PKN Orlen S.A.

Annual / Quarterly Financial Statement • Mar 28, 2024

Report Content Predicted accounting one-off which impact significantly financial datafor 2023 presented in financial statements for 2023Regulatoryannouncement no 21/2024 dated 27 March 2024ORLEN S.A.("Company") informs that it conducted tests for impairment of ORLENGroup's assets in the Petrochemical segment.As a result of theseactivities, the Company predicts the recognition of impairments of fixedassets and fixed assets under construction of the Petrochemical segmentwith a total value of PLN (10,2) billion in the consolidated financialstatement for 2023.At the same time in the separate financialstatement for 2023, the Company predicts to include the recognition ofimpairments of fixed assets and fixed assets under construction with atotal value of PLN (10,2) billion.The above accounting one-offhas a significant negative impact on the Company's EBITDA and ORLEN'sGroup EBITDA for 2023.The impairment of the above-mentionedassets results mainly from the continuing difficult economic conditionsin the petrochemical products market, primarily the pressure on salesmargins. Recently, a deepened negative impact of geo-political factorson the efficiency of the petrochemical business has been observed. It iscurrently expected that the reduced margins of the petrochemical segmentmay persist in the long term. This has a significant negative impact onboth the efficiency of current petrochemical assets and assets underconstruction, including the Olefins III Complex.Significant forthe estimated impairments are the high costs of investment in OlefinsIII caused primarily by the war in Ukraine and related sanctions andthus the high costs of materials, disrupted supply chains and limitedavailability of execution resources. The estimated capital expendituresallocated to Olefins III project amounts to, in accordance with theformer announcement, ca. PLN 25 billion. At the same time, together withOlefins III project, ORLEN realizes activities connected withmodernization and development of the infrastructure at the ProductionPlant in Płock for the future investments, as well as other developmentprojects connected with Olefins III, the total value of which isestimated for PLN 10 billion, of which nearly PLN 8 billion refers toPetrochemical segment and was included in the test for impairment.Theconstruction of the Olefins III Complex is one of the key elements ofthe implementation of the transformation of the Company's existingrefining and petrochemical assets in Plock and Gdansk. It will enablethe integration of petrochemical processes within the ORLEN Group andunlock operational synergies. The investment will support the continueddevelopment of the ORLEN Group through organic and inorganic activities.The Company expects that the implementation of these activities wouldstrengthen the Company's position as one of the leading players in thetransformation of refining and petrochemical assets in Europe.Additionally, following the corporate decisions made in 2023 regardingthe Olefins III project, ORLEN established the Petrochemical SegmentValue Creation Program, the main goal of which is to develop a conceptof sustainable improvement of the segment's competitiveness and margins.Theabovementioned one-offs are currently being audited by the auditor andmay be subject to change.At the same time, the Company informsthat analyzes of the value of other assets of the ORLEN Group areunderway. In case any impairments or updating reversals, which impactsignificantly the financial data for 2023, become probable, the Companywill publish regulatory announcement with that information.ORLENS.A. will publish its separate and consolidated financial statements foryear 2023 on 25 April 2024.