WOOD Flash – Orlen: strategy update 2035 – evolution, rather than revolution

Orlen announced a new strategy update yesterday (9 January), laying out management’s targets for 2035E and the path it will take to get there. This strategy update follows a change of management and, so, could have included major changes. In general however, much of the broad sweep of strategic choices resemble those in the previous plan, even though the details have changed. Management is still committed to a progressive dividend strategy, with a minor upward adjustment, which sees the 2025E dividends per share at PLN 4.5. The annual capex for the whole period is lower than in the old plan; however, for the next five years, the annual budget of about PLN 40bn is similar to the old plan; while, in subsequent years, the capex declines significantly. If investments proceed as planned, management expects the EBITDA to grow between 60-75% between 2024 and 2035E. The plan calls for total emissions to decline 13% by 2030E and by 25% by 2035E. In the refining segment, biofuels capacity should increase to 210 ktpa in 2035E, from the very low base in 2024. The petrochemicals plan focuses on renewable and recycled feedstock, not capacity increases. Upstream gas production should grow from 9.1 BCM in 2024 to 12 BCM in 2030E, and remain flat afterwards. The biggest segmental focus is on energy, where Orlen plans to increase its renewable generation capacity from 1.3 GW in 2024 to 12.8 GW in 2035E. The first two SMR nuclear plants are scheduled for completion by then. The two main focus areas in retail are the customer loyalty programme and the rollout of EV charging.