Reuters’ latest report on a potential takeover of the Schwedt refinery by Unimot has re-energized the market on both sides of the Oder. Apparently, Polish companies still want to take a chance at the production and sale of conventional fuels, despite the fact that some (in my opinion wrongly) believe they will become significantly less popular – writes Mateusz Cabak, contributor to BiznesAlert.pl.
The fact that Unimot may be interested in acquiring a 37.5 percent stake in PCK Schwedt, sold by Shell, should not surprise anyone. It is Germany’s fourth refinery when it comes to processing capacity, it processes 210 thousand bbl/d, which is the same as the Gdańsk Refinery, and covers 90 percent of Berlin’s demand for fuel and diesel. Its Nelson Complexity Index (NCI), which indicates technological advancement and profitability of refinery production, is 10.4 vs. 7 for Leuna (Total), 9.5 for Płock (Orlen) and 11.1 for Gdańsk (Orlen/Saudi Aramco). In summary Schwedt is a modern and large refinery
on a regional scale, operating in a demand market.
Unimot came into the spotlight during the Orlen-Lotos merger. At that time Orlen had to implement the so-called remedial measures, imposed by the European Commission, and separated and put up for sale the asphalt and storage assets, originally belonging to Lotos Asfalt, Lotos Infrastruktura and Lotos Terminale. Unimot thus took over 9 depots and fuel terminals located across Poland, as well as plants in Czechowice-Dziedzice and Jasło that produce mainly road asphalt. Maciej Szozda, former vice president of Lotos responsible for production and trade, who in 2018 served as president of Unimot and co-created the group’s strategy for 2018-23, could have already noticed the potential of these assets. However, even after his dismissal, the Board of Unimot did not stay idle and took over Olavian, established by Henryk Gruca, the former President of Lotos Kolej, and Partners4Sky, a company operating on the general aviation market. From the point of view of Unimot, which right now owns the infrastructure for fuel storage, logistics, retail (122 stations in Poland and 10 in Ukraine under the AVIA brand) and commercial competencies, the acquisition of shares in the refinery is an important step in the development strategy. The only question is whether the company, which spent a total of more than PLN 400 million on acquisitions last year and this year, can afford to buy shares in the German refinery. But what about Orlen, which was also potentially interested in buying the PCK shares?
Where two dogs fight…
Orlen is interested because of Schwedt’s potential, the market where it operates and the synergies for Orlen’s German gas stations, 605 points and a six point participation in retails sales (as at 30 June 2023), as well as the possibility to take over a competitive supply channel of fuels and diesel to Poland created by Shell. However, the most important issue is the probability of completion of the transaction itself. It looks like the potential investor will reach an agreement with Shell sooner than with the German government, which has not yet ousted Rosneft, a more than 54 percent shareholder, from the PCK Schwedt. On the one hand, the aforementioned stalemate is blocking the government talks between Poland and Germany about the target volume of oil supplies by the Gdańsk Naftoport to Schwedt, and on the other hand, hinders Orlen, as a state-owned company, in possible talks about entering the PCK’s shareholder base.
Unimot’s financial results for 2022 shot up to PLN 13.4 billion (sales revenue), PLN 0.5 billion (EBITDA) and PLN 0.5 billion (cash flow from operating activities) mainly due to the favorable macroeconomic environment. I wonder if the company will be able to do it again this year. Important in this case will be the unpublished data for Q3. The total debt as of December 31 last year is PLN 209 million, but this amount does not take into account the acquisition of Lotos’ depot and asphalt assets, which Unimot bought for PLN 366 million. The fact that Saudi Aramco paid PLN 1.15 billion last year for a 30 percent stake in the Gdańsk refinery + an additional PLN 1 billion for a 100 percent stake in the company responsible for wholesale fuel sales outlines the scale of the investment in PCK Schwedt, which requires both significant capital and a comprehensive financing model. This will certainly be the biggest challenge for the Board of Unimot.