting one. So volumes went down in terms of tons, but the volume effect is positive in terms of money.
That relates to changes in the sales structure for Refining products and also is a consequence of quite an aggressive sales or commercial strategy in the third and fourth quarter of 2023. This year, or in 2024, we sold more products as compared to or more owned production products than compared to the import or trade products. And we obviously deliver full margins on our own production, so both production margin and commercial trade margin. When it comes to the operational results of our refineries, very strong performance with throughput increasing in Poland and Czech Republic.
There is a slight decrease in Lithuania related to planned maintenance shutdown, but mostly to shifts in crude supplies related to weather conditions in the Būtingė Terminal. Therefore, we had to limit throughputs in our refinery in Lithuania. Two more elements that I would like us to note here. One is we successfully managed another round of negotiations with insurers and received compensation, another compensation installment for the desulfurization unit. We call it H-Oil . All right. And just a reminder, we spoke about it already, the previous year's quarter includes a write-down of PLN 1.5 billion, obviously not on the books in this year.
Therefore, you've got others as the largest contributing component here, but essentially consisting of those two adjustments. Petrochemicals, a continued struggle, but a struggle that we started navigating proactively. Definitely the macroeconomic environment and the market pressure is still there. We delivered strong volumes and sales. You may notice that each of our product groups delivered strong sales growth, but that didn't translate to any improvement of the results. Simply, the economic macroeconomic environment is too tough to enable us respond to that with the volumes growth. But the good news is that the operational performance and supply of products was strong. There's one more good news, even though in the negative territory, and that's the restructuring accrual related to Spolana plant restructuring.
We made decisions towards the end of quarter four related to restructuring plans of Spolana unit and closing or shutting down certain production units there and also making significant redundancies. That is an estimate of PLN 0.4 billion of costs, but surely aimed at improvement in the segment in the future quarters. Energy segment, solid operations. There are three business lines that contributed visibly to the result of almost PLN 2.3 billion quarterly EBITDA for the Energy segment. That's distribution, that's heat production, and that's electricity production. Each of those business lines delivered more than PLN 500 million of EBITDA to the results.
Production, electricity production, specifically by our CCGT units, benefited or enjoyed lower contracted gas prices. Our heat production business line obviously performs better in the winter season; therefore, hence, expected results. When it comes to volumes and production of electricity, one thing to mention is renewables production. Renewables, even though a much more difficult quarter when it comes to weather conditions, still contributed solidly to the results of energy. As a result of our transactions, M&A transactions, we improved or increased installed capacity in renewables up to 1.5 GW.
And just lastly, to mention for the sake of of record, Energy segment in the fourth quarter had, was not burdened by the regulatory write-offs. Those were discontinued, and as you can see, benefit, or, those discontinued, and so the segment benefited by PLN 0.6 billion in the fourth quarter, when, when it comes to operational results. Retail segment, and the good news here is that across all of our retail markets, we delivered strong operational results, strong margins on fuels and non-fuels, strong volumes. We are growing the number of stations. The number of fuel stations increased year-over-year for the fourth quarter, but that's a result of of M&As in Austria and Hungary, something we already introduced and spoke about.
But the non-fuels sales points also grew by 103, and alternative fuel stations also grew by 135 points. The largest positive impact obviously comes from fuel margins and non-fuel margins, and that's across all segments. But there is one thing to keep in mind, Polish market simply re-established the fuel margins. In the fourth quarter of 2023, we had abnormally low fuel margins in the Polish market, as a result of that aggressive commercial policy or strategy that also impacts the Refining segment. Polish zloty is gaining against key currencies. Therefore, there is some negative result related to the foreign operations in Retail. And as we grow our network, fixed costs grow as well.
Therefore, you've got some negative impact on the result of the segment, but all in all, very solid performance. Next is Upstream, and Upstream is all about volumes as well. We grew volumes by 17% in terms of hydrocarbon production, and that's mainly an effect of increased production in Norway. In Norway, as a result of our KUFPEC assets acquisition, we managed to grow production volumes by 30 BOEs a day. That's that represent a 40% increase compared to last year. Again, I will mention that, because that really requires proper significant attention. There was no more gas write-down related to Upstream operations, and this we will discuss in the outlook section as well.
There is none in place, therefore, we believe this is a good example of, a good exemplification of what the results of Upstream might be in the future. Just one reminder, in total, gas write-offs were very similar for 2024 and 2023, roughly PLN 15.5 billion. But in 2024, timing was different. A nd, we had, all of that write-down accounted for in the first half of the year. An additional element to, keep in mind is the increase of gas prices by 9%, for the fourth quarter, because for the full year, we had a drop in gas prices. But that was compensated by stronger PLN, against, specifically Norwegian krone, and the U.S. dollar. And lastly, production in Norway. I mentioned the growth.
There was one quite significant event in our Norwegian assets, and namely Sleipner B fields. We had, or I can't really call it fields, probably there's a better English for that. But our Sleipner B assets happened to be a victim of a fire, let's put it this way. We had to stop production, but we managed to compensate for that lost production, increasing production in other fields. Therefore, all in all, we managed to increase production in the fourth quarter, very close to the maximum levels or highest observed levels of 2.15 thousand BOEs per day. And then gas trading comes as the last one of our segments. We increased volume sold to industrials and retail customers.
Industrial total sales for the fourth quarter of 2024 went up by 5%, so 2% for the full year. As a result, our distribution volumes grew as well. That represents a growth of 10%, and all those significantly improved the results or impacted the results of the segment. There is one notable phenomenon here to keep in mind when thinking about outlook for the segment, and that's narrowing spread for sales for contracted sales of gas. And we have observed the narrowing spread for the last year, and that also remains in place for 2025.
Again, but I will only very briefly notice that, keep in mind the PLN 7 billion positive impact for the fourth quarter of 2023 in the Gas segment, that is no longer in place in 2024, therefore, distorted comparability of the numbers. On the next page, we will talk about our investment plan. I shared with you on the first page of our presentation that 2024 ended up... we ended up spending PLN 32.4 billion into our asset base. We expect it to be PLN 35.3 billion in 2025. There are three large investment categories here, obviously, Upstream & Supply, Downstream, and Energy.
Key projects for Upstream & Supply remain to be Norwegian assets, and that's exploration production projects for Yggdrasil, Tommeliten Alpha, Fenris . There are some other investments in Poland and Canada, but the Norwegian ones remain a key priority for 2025. For the Downstream segment, there is we continue to deliver the projects we already spoke about, or investments we already spoke about. That includes the New Chemistry project, and the units of hydrocracking in Mažeikiai, also hydrocracking oil units in Gdańsk, but also our biofuel units, like bioethanol, and rapeseed oil press units. I'll leave it with that. When it comes to energy, there are two key areas of investment.
We continue delivering CCGTs in Grudziądz and Ostrołęka, and obviously investing heavily in the distribution grid, especially that we just obtained the financing from BGK of PLN 7.5 billion at extremely favorable prices with extremely favorable commercial conditions. Therefore, we would like to maximize utilizing those. Consumers and Product investments are all about expanding our network to non-fuel sales and alternative fuel stations, obviously working on the quality of our fuel stations as well. One other thing to mention here is leasing financing. We spoke about the diversification of financing. We are also utilizing leases for the purposes of financing our investment plans.
And leases are expected to grow in 2025 from PLN 1.9 billion-PLN 3.6 billion, as we are, as we just started our ships 2025. An outlook to summarize our presentation. I'll give you some more thinking behind the impacts here or the key elements here. Upstream & Supply segment will surely have it easier in 2025 because of lack of the regulatory burden, so lack of the gas write-off that impacted the results of 2023 and 2024. What's more to keep in mind here is gas prices and the movement of spreads. We expect spreads to be tighter between the selling and contracting price in our gas trading contracts.
But we expect improving or increasing gas prices to support the results of the Upstream & Supply segment as we see production coming in according to expectations. Obviously, favorable import spread, if that continues, gives us a benefit on the results as well. When it comes to downstream, we spoke about searching for new normal in terms of refining margins. I think this is exactly going to be the year of managing the two. Impact from the adverse, or maybe not adverse, but less favorable macro environment in terms of Petrochemicals, probably adverse as well. But then we expect significant improvements in terms of operations.
Visbreaking and desulfurization unit should be online in 2025 in Poland, as such, improving the use of middle distillates. And we expect that to support the results of the group. But we will continue to operate in a market that will be more comparable of 25 to 24, but probably still quite difficult to navigate. Energy. In terms of energy segment, our key expectations are actually already not even an expectation, but already known is increase in distribution tariffs. We will record better results from distribution. We also expect increase in electricity production as our renewables portfolio grows and contributes to the results of the segment.
Negative gas prices, increasing gas prices will obviously have a negative effect on the energy cost base, and impact the segment here. For Consumers and Products, I think it's going to be exactly another year of focusing on our customer needs, the quality of our work with the customers. So we expect that to translate in higher sales and higher margins. But please also keep in mind that we will be changing the composition of the segment, and Energy, and Gas, R etail will be incorporated into the consumers and segments, or has been already incorporated into our Consumers and Product segment that will add to the result of the segment, but is expected also to improve the results compared year-on-year.
We expect the full year's EBITDA to be somewhere in the similar territory to this year's EBITDA. We see definitely potential upsides, but as we are still at the very early of the year, we simply want to be cautious and conservative with our expectations. We've got a very good base for 2025. We see no surprises on the horizon for the time being. Therefore, we're moving on, delivering the results, hopeful for the better, but still, when talking about the expectations, we would rather remain cautious, and moving the territory similar to this year's EBITDA, which, by the way, significantly exceeded expectations. So that's also worth keeping in mind. This concludes my presentation for today. We will be happy to take your questions right now.
I'm together with the team, in the room here at our online headquarters. Please go ahead.
Yes, thank you. By the ordinary token we have, I will, I'll let you ask questions, according to who came first. And, by all means, first was Anna. Please, Anna, the floor is yours.
Hi, can you hear me? Hello?
Yes.
Okay. Thank you for taking my questions. I have several, if I may, starting with the investments. So you provided the CapEx guidance, but you also were flagging the range of total investments, including M&A, for 2025, 2027 in the strategy. Do you have already clarity of what level of potential M&A can we see in 2025? And whether would you target a positive free cash flow for the year, or still a bit of a negative free cash flow in 2025, if including M&As? That would be my first question. The second question around Venture Global contribution. You expect the first cargoes to be delivered in April. Could you comment what contribution could it have on your trading business?
Maybe more broadly, you already commented on the direction for the trading business, but maybe you have some numbers you can share in terms of what EBITDA contribution from trading would you expect for 2025? And finally, a quick question around: Do you see any risks to Canada Upstream production from the tariffs discussion? Thank you.
From what discussion, Anna? Sorry, I didn't get that.
Tariffs.
Oh, tariffs. Okay. All right. Let me start with the M&A. That's probably the easiest one. We are, as we communicated during the strategy, indeed, taking into consideration both investment streams. So, the in capital outlays for the asset base, where developments and maintenance of the assets versus the buy decision. However, for a particular year, that would be rather impossible, unless all those transactions, or some transactions, would be at the stage that are already announced. So since we do not have any transaction announced, I find it difficult to give an indication of the potential M&A outlay for 2025. We are working on a number of deals today.
We spoke about during our press conference about the one that you also always ask or question, that's the polyolefins in Police. But we are also focusing significantly on renewables acquisitions. If there is a deal that comes close to fruition, we will obviously talk about numbers. But since M&As are simply a different animal than CapEx, that you need to plan well ahead, contract well ahead, and you've got much more visibility on CapEx, it's very difficult to talk about the estimates today for the year. When it comes to Venture Global, and two comments here.
Venture Global itself, what we know today, is that they informed us about the first cargoes and deliveries expected for April 2025. Until it happens, it's really difficult to comment anything. We need to make sure that we receive that cargo. We've got some more visibility on the cooperation with the vendor, with the supplier. So far, the credibility of the supplier has obviously been impaired. So let's please give us some time until April and then we will comment more, probably with the first quarter results. We would rather avoid speaking about single segment contributions. We also asked Anna about EBITDA from the segment, but we discussed the trajectory or let's say, movements.
There's a lot in the Upstream & Supply segment that makes us optimistic about 2025. I mentioned the lack of regulatory burden. I mentioned improving gas prices. There is the threat that we need to be cautious about, and some probably market-driven volatilities that still might be difficult to navigate. But all in all, we're optimistic about Upstream & Supply segment for 2025. And Canada tariffs, I'm probably a bit less prepared to discuss that one, so I'll try luck with the team, and if not, we will... No.
Well, I would say, well, looking on the Canada operation in terms of Upstream, so the activities are quite small over there. Yeah. So the contribution to EBITDA is between PLN 300 million-PLN 500 million for this lot on the yearly basis. So having in mind that combined segment Upstream and again will deliver significant results in 2025, I think that Canada Upstream is negligible.
Thank you.
Fair point, Konrad.
Right. If there are no follow-ups from you, Anna, Giuseppe, the floor is yours.
Hi. Good afternoon. Thank you for the presentation. We have two questions, if we may. The first one is about the new segments. You mentioned that the way the segments are gonna be structured, it's not just for presentation matters, but also because you're gonna think about them in a more synergetic way. And we were wondering if you could provide more details and color about the potential synergies and cost efficiencies and maybe ballpark estimates about the numbers might be. And then secondly, about dividends. This year, you paid a very large dividend per share, and it's higher than your free cash flow generation, and we were wondering if you would be willing to do that in the future as well, so the dividends being higher than free cash flow. Thank you.
Yeah. Giuseppe, I'll start with the dividends, and thank you for the question, because I actually would like it to be heard that we are very serious about our commitment to shareholders, and the commitment is that we will share our operational results and the operational cash flow with the shareholders. Obviously, each year evaluating where we stand. We made this evaluation where we stand quite recently. We delivered strong results for the fourth quarter, exceeded the expectations, managed to raise very favorable funding. We also see no significant associate threat or impact to our results going forward.
It is a check on all the parameters that we set to decide how much we can share with our shareholders, still in order to be responsible on the responsible side of the matter. So yes, we are willing, and we are serious about our dividend policy. Each year, we will again, in a responsible manner, evaluate the standing of the company and operational performance and cash flow generation profile. But we change the paradigm. We're not talking about free cash flows allowing us to share with the shareholders, because we know the large investment plan is of rather abnormal nature. So we would normally not expect several years to go with negative free cash flows. But we are a very strong business that's of diversified nature.
We believe we can generate cash flows that will allow us to keep the strong balance sheet position of the company, but share attractive dividends or, share, dividends with the shareholders, that are, simply comparable to other players in the industry as well. So that's my statement on the dividend. On the segment compositions, on the, on the segment compositions, yes, Kuba, you may, you may drive us to the page where we... On a very high level, of course, I understand, we will need to provide more details, and this promise that will come with the full year financial report, mid-April to be expected. But how we grouped, the segments and what synergies, we believe, it's not, a matter of belief, what, synergies, are there, between the segments?
Upstream & Supply simply consolidates all of the activities that supply commodities to our doorstep. So that might be Upstream, that might be supply of commodities to other business segments, so to Downstream and to Energy. That's the kind of logic here. And then the Downstream segment takes an input from the Upstream & Supply, and processes that input into final products. And those final products go to Consumer and P roducts or own sales of the Downstream segment. Energy obviously takes that input, too. There's some more happening there in the Energy segment, different sources or different ways to produce energy, but also distribution assets, with both gas and electricity be put in the Energy segment. And Consumer Products, that segment will consolidate all activities facing our clients.
We want to make sure that we have the right organizational focus on the integrated offering for our consumers on the consumer insights into product development. All that we believe are synergies currently not tackled and we're tackling and that will help build an even more loyal consumer base for the future. So I hope that on a high level, synergies are seen here and kind of logical. Numbers will come with the bridge, how to translate 2024 numbers into the new segments.
That's helpful. Thank you.
Tamas, please.
Yes, good morning, and thank you for taking my questions. Three questions on my side. First of all, retail accounting changes. You mentioned that you changed the accounting principles, how you treat your Retail business. What would be the result or what would be the growth of this segment without this accounting? Because I believe that this comparison you showed, it's not a like, like-to-like comparison. And basically, I saw that volumes increased, fuel margins increased, but your result went down. So that's my first question. Second question is, what is the outlook for the, the Refining and the Petchem margins, and, do you see any upside, for example, in, in the Petrochemical activity, in, in margins or in volumes? And finally, can you tell us what is your net sensitivity on the gas prices?
So, is higher gas prices improve your results per se, or are you more like neutral to the change of the gas prices generally? Yeah. Thank you.
I think we will need to follow up on the mentioned accounting adjustments or changes in accounting treatment for Retail, because I don't recall any segment-related accounting adjustments. We did several accounting policy adjustments for this year, but you will always have the base year adjusted. The comparables are always adjusted, and the reporting year is adjusted. We believe what we propose today, and that relates to interest for late payments and interest for receivables as more related to operations and financing. Therefore, we moved it above the EBITDA. But again, you will always have it adjusted for both the reporting year and for the comparable year. Our outlook for refining margins, we expect refining margins to be in the territory of high single digits, somewhere between eight and nine.
That's what we currently observe, slightly better than what it was for Q3 and Q4 of 2024. And that's the assumption that we are internally working with. On the Pet chem margins, we don't expect any significant movements. The situation remains dire. There's still strong supply of cheaper products from overseas. And there are still issues on kind of local European level to monitor the inflow of goods such as fertilizers and how local production can be supported. We don't think any of those would translate into any visible, significant impact on the results of the segment. And the net sensitivity to gas prices, I will start, but team please, complement. And that actually...
There is no easy answer because it's not only about the net sensitivity, but it's also about the magnitude of volatility and timing of that volatility. There are some pretty easy answers when it comes to segments. So for the Downstream segment, growing gas prices is negative, is a negative effect, because gas is an input into electricity production. For Energy, that depends what drives the energy price. But in general, you may assume that energy price going up has a negative impact on the energy segment result. But for Upstream & Supply, it is not an easy case. For Upstream business, obviously, growing gas prices with the volumes or multiplied by the volumes simply give better return on the Upstream operations.
But supply business is then about contracting, and we contract sales of gas for the next year, and we obviously contract them or hedge our position on the supply side. And when the volatility is significant or there is a sudden movement in the gas prices, it's very difficult to manage that contracting position in order to benefit best from the movement in the global prices. That would be my answer, unless there is anything you'd like to add, team.
Yes. This is Marcin Piechota speaking. Please, remember that, when it comes to supply of, of gas, what is crucial to, to observe in forthcoming months is the spread between the Henry Hub and the TTF pricing. This will be the significant factor behind the results in Upstream & Supply, due simply to the fact that, nowadays, the margins that can be generated on the LNG coming from United States on the Henry Hub basis is very profitable. W e hope, that, we can be a part of this environment, and, generate margins on our long-term contracts. So this will be a key driver for, for this, trading part of the Upstream & Supply business.
In case of Upstream, of course, here we have a very, very direct connection to the spot market, as this is a basis to settle the gas that we are producing and we are transferring within the company. So, that's probably the, the best comment right now.
In terms of, Retail, you were asking about, let's say, changes in the, accounting, policies. So let's say the initial year, Q4 2023, has already been, changed. So the change that you see, so Q4 2024 comparing to Q4 2023, and, this, change is, presented on the others, -PLN 300 million. So out of this, roughly speaking, half of it comes, from the fact that, there was a change in FX, differences. So due to, let's say, a stronger PLN, and, we put, this, from below EBIT and added to the operational results. So that's the change.
Correct, but it is not the change that drives the difference in numbers.
Yes.
It is the change of exchange rates that drives the difference in numbers, simply from the Polish zloty.
Yes.
Okay. Can I ask a follow-up on this issue? Because that's not really clear. So you say that it's mostly the FX impact which push, which pushed down the results. Is this more like a temporary phenomenon, or do you expect these FX changes to be permanent here? 'Cause I think it's more like a one-off or a kind of a negative move in the FX rates. Do I understand this correctly?
Well, that largely depends or only depends on the movements of FX and Polish zloty over the last quarter, significantly improved against the key, specifically against euro, but also some other currencies of the region. Reporting and earning in euro, like Germany, or Slovakia, or Austria, that translated into weaker or into a negative impact. But if the currencies remain stable, then you shouldn't see any significant impact to the results.
Well, simply put, it was below EBIT, now it's in EBIT, so it's an ordinary exposure to FX.
But it's in EBIT for both of the years, again. So not really, not a matter to you know to discuss.
Okay. Okay, I think it's clear. Thanks. Thanks very much.
Okay. Moving forward, Łukasz, please. Łukasz Prokopiuk?
Oh, hello, this is Łukasz Prokopiuk, DM BOŚ. Thank you for taking up my questions. I would like to ask a follow-up on LNG imports. Could you please tell us if all goes according to plan, what are your expected LNG volumes imports based on Henry Hub this year and next year? That would be my first question.
Team, I don't have the percentage immediately on hand, so Marcin?
Okay. So, let me start with what we have in our long-term contracts. We have Cheniere, that's 1.95 BCM per year, and this is a fully utilized contract. On the other hand, we have the Venture Global long-term contract for the deliveries coming from Calcasieu Pass, and this is up to 2 billion cubic meters per year. And, starting from 2025, we should expect that this contract, if the promises coming from the Venture Global will realize, this will be fully utilized. We cannot say what about the volumes in 2024, sorry, in 2025, as we are still expecting the very first delivery.
Mm-hmm. So the known volumes of LNG coming from the U.S. are 1.9 billion for Cheniere?
Yes. Also, starting from 2026, we should expect first deliveries coming from Plaquemines. This is the second terminal owned by Venture Global. And a similar case, depending on the first delivery, then we should expect how big the volume should be. The contract states the contract was assigned for 5.5 billion cubic meters per year.
Okay, but the contract with Venture Global, the one that is set to come online in April, it suggests that you should have, like, over 9 billion cubic meters this year if the delivery arrives, yes?
Mm-hmm. It is two now, up to two BCM for this year of 2025. So two plus unknown pro rata, probably number-
Mm-hmm
... of the 20, within 25, so the second Venture Global. And there's a third Venture Global, with roughly five annually, starting from 2026. However, dependent on when it kicks off and, calculated pro rata.
Okay, that's precise. Can you tell us anything about Polimery? How much EBITDA do you think it can generate in a normalized environment? Or can you tell us anything about this asset?
Yeah, I think at this stage, all we can comment really is that we are heavily engaged in the due diligence process and working on the valuation and the financial business case. You probably are all well aware and follow the communication of Grupa Azoty as well, that the polyolefins asset in Police has been through some struggles over the past quarters with the construction process still not finished with the supplies of propane and utilization of capacity. We don't have reliable paths to be commenting on the future performance of the asset. So there's a lot of work that we are doing right now with our advisors, financial, technical advisors, in order to understand what's the expected recurring performance of the asset.
Then, we've got also our commercial advisory team to model what might be and what demand and pricing we can expect in the near term and in the midterm. And only when we've got all that information, we will be able to or in the position to discuss what we expect from the asset. So it's a bit too soon. We understand there is a lot of interest, and we're working on proper disclosure. But first of all, we need to see whether there is a transaction or not, and what might be the parameters of the transaction.
Okay. Okay, should we expect more insurance for the HOG unit in the future?
There is still a lot of work that we need to do with the insurers. So currently, the two installments that we received were, let's say, of a no-brainer nature. But obviously, much more to come. It's been quite a long business interruption. Just to remind you, it started in September 2023, two years ago. Yeah, two years, more than two years ago. So that's definitely one of the most senior or serious unit interruptions. Therefore, I would expect more installments to come. Difficult to comment on the amounts yet, but yeah, we'll keep you updated.
Perfect. One last question, or a few questions related to one topic. Could you please show page 19 about the changes in segment reporting? The four segments we see here, do you consider showing costs by type in the four segments? Cost by type, I mean salaries, services, raw materials used, yes, per segment. Have you considered it?
It's a difficult question to answer, 'cause we will provide the information that we believe is relevant, right? So if there is relevance in adding disclosure on the cost, t hat shouldn't be an issue. Obviously, on a general level, the segment reporting is what it is. It is defined by the International Reporting Standards, and on a repeated basis, included in our financial statements and disclosure. But our key objective is to make sure that our reporting is relevant, provides better understanding of the business and the business drivers. So if there is merit, then we will obviously share that information with you.
I think there definitely is merit.
Yeah, and I was just about to mention that. We discussed it, just for the sake of others, we discussed it with Łukasz offline once, and we believe that that's a worthwhile and fruitful discussion to follow before we publish full year. And we will be getting back to you for your feedback to some extent, reasonable, when providing the data. So, this is to come shortly in a couple of weeks from us before we publish full year to make sure that we are all aligned to what we have repurposed here.
Okay, another question regarding the segments. Like, will you show any EBITDA contribution from the new segments? I mean, well, okay, Downstream is a big segment, but will you show Refining EBITDA, Petchem EBITDA, I don't know, fertilizer EBITDA, PTA EBITDA? Will you show the contributions just like you show in the energy segment, all those, the waterfall graph where you show renewables, heats, and-
Ex-
distribution and so forth?
No, that's an excellent example. We will provide the necessary disclosure for our investors and analysts to understand the business and the business drivers. And we found it useful for the energy segment, therefore, we're presenting it right now. And when we report the next quarters, and we find another set of data useful to understand the business and the business drivers, we'll certainly provide the disclosure.
Okay, very good. Sorry, one last question. When you publish the first quarter, yes, it will be under the new segment regime, yes? But will you show the whole year, all the quarters of 2024, changed, or it will be like, it will take the whole year to, for us to see the changes, you reporting each quarter individually?
Our ambition for the sake of better understanding the business composition going forward, we will provide a bridge from full year results of 2024 to from the old segments to the new segments. We will not be recalculating the quarters for the year-end reporting. We will, though, obviously, provide quarterly new segments for the purposes of comparison of results of quarters of 2025. So with the first quarter of 2025 results, you will see the results of the current reported quarter according to new segments, and comparables for the previous year, according to the new segments.
Okay, but, what I urge you to do, or it would be highly appreciated if you, in the first quarter, if you showed all the historical quarters change, because we will wait a whole year to understand what is happening in the company with the new accounting rules. It's,
Łukasz-
That's all from my side.
Let's take the technicalities offline. Your point is noted. Let's debate it. Let's see what is actually the right kind of balance of effort and value to be derived.
Noted, recorded, and transcribed it.
Thank you very much.
So, Łukasz, we'll take it offline, okay? Now we'll-
Yes
... move on to Tomasz Krukowski, please. Tomasz?
Hi, Tomasz Krukowski, Santander. Three questions, if I may. The first one is on your guidance. When you discussed with the guidance for 2025, as a basis, you were referring to 2024, but the one which you reported, which was PLN 35, or the one which you showed in the presentation, the adjusted figure with the impact of all those regulatory measures, PLN 44, I believe?
What is the difference between the 35 and 44 is probably to be analyzed. But our thinking on a kind of daily basis and the way we work with the business is on the EBITDA LIFO basis, so the 34.
Mm-hmm.
That's also how we communicated with you in the past.
Okay, thank you. The next one is on working capital. In the past two years, we saw quite significant decrease in working capital, which supported operating cash flow generation. So the working capital level, which we right now see in the balance sheet, this is something which we should expect to be stable going forward, or you expect any changes on this front?
We work in the commodities business, so a lot of the working capital changes comes from changes in the macroeconomic environment. Therefore, that needs to be kept in mind. We believe there is upside coming from working capital management and integration of our businesses as well. There's even a special initiative run by Przemek and the strategy finance team to provide simply a work plan for improvements in the working capital. So on the kind of operational managerial front, we're doing a lot to improve working capital. But the large kind of grand scheme changes are often a result of volatility in the macro environment.
Got it. And the last question is on leases. You mentioned during the presentation that you expect your leases to increase over the course of 2025, and the figure, which I believe you referred to was nearly PLN 4 billion. It was the increase in the balance sheet amount of the leases which you book, or this is the increase in the cost or the lease payments which you book in the cash flow statement? And if you can elaborate a little bit on what is the nature of the increase in the leases.
There is an increase from 1.9 to 3.6. The 1.9 includes various arrangements related to catalyst as well, and I think Downstream production. The upside or the increase in the amount relates to shipping cargos leases. And what it represents is it represents the value of the assets. So it represents the leases value that finance the asset, not the payment. Right.
Mm. Okay. Thank you.
Łukasz, I don't know how you managed to squeeze in before Piotr, but I will then give the floor to Piotr, since I believe others deserve credit for asking questions.
Piotr has waited for a while.
Piotr, please.
Ah, yes. Good afternoon, everybody. Congratulations on the results. I have a couple of questions. So the first one I wanted to ask you is about your dividend, 'cause I think finally, market tries to get a grip on the minimum base dividend to a maximum level. So when you decide on a PLN 6, whether this year or you will decide next year for the next year, how, to what extent this is a forward-looking measure assessment of the business and your confidence? And can you help us understand your thinking, how you really determine this figure? Because what I'm trying to get out of this question is really if we go into the next year or year after, and we will... At the moment, market thinks only about the base dividend, but maybe we should be thinking about PLN 5, PLN 6 or whatever the estimate is.
Can you help us understand how you derive the 6.6 PLN per share number?
I think that's a fair question. And there was actually a very clear, kind of thought process behind it. So first, obviously, we analyzed the quality of our operational cash flow generation and expectations going forward. We believe, especially the last quarter, proved so the quarter that was more business, driven, than regulations driven, delivered really strong performance, and there is an expectation for the business to continue, with, with good cash generation, for 2025. So we felt confident in here. But then we did, simply peer analysis as well, where we stand in terms of, the total return to shareholders, where we stand in terms of yield.
Where we stand, in terms of our evaluations, and how we can make sensible steps to catch up with the peers. So that was another consideration, and we ended up suggesting to the board team that we should go with the 20% payout of the operational cash flow, reaching almost 10% of the dividend yield. That already makes us, let's say, at par or very close to some of the European peers. But also gives us some, let's say, or helps us keep the pace of catching up with the dividend payout.
So that was the essential logic behind our thinking, and I think it has led us to a decision that internally we all digested and accepted, and that's how I would like to keep things going in the future.
Okay. Understand. And can you maybe guide us a little bit to what extent the cash conversion of EBITDA, which you guided, may be different in 2025 versus 2024? I'm basically trying to get a sense whether the cash flow... Like, what is the maximum amount on the current EBITDA guidance you can generate as a per share basis that could theoretically be a top floor for a dividend?
So the dividends conversion in 2024 was actually very satisfying, right? And what helped us here is obviously more kind of business-driven result of the business. So in 2023, we had those large volumes of PTAs, non-cash items, and they were simply absent in 2024. And we will be working on the quality of the results for 2025 as well. We currently do not have any non-cash adjustments on kind of on the horizon that we would need to discount. Something to keep in mind going below the operational cash flow, but I would expect you compare EBITDA to cash flow generation on the operational cash flows.
But something to keep in mind in terms of cash flow forecasting is obviously an increase in CapEx and increase in financing costs as we take up on leverage on our balance sheet, but that's below the operational financing or cash generation.
Okay. And the last very quick one from my side is on your CapEx for 2025, do you think this could theoretically surprise to the downside, that you could have some delays in some of the projects and the actual execution comes lower than the number you gave, you gave us today?
There's always a risk to manage throughout the year. Look, this PLN 35 billion CapEx is quite a massive program management exercise. There are lots of projects for all of our segments, and it is a complex business to manage those. We did our homework, so we were really diligent, preparing our plans and budgets, having hours-long discussions with the business, making sure that there are proper schedules, making sure that there are proper teams managing those projects. But there is always a risk of delays, sometimes out of our control. I could give you some examples of projects being delayed because of permitting. It happens in the large infrastructure businesses.
The moment we see that, the moment we notice that, we will keep you updated with next quarter's results.
Okay, thank you very much.
We will be going towards the end. However, we do have a couple of minutes. So, Oleg, please.
Yes. Good afternoon, and thank you for the opportunity to ask questions. I have a few. So, first, with the Upstream segment being back in the game, can you talk in more details about your expectations for the Upstream production in 2025 and 2026? What level of growth do you expect in crude oil and natural gas, or growth or decline? Secondly, most of oil and gas producers are confronted with high cost inflation. I know that ORLEN does not report OpEx per BOE. Maybe you can do that in the future, but hopefully, you can provide some comments on the cost, inflation last year and whether you have some efficiency improvements initiatives on the table. And the same question would apply also to the Retail segment, since most of, retailers, including ORLEN, are facing high cost inflation.
So if you have any cost-cutting initiatives here as well, maybe you can provide some examples. That would be very helpful. And lastly, does the change in segments reporting aim at increasing the efficiency or generating some synergies going forward? And if yes, of which nature? Thank you.
I'll start with the last one, the easiest one. Changing accounting policies does not create any efficiencies. It is simply a better representation of the operational results. So what used to be treated as an item financing the business is actually a result of operations, and therefore should be included in the operational results. That's the rationale behind that change, but it will not, in itself, create any efficiencies. When it comes to Upstream segment, Marcin, will you pick this one up?
Yes. Thank you, Oleg, for the question. Let me start with the volumes. Taking into account what's happening on the slide there, and sign- and slightly lower volumes that we recorded in the fourth quarter of this year, we should assume that, in terms of gas production, we will have to wait until 2026 to see some significant improvements. And for 2024, we should see the volumes of gas production flat. We do not expect to cover the loss of Sleipner with increases in production from other fields, what has already been done in fourth quarter.
In terms of crude oil, we assume natural decline of the production of around 8%-10% next year. In case of 2026, here, rough in comparison with 2025, so rather flat volumes production in terms of gas. In 2026, we expect an increase, thanks to the investments that we are right now conducting on the Fenris and Tommeliten Alpha mainly, and Yggdrasil area. So we expect total gas output to increase by 10%. And in terms of crude oil, we do not see the potential to reverse the natural decline.
So, here we are rather seeing flat production numbers when you're thinking about 2026 compared to 2025. So that's what the production plans look. That's what, how we see the production plans. In terms of unit production costs, in fact, we saw those especially in Norway to be rather flat. So we managed to not to inflate the costs. In terms of Polish production, I think that it's fair to assume that there is also a similar correlation to the simply inflation that we saw in the last year.
We are happy with the performance in Norway, where in fact the unit costs per barrel decreased by 1% last year. With Polish production costs, we will be looking into this.
Thank you, Marcin. That was diligent. Jakub?
Cost in Retail.
Cost in Retail, correct. Whether we've got any kind of formal cost initiatives in Retail segment. I think the focus in Retail is different. The focus is efficiency, not really cost cutting. So obviously, we are cautious and aware of the cost base increases, and anytime it happens, it receives a lot of attention from our C&A teams and commercial teams. But what we want to make sure is that we deliver maximum value of the fuel and non-fuel networks. Therefore, it's rather working with the margins, it's working with the consumers, it's making sure we grow volumes than particular cost-cutting initiatives.
Thank you very much. So what you're saying is that out of PLN 300 million impact of other cost items in Retail year-over-year, not all of it refers to higher operating costs at fuel stations?
No, just like, just like, Konrad mentioned, roughly half of that, if I remember correctly, was the FX impact, and the rest was, an increase in costs, related to, operations. But one kind of word of caution, do not, attempt to model the full year with one quarter results. Take some longer, period into consideration. Business is, seasonal in terms of retail sales. And also quarter four, tends to be a tricky one, to use as a recurring base for the future. We take all sorts of stock counts in quarter four, that might have impacted, the results of particular cost points.
Also, the Q4 was not comparable in terms of number of stations.
S o, this is something that you need to bear in mind, and we have those listed in the table. You see that the number of petrol stations expanded by 7% with the M&A we had. So year over year, this 300.5 is co-attributable to FX. And roughly, I would doubt if more than a half out of the half, so a quarter, would be the increase in the number of petrol stations that drove the cost base. So again, as Magda said, this is not apples to apples here.
Thank you. Very helpful.
And last, but not least, Michał Kozak. After Michał, we will be concluding the very productive meeting. So without... I'm, I'm giving you a notice that it's the last round.
Thanks.
Thank you. Thank you. Two topics, short topics from my side. The first one, should we expect the LNG deliveries from the Calcasieu since April this year to be realized at the current TTF Henry Hub spread, or did you hedge this spread at a lower level, earlier?
I think first we need to have some clarity when it comes to volumes and deliveries. I wouldn't rather discuss the particular hedges or cargos whether hedged or not. We evaluate our position on a global open position not on particular cargos. That's our approach and the policy for commodities hedging.
Okay, thanks. The second and last one about dividend. What was the exact number, exact value of operating cash flow minus financing costs for 2024, which is the basis for the payment of a higher dividend, up to 25% of that line indicated in the strategy?
Yeah, that's an easy math. So, all you need to do is take a look at our cash flows from operations in the financial segment. That's PLN 36,634, to be very precise. And then costs related to loans and leases, and that's a number close to PLN 1 billion. So that's how we arrived at the base for the calculation.
Okay. And how does CapEx affect this decision? If CapEx is higher than OCF minus financing, there will be no excess dividend, right?
Our dividend policy is not linked to our CapEx-
Yeah, I know.
... in a direct manner.
Mm-hmm.
We were very clear that we will show operating cash flow less cost of financing. There is, of course, an indirect impact, right? We will always evaluate when evaluating-
Okay
... the position of the product, whether we are on track, whether there is some significant risk that we need to take into consideration, any significant delays for us that are expected to produce returns in the nearest term. So there is a lot of consideration there, but there's kind of no direct link of our dividend payout to CapEx delivery or lack of delivery.
Right. Thank you very much.
Placing and comparing quickly. Old policy refers to free cash flows. New policy refers to operating cash flows minus cost of financing. So-
Yeah, sure
... we are strongly underlining this significant change.
Thank you, Jakub, and thank you everyone for joining. It was great catching up with you today. If any questions, our team is always ready to address those, and I'm even happy to connect with everyone, so please do not hesitate to shout out. It's been a hell of a ride, this 2024. I look forward to 2025 and our next meeting in May. Thanks a lot. Bye-bye.
Thank you very much for spending this-
Thank you very much.
... hour and a half together. Thank you.
Bye-bye.