Good morning, everyone, once again. Welcome to Orlen presenting third quarter results of 2026. We are sitting here today in Orlen headquarters. The meeting will be led by Mr. Sławomir Jędrzejczyk, company CFO. We are here today in the room with Jacek Matyjasik, Head of Treasury, Damian Wieczorek, Head of Controlling. My name is Jakub Frejlich, I am Head of Investor Relations. Next to me, Marcin Piechota and Konrad Włodarczyk from Investor Relations. Without further ado, I will pass on to Sławomir to give the presentation. After, we invite you to ask questions. As usual, please raise your hand. I will address it accordingly to the order you raise your hands. Please, Sławomir, the floor is yours.
Thank you, Kuba. Good morning, ladies and gentlemen, and thank you for joining us. Before going into numbers, let me spend a few minutes on what I believe are the most important developments of the quarter. We delivered another strong set of results in a volatile, uncertain market environment. Equally importantly, we continue to execute our strategy and strengthen the foundation for the future cash generation. Let me highlight a few examples. In upstream and supply, we continue to strengthen our resource base and security of gas supply. The appraisal of Afrodite confirms significantly higher resource potential than initially estimated. Our share now represents more than 4 billion cubic meters of natural gas. That is more than twice the original estimate at the beginning of the year during the acquisition. This is the largest discovery in Norway this year.
At the same time, we brought Idun Nord, Alve Nord, and Ørn on stream. We are not only talking about resources for the future, we are bringing new production into the portfolio and strengthening our supply base. In downstream, we took another important step in securing and diversifying our crude supply. We signed a three-year agreement with Equinor for crude oil from the Johan Sverdrup field. Annual deliveries can exceed 9 million tons, covering up to around one-quarter of our crude requirements. For me, this is important for two reasons as well. It strengthens security of supply, but at the same time gives us greater flexibility in optimizing our crude oil. We also continue to improve the efficiency and energy footprint of our downstream assets, including the new solar capacity in Mažeikiai. In energy, we achieved another important milestone at Baltic Power.
All turbines have now been installed, and the project has entered the commissioning and testing phase. At the same time, we continue to connect new renewable capacity and modernize the electricity distribution network. Again, these are tangible milestones in the execution of our strategy, not simply the plans for the future. Finally, in Consumers & Products, we continue to develop our customer proposition and new mobility solutions, including electromobility and further expansion of the VITAY ecosystem. If I were to summarize the quarter in one sentence, I would say strong financial performance today, combined with continued investment in tomorrow's cash flow. We are strengthening security of supply, developing new production, delivering major energy investments, and broadening our customer offering while maintaining a very strong financial position. With that, let us move to financial results. Slide number 3.
In the third quarter, we delivered PLN 80.1 billion revenues, PLN 14.8 billion EBITDA LIFO, PLN 12.7 billion cash flow from operations, and we spent PLN 7.8 billion of CapEx. We may say this is another strong quarter supported by favorable macro and diversified business model. We deliver strong earnings translated into cash, while the balance sheet still remains exceptionally strong. Now let's move to slide number 4, where we present operating parameters. That was the quarter with seasonal maintenance shutdowns, some unexpected shutdowns, and weaker demand. Let's start with upstream and supply. The production dropped by 7%, which is mainly in Norway and Poland, whereas in Canada, we achieved 7% growth. I would like to just point out that the fourth quarter should be much better, so part of this drop will be regained in the fourth quarter.
As regards natural gas sale, this has dropped by 15%, mainly due to the fact that it's lower consumption on Polish market, so lower sale on Polish market, and as well lower export sale. U.S. LNG imports through our long-term contracts dropped by 23%. That's due to the reason that we reallocated those gas carriers into other markets, like Asian market or European market. What's very important, just yesterday, we started to load the first gas carrier for the second Venture Global contract. As you recall, this is 5.4 billion cubic meters yearly. In 2027, you should expect all the second Venture Global deliveries to be in place. In downstream, our crude oil throughput dropped by 1%. This mainly in Płock due to the shutdown period and prolonged shutdown of our steam cracker.
In Lithuania, almost full capacity utilization, Unipetrol, high utilization due to the fact that we did not have that big shutdowns as compared to 2025. As a result, refining sale dropped by 5% due to lower crude oil throughput, but due to a lower third-party transaction, trading transactions as well. Petrochemical sale, we still see pressure on the market, so - 6% growth. I mean sale. In energy, electricity production - 4%. That's due to the fact that more renewable energy was put into the system, so that's why our gas-fired power plants operated in limited volumes. Heat production 4% lower due to less demand. As regards distribution network, very good results in electricity distribution, + 6% due to partially better consumption of the market, but partially as well due to enlarging our distribution network. In natural gas, drop by 3%.
This is in line with drop in the consumption. What's very important, our share of zero and low emission in installed capacity improved by 5 percentage points, so now it's 65%. As regards consumer end products, we saw some pressure from the consumption point of view, especially on German market, where we observed the drop. As a result, altogether, retail fuel sale dropped by 1%, but it's good to mention that non-fuel sale is increasing. Our strategic targets, we deliver our strategic targets in convenience area. As regards natural gas sale, - 3%, so this is similar to distribution network, so basically drop in consumption. Electricity, +10%, and this is a really very, very good result, partially due to consumption, but really better performance in our internal performance. Now let's move to slide number 5, EBITDA.
I would like to point out that diversification is working with different businesses supporting group earnings at different points in the cycle. Upstream delivered PLN 4.7 billion. That is supported by commodity prices, partially offset by production profile and gas trading economics. In downstream, we delivered PLN 3.3 billion, so strongly from supportive refining macro. However, we observe lower volumes and trading and negative hedging effects, partially offsetting macro upside. Please bear in mind that windfall for the period since March to September will be included in our P&L and cash flow in the fourth quarter. The amount is roughly PLN 2.4 billion. Energy delivered PLN 2.7 billion, so providing stable and increasingly predictable earnings. Renewables and regulated distribution strengthening the quality of our energy contribution. In Consumers & Products, this business line is resilient with improving profitability outside Poland. Now let us move to CapEx.
As regards CapEx, we remain in an intensive investment phase with capital discipline, which is unchanged. For the first nine months, we spent PLN 6.6 billion in upstream, mainly in Norway, PLN 2.7 billion, and PLN 1.2 billion leasing costs for gas carriers. Downstream, PLN 7.7 billion. The highest amount is, of course, Nowa Chemia project, roughly PLN 4 billion. In energy, PLN 7.3 billion, so the main amount is PLN 3.8 billion from distribution networks, both energy and gas. PLN 1.2 billion is CCGT projects we are currently undertaking. Now let us move to slide number 7, when we provide the cash flow. The cash flow is really strong. We delivered, as we know, PLN 42.8 billion EBITDA LIFO, so we present here LIFO effect. Increase of working capital by PLN 6.4 billion due to the higher prices of crude oil and gas. Then tax paid PLN 5.1 billion.
Altogether, we generated PLN 36.4 billion cash, and we basically distribute this as we always indicated for the biggest investment program in the history of Orlen. We spent, including leasing and acquisition of minority Energa shares, PLN 23.9 billion. The highest dividend paid in June, PLN 9.3 billion. Altogether, net debt increase, that was actually decreased by PLN 2.8 billion, but if we take into consideration PLN 2.4 billion windfall tax, which is going to be paid in November according to regulations, you may say that the quarter was basically distribute all amount we generated from operating cash flow, we distributed to CapEx, dividend, and windfall tax. Now let us move to the slide number 8. Our balance sheet provides significant flexibility, as we know, but our approach to capital allocation remains absolutely disciplined. A few messages here.
Diversified financing across currencies and instruments, long maturity profile limiting refinancing risk, and strong credit ratings confirming conservative financial policy. To close my part, I would like to emphasize Orlen's strong current performance, continuing strategic execution, and financial flexibility to create value through the cycle. That is all at this part. Kuba, we are ready to take the questions.
Yeah. Thank you very much, Sławomir . I will be handing over to you guys for you to ask questions. First, people first. Ricardo, please go ahead.
Hello. Yeah, can you hear me now?
Yeah.
Perfect. Good morning. Thanks for taking my question. If I may, first question is on CapEx. It is running below the previous estimates for the year. First, how much of that is a delay, and should that move into 2027? Or second, what is the efficiency there that we are seeing this year as well?
Okay. Thank you for that. Of course, our CapEx set was like PLN 36 billion. However, if you look into our past performance, and this is not only our past performance, but many companies, basically, it is sometimes difficult to just achieve full CapEx plan. So really, you can expect kind of up to -10% lower CapEx spendings. Of course, we will see how the next two months develop. I would say this is across several projects, so there is no kind of one project that accounts for that amount. As this relates to the projects which are ongoing, you may assume that this amount will be included in the plan for 2027. However, we do not expect. Of course, we continue all these projects according to schedule, so I would not expect that CapEx for 2027 will be highly inflated by kind of postponing or moving some amounts to 2027.
Thank you. The second question, if I may. This year, you are seeing some volatility on your supply, both on oil and on LNG side as well. When you think about your strategy going forward, more of a structural basis, would you be willing to take more of a diversified supply strategy as a way of reducing the exposure to any potential disruptions?
Thank you. Of course, we believe we already diversified our sources of delivery gas and crude oil. From the gas perspective, the second contract of Venture Global 5.4, which is coming in force, proves that absolutely. Of course, currently, we have Norway, and we have U.S., and we have Qatar. One gas carrier is heading to Poland currently. We do not, at this stage, receive the news that a second gas carrier is going to come. However, still, Qatar contracts are valid. We will see how the situation in Middle East develops. From the gas point of view, we have big contracts from U.S. market, we have Norwegian area, we have still valid contract with Qatar. So, I believe we are on the safe side. From the crude oil, we signed this new contract with Equinor. So again, Norway is a big chunk of delivery crude for us.
We have big contracts with Saudi, and we know that there were some disturbances in September. However, we managed to get this crude oil from different sources, from spot transactions. So, I believe the crude is available on the market. To conclude, I believe we are kind of on the safe side. We have good strategy in force since many quarters, many years. Unless there is anything really, really difficult, everything is under control.
Great. That is great. Thank you very much.
Thank you. Now move on to Anna Kishmariya from UBS, please.
Good morning. Thank you for taking my questions. I have a couple. First, around the hedging impact on the downstream side. If you can comment what is the outlook for the fourth quarter and whether you expect, maybe you can comment around the magnitude of the impact you expect in fourth quarter, and what we saw already in third quarter, like what was the actual negative impact from hedging? My second question will be around Mažeikiai refinery, BoB project. There were some comments from CEO about reconsideration of the project and that maybe additional investments could be needed.
Could you please provide us a little bit of color around what could be the magnitude of investments and how viable are the risks of closure of the refinery, which was mentioned, and also whether it will be included as an extra CapEx in your future strategy update when it happens? And maybe a final one, just if you can provide a bit of a color around possibility of windfall tax on gas, because that appeared in the media as well. Thank you.
Thank you so much. Starting with hedging, this really needs explanation, so maybe I will focus and spend some time on that. Of course, we provide a lot of information in the financial statement, as we know, so I strongly encourage you to look into the notes of 5.5, 5.6, 5.9, 5.15. So there is a lot of information there. In the presentation, IR presentation, there is a supporting slide number 17, as far as I remember, where we present our hedging impact on the No-
18.
It is actually 18. Where we present the hedging impact on our business lines, it is true that in downstream, there is PLN 4.5 billion negative impact. Please bear in mind that, of course, in the hedging strategy, we hedge the cash flow. Majority of our hedge valuation goes through capital shareholder equity. Part, ineffective part goes into P&L, and that part which goes into P&L covers both realized transactions and still open transactions, so just valuation. You may say that in this PLN 4.5 billion in downstream, PLN 3 billion was a kind of realized, and PLN 1.5 billion is ineffective part of unrealized valuation. We will see how the situation develops in the future. The second comment, I encourage you to just look into the open positions.
We have, if you look into the notes to the financial statements, our open position for the next quarters and years is PLN 9.6 billion negative, PLN 9.6 billion , whereas deposit on the account is roughly PLN 4.5 billion. Altogether, you may say that we have still open position of PLN 4.8 billion, actually, as far as I remember, deposits. Open position, not covered by deposits, is roughly PLN 4.8 billion. We should look into our hedging policy more from the cash flow point of view than P&L point of view.
From the cash flow point of view, you may say that PLN 4.8 billion deposits is already included in our cash flow, so the open position is just PLN 4.8 billion. Assuming everything stays at the same level as end of September 2026, from the cash flow point of view, we would spend PLN 4.8 billion additionally to close those transactions. However, again, we are securing our cash flow, so if we spend PLN 4.8 billion for hedge, that means that much, much higher extra extraordinary amount will be delivered in the cash flow from operations, as we know.
That is in a kind of broad picture where we are in terms of hedging. Of course, maybe last comment, we are hedging all different areas, but major impact is in gas and refining margin and crude oil. Gas is spread across a few years, basically 2027, 2028, and partially as well 2029, 2030. In terms of margin and crude oil is basically short term, so mainly the fourth quarter this year. When I talk about this amount, PLN 4.8 billion, this is again spread across a few quarters and a few years as well. We will see how the situation develops.
Basically, of course, the future curves moves very dynamically. We will see how the next weeks and quarters present the final numbers. As regards BoB, of course, this project was in the pipeline in our CapEx program, and as we know, the major contractor went bankrupt, so that is why we stopped the project. Currently, we are still in the phase of evaluation, the future works which should be done. We are in the process of selecting possible vendors just to kind of reevaluating investment case. I am not in a position today to give you final answer and final details how we are going to progress with these projects. However, ORLEN Lietuva currently generates cash, as we know, and our position is that this cash should be utilized for the future of ORLEN Lietuva rather than for windfall tax.
That is why we have this kind of debate regarding any windfall tax in Lithuania. As regards the third question
Windfall for gas.
Yes, windfall for gas, it is definitely too early, so let us wait how the situation develops. I have nothing to comment specifically on that area.
Thank you very much.
Thank you so much.
All right. Now moving on to Tomasz Krukowski, Erste, please. We cannot hear you.
Yes. Hello, Tomasz Krukowski, Erste. Just two questions. The first one is on your crude supply cost in the third quarter. How should we think it in relation to the benchmark, given what has happened in October and given all those articles about the surging freight cost? This is the first one. The second one is on the natural gas. Actually, I am wondering how should we think about your realized natural gas price next year, just looking at your hedging book and also taking into consideration both upstream supply and the energy contracts which you have?
I think that was the first question. We have this refining margins, Central Eastern Europe refining margin benchmark, and this is really, after these few months, we can say that that was a very good approach because in this refining margin, we include differential and we include logistic costs. If you look into the third quarter, the amounts, logistics, and differential were not very significant, I mean, a few dollars. That was not, like, in the mid-single digit numbers, so that was not unusual. You are absolutely right that October is a kind of extraordinary because we are again moving into double-digit numbers, especially freight costs increased quite significantly. But for the full fourth quarter, it is too early to say. Let us see how the situation develops in November and December. We should expect, of course, slight drop here.
We don't see, if you follow this OSP from Saudi Aramco, this is not very significant. October was mainly due to the Norwegian crude quotations. Let's hope November, December will be modest. Altogether, for the fourth quarter, there will be single-digit number again. As regards effective price, of course, we don't deliver at this stage very precise numbers how this hedging policy affects particular quarters in 2027, but definitely part of the gas delivered from U.S. is hedged, so basically Henry Hub. Our hedging policy is basically starting from 50% something in the first, maybe even like 80, going down to 10, 20 across the period. You should expect the kind of higher hedged volumes for the short term and lower at the end of the curve. On average, it's really let's wait how the curves are going to behave.
I'm not in a position to answer you very precisely. Generally, you are right. We are hedging Henry Hub, and we are hedging the spread Henry Hub TTF.
Thank you.
Okay. Further going down the line, Łukasz Prokopiuk, BOŚ, please.
Hello. Can you hear me?
Yeah.
Okay. I have a few follow-ups on hedging. The first one, will you back down from hedging refining margins in the next quarters? That is the first one.
As I said, currently, we have hedged margin for the fourth quarter. We do not have any hedges for 2027. However, we observe the market, and of course, we have our base case assumptions for refining margins. If the margins are going to be exceptionally high, again, we do not preclude that we are going to hedge that. But I would like to point out again that please look into the hedging as not the kind of extra cash out, but limiting the cash in, because we are hedging extraordinary kind of margins. So that is why we have base case. Probably you have your own models as well. If there is a kind of extraordinary margin, you should assume that we are not going to deliver as exceptional cash flow as you would expect without hedging. However, still, this is going to be very good cash flow.
If I understand correctly, in the fourth quarter, you did not hedge additional You did not open additional positions. You just have the open positions from the third quarter, yes? More or less.
Yes.
On refining margins.
Yes.
Okay.
Yes, that's true. That was really partially hedged, so we did not hedge the majority of this margin. We are, of course, exposed and open for development of the margins in the fourth quarter.
Okay. Another question. The PLN 4.5 billion loss in downstream, how much of this amount is related to refining margin hedging?
I would double-check that. This is roughly-
Is it similar?
At this stage, I would say half-half, but let me double-check, maybe even higher. I will double-check. Sorry, I don't want to be misled.
Okay. This was asked, but I didn't get the answer correctly. If the macro doesn't change from, I mean, in the fourth quarter, because it's similar right now to what it was in the third quarter, maybe a bit down, but if the macro remains like this, what is the amount of hedging loss that you would expect in the P&L in the fourth quarter?
I mean, as I explained, partially, this is already included in P&L due to ineffective part of our hedging. I would not answer this question precisely at this stage. If you allow me to come back again, but basically, crude oil and margin is basically in P&L, majority of that. But I will double-check and follow up.
Because what I am wondering, if you do not open new positions, is the loss already, if the macro does not change, is the loss already in the P&L, or is it that you will book another PLN 2 billion, PLN 3 billion loss in the fourth quarter? I am not asking for precise numbers, but do you know if should the market expect another level of few billion hedging loss on the refining margins in the fourth quarter, given current macro? Because if the macro goes down, I understand the hedging will be smaller, the losses will be smaller.
My point is, Łukasz, that refining margin and crude oil is basically treated not as a hedge accounting. Gas is treated as a hedge accounting. So you may expect, that is why I am a little bit wondering what answer I should give you, because I look from the cash flow perspective rather than P&L. Because from P&L, you should just assume that gas is basically shareholders' equity, so this other comprehensive income, and margin and crude oil is basically directly into P&L. And what I said, that this PLN 4.5 billion negative hedge impact on downstream P&L in the third quarter, PLN 1.5 billion is still not realized. Meaning that even if we revalue at the end of September, everything goes into P&L.
However, part goes into P&L because that was kind of closed transactions, and part because that was mark-to-market valuation, and it is still on the balance sheet, let us say, but it is already in P&L. What matters from my perspective is how much cash will be distributed outside company through those transactions in the fourth quarter. And that is why I try to explain that our open position, which is not covered by deposits, is just PLN 4.8 billion, which is spread across a few quarters in the next year, even more than two years, 2027 and 2028, because those are amounts covered by gas hedging in some scale. I would encourage you to look from the cash flow position rather than P&L position.
Because if you look, for example, if you look into our cash flow, where we present cash flow for the nine months, slide number 7, you can see here that valuation of deposit and derivatives is just - 0.4. That means that we have in the P&L the amounts which are non-cash covered by deposits, which were included. So, we can discuss this offline in detail, but to conclude, please look from the cash flow rather than P&L.
Okay. But
Cash hedging
I think I understand. Okay. So, one last question about hedging, the TTF Henry Hub spread hedging. So, like, the part of the TTF hedging, I ask you this question every quarter, but the average price in 2026 for annual delivery for the next year TTF forward gas contract should average at EUR 45, EUR 50 per megawatt, more or less. And is this a high price in your opinion compared to your hedging for the next year? Is it a low one? Is it okay? Can you tell us anything about such a price? EUR 45, EUR 50 .
Łukasz, I understand your struggle, actually, and really, we try to provide as openly as we can all the information so that not only you, but the whole market can analyze our performance. Actually, we even discussed this a few days ago, that in the full year financial statements for the full year 2025, if you take our financial statement, you can see there not only volume sketch, but the strike prices as well. This is not under the regulations that we should include those strike prices in the quarterly statements. However, in November, and I mean in February, when we are going to present our full year financial statements, our strike prices will be included.
We, of course, will reconsider our disclosure policy, how we can approach that, but definitely in February, you should expect a very detailed distribution of our exposure. If you can wait a little bit more still, I would be grateful. Thank you.
Okay, thank you. Thank you very much.
Thank you.
Thank you, Łukasz. Now we will move on to Piotr Dzięciołowski from Citi.
Yes. Good morning, everybody. I have a couple of questions, if I may. Firstly, can you I do not want to ask about hedges. I think I am confused as everybody. I want to ask you about this ORLEN Paczka business you want to sell to Poczta Polska. What is the roughly size of the transaction? I do not need a precise number, but can you give it, like, how much it makes and what kind of a multiple you are aiming? It could be large bracket, but if you give us an indication what size of a deal we are talking about. Then second thing I wanted to ask you was this comment made by you on yesterday press conference about a flat gas prices over the heating season for the households.
How do you see the situation against the kind of your potential P&L loss that you would have to subsidize the tariff, given you are not fully hedged? Then how you fund it, and if you can make a read across into what is the kind of a windfall profit tax could be? Do you have any assessment of this? Can you explain our situation? Are we going to repeat the 2023 playbook? Then I have one final one would be, assuming the LOTOS assets are for sale, whether this is this wholesale contract position or refinery itself, could you make a case versus European Commission that you could buy these assets? We are now talking about, I do not know, European refinery crisis or global market and so on. The conditions change versus the time when the company was asked to dispose these assets. Thank you very much.
Thank you, Piotr. Those are, of course, very valid questions. Unfortunately, they are very sensitive. As regards ORLEN Paczka, I can confirm that we are in the middle, maybe not in the middle, but we are in the M&A process. As you can imagine, this information is very, very sensitive. I am not in a position to give any indications and any numbers regarding the valuation or multiples. As regards the heat, of course, this is again subject to regulatory approval, so this is in the process. Again, very, very sensitive process. Sorry for that, but I cannot comment how the situation can develop. As regards LOTOS, our CEO, Ireneusz Fąfara, talked a lot about Aramco. I can just confirm that, of course, Saudi Aramco is one of our key kind of vendors. We are in touch with them.
We are discussing the current situation in crude oil. At the same time, of course, we are in touch on other topics, but definitely too early to discuss any details. From the European Commission, again, this is more a question how European Union would react. Let's see how the situation develops. Sorry for that, but I cannot give you any concrete answer for those questions.
Okay. Given you didn't answer any of my question, can I ask one more?
Yeah.
It's the final one.
Yeah. Well, look, assuming your current portfolio of CapEx projects, what is the trajectory of CapEx into 2027, 2028, 2029 in terms of how much the CapEx would have come down if you do not come up with any new ideas? I know, I am sure you have a list of new ideas, what you want to buy and build, but based on the kind of maintenance CapEx, I think it is around eight. So, like your current CapEx profile based on what you do on the books, how does this look like?
I would say you should look into our strategy officially announced in January 2025. The CapEx range we indicated there was between PLN 30 billion and PLN 40 billion organic CapEx, especially Nowa Chemia project is the biggest one. There was slight increase of CapEx in the years 2025, 2026, 2027 with the peak, as far as I remember, 2028 or something. We are in the process of updating our strategy as we indicated. I would not expect any significant difference for the next few years from the organic CapEx point of view. We always indicated that any M&A possibilities will be analyzed by us, and this is mainly upstream. If you look into our cash out from the investment and CapEx, basically the question is regarding M&A options. But we analyze a few cases. However, definitely we are not in the stage to communicate any of them.
So 2028, 2029, the CapEx should start dropping, right?
I mean, if we finalize new chemical projects, which is the kind of the biggest, and we finalize CCGT plans, of course, that's the peak for the next three years, definitely.
Perfect. Thank you very much. Have a good day.
Thank you.
Thank you, Piotr. Now we move on to Sashank, a new joiner, recently started covering from HSBC. Sashank, the floor is yours. Bank of America, sorry. We can't hear you. Sashank, can you hear us?
Yes, I can.
Yeah?
Can you hear me now?
Please go ahead.
Yes. I wanted to just understand more about your Energy segment, given you had some positive hedging in Energy segment in Q3 of PLN 264 million. How should we look at-
Is now exiting
the contribution from this segment going into the next year, especially as Baltic Power moves from construction into operation? That is the first question. The second one is more on, given the current supply chain issues that we are seeing, cost inflation, just wondering how the CapEx for your projects is trending versus your initial targets. Thank you.
Yeah. Thank you so much. As regards Energy segment, of course, this is subject to energy prices and development of energy prices. I would look into Energy segment from our investment point of view. As you indicated perfectly, we are completing Baltic Power. However, please bear in mind that this is JV, so it is not going to be included into our EBITDA. This is below EBITDA. We are concluding just like next year, according to our plan, we should conclude Ostrołęka and Grudziądz, the first Grudziądz. Some contribution from that. So definitely, we focus on growth in energy, we focus on our big projects, and you should expect the kind of EBITDA increasing, assuming the energy prices are stable, right? From the second point of view, I mean, CapEx, that is true, of course. Usually, always, when we sign long-term CapEx initiatives, we secure the contracts.
However, that is true that from time to time, we have a kind of pressure from the vendors to have this inflation increases. So in some of the project, we observed that, but I would not indicate any precise number and kind of what percentage increase in CapEx we observed due to this inflation.
Great. Thank you for that.
Thank you. Thank you so much.
Oleg, please, the floor is yours.
All right. Yes. Yes. Good morning, Oleg Galbur from ODDO BHF. One question and one follow-up. The question is about the impairments that you booked of PLN 1 billion for renewable assets. If you can comment and explain what was the reason behind. And the follow-up on the refining margins due to extremely high volatility, could you tell us what is the current level of indicator refining margins after deducting the logistics costs that you currently see? Thank you.
Okay, thank you. As regards impairment, maybe I will enlarge. This is 1.8, and you indicated perfectly that more than PLN 1 billion is our renewable, and this is due to the fact that we updated weighted average cost of capital, but generally, we updated our forecasts for energy prices. Basically, the major impact is lower energy prices. Please bear in mind that we included PLN 1.4 billion for our Nowa Chemia project, but that is, I believe, understandable as we are indicated for the next few quarters, you should expect that whatever we spend for Nowa Chemia projects will be incurred. As regards refining margin, including logistic costs, we dropped below 20, so you are absolutely right. It is very volatile. It is too early to just draw any conclusions for the average fourth quarter, so let's see how the situation develops.
Thank you.
Thank you so much.
It does seem that last but not least, Michał Kozak, Trigon. Can't hear you, Michał.
Hi, do you hear me?
Yeah.
Thank you. I have three questions. The first one, could the GAP arbitration outcome affect talks with Basell over potential penalties at Nowa Chemia?
GAP arbitration. We have arbitration with LyondellBasell, and we expect, at least that's the recent announcement from the court, that we expect this mid-November, 16th of November. Of course, the result of these arbitrations have some implications on the closing of GAP transaction. That's what we indicated. We do not discuss new chemical projects in that zone.
Because I think you reported that you have also some dispute or arbitration regarding Nowa Chemia Olefins with LyondellBasell.
Okay. We are in touch with Lyondell because we have contracts with Lyondell as ORLEN S.A. for delivery ethylene. Of course, that partially affects, but those are normal trading discussions at this stage, so I don't see any significant importance. It's more related to closing of GAP transaction.
Okay. My second question, could the potential penalties for breaching this agreement with Basell be so high that you would decide not to proceed with the GAP acquisition?
It's definitely too early to say what kind of outcome from this arbitrage would be. You can imagine different scenarios. Really, it's too early. Let's wait. It's just 10 days, hopefully, because we all wait for the final clarification of the situation. Let's hope in the next 10 days, we will have much more visibility on that case.
Sure. Last question from my side. Is there any chance Orlen could acquire Saudi Aramco assets, for example, through a JV or another structure, which would be acceptable to the European Commission?
That was the question of Piotr, so I can answer-
Okay, sorry.
-in the same line. It is definitely too early to go into a kind of concrete scenarios on that.
Sure. Thank you.
Thank you so much.
We can move back to Łukasz, who apparently does want to close the call with the final questions. Łukasz, please.
Sorry about that.
No worries. Go ahead, please.
Could you tell us how much CapEx do you still need to spend on the Nowa Chemia?
We've provided in the last news that was 35.8, as far as I remember, and we spent till date. We will double-check. Just a second, I will look at that. I don't have this number, Sorry, I have it probably. We need like We spent roughly 22, probably roughly 22, so we should expect a kind of-
15.
35 minus 20, minus 22. Yeah, yeah. We spend around 22, yeah, so far.
Okay.
At the end of September.
In equity methods gains, you recognize PLN 400 million. Is it Baltic Power?
No, it is too early. Of course, we have the first profits from there because we are in this stage of commissioning, so the first electricity is distributed, but that is not that high amount.
What is the equity methods gain of, like, it is almost PLN 400 million. What happened here?
PLN 400. I will double-check if you allow me.
Below operating profit.
We will give you offline, yes. I don't remember that.
Okay. One last question, sorry. Again on hedging. When we look at the forward fuel market, it's in very strong backwardation. The backwardation is the highest I remember, and the level of backwardation, does it have any impact on your decision to hedge or not?
Definitely the curve has kind of impact on our decision, so this you're absolutely right. This is not the question of the current price, but this is the question how the curve behaves and how we look at that. So, what we are hedging, we are hedging the different, we are hedging margins, so basically we are hedging the difference between the crude oil and the product. So this is not that straightforward that you pointed out absolutely correctly.
Because I really You are a refiner, you should want exposure to refining margins, and if you hedge three months ahead, you lose half of Well, not half, one-third of the margins because of the very strong backwardation. I don't know why you should want to hedge margins.
I mean, we are hedging cash flow again, not precisely margin, and we are not going to lose that. No, it's a longer discussion, really. We are not just looking into the We are comparing crude oil, we are comparing with the products, and we just secure the margin. Of course, you pointed out perfectly, if the curve is going down and we are hedging, for example, margin in February, that means we are not able to deliver the current margins in February, right?
Yes.
So, longer discussion. If we can take this offline, really, probably we should organize a kind of separate session, not only for you, but the-
Please don't hedge. Please don't hedge. Thank you. That's all from my side.
Okay. Okay. Thank you so much. We will consider that, but please bear in mind that we have two per- Just to conclude on this hedging, we have two perspectives here. One, someone, let's say investor, who wants to kind of have exposure to volatility, but there is a perception of the company who wants to stabilize cash flow, right? So, of course, we are not generating that much volatility. In the situation like it is at the current moment, of course, we don't deliver the results one may expect. However, if the situation drops into negative area, basically we will not lose that much. That's hedging basically, right?
Moving on.
Thank you so much.
We will take last questions because we would like to resume by 9:00 A.M. Krzysztof Kozieł, Pekao, please.
Hello, everyone. Can you hear me?
Yeah. Yeah, go ahead, please.
Yeah, just one small follow-up on the windfall tax, because you said that you're going to book and pay Polish windfall tax in fourth quarter. How about the windfall tax in Czechia? Are you going to book that too in fourth quarter or maybe later?
But in Czechia, it's still under discussion, so it's, of course, there is a proposal, and we don't have a kind of final resolution as far as I understand. So I cannot answer whether Of course, we will book according to the regulations once in place.
Okay, so no provisions like for eventual-
No. No.
passing on that? Okay. Thanks. Thank you.
So far, we don't have any provision on Czech Republic windfall possible, no.
Sure. Thank you.
Thank you.
We now will be concluding the call. Thank you very much for your active participation. Thank you guys for your questions. As usual, our investor relations is available, so for any follow-ups or ongoing discussion on the business performance, please direct us in person. Thank you very much and see you on the road, if not on the next call for Q4 in February. Thank you very much.
Thank you so much. Have a good day. Bye-bye.
Thank you.