PGNiG and PKN Orlen to merge for Polish energy security

Polish oil and gas player PGNiG and compatriot oil refiner Polski Koncern Naftowy Orlen (PKN Orlen) have agreed on a plan of the merger of the two companies.

On 29 July, the management boards of PGNiG and PKN ORLEN agreed on a plan for the merger and on the exchange ratio at which PGNiG shares will be swapped for PKN ORLEN shares.

The merger plan will be implemented once relevant decisions are passed at the general meetings of the two companies.

“Building a large, strong multi-utility group is a landmark business project that will stimulate further economic growth and help enhance Poland’s energy security. When PKN ORLEN and the LOTOS Group join forces, it will be easier for us to achieve the energy transition that Poland and all the other countries in Europe simply must undergo,” said Iwona Waksmundzka-Olejniczak, president of the management board of PGNiG.

“In order to secure a strong position on international markets and ensure Poland’s energy security for many years to come, we need to build a company capable of successfully competing in global markets,” added Waksmundzka-Olejniczak.

“Building strong corporate groups with diversified, complementary business lines is not only an international standard, but also a necessity considering the challenges posed by the energy transition and Poland’s economic growth prospects. Hence the importance of skillful strategic execution. Our key strategic goals focus on investments in zero- and low-carbon energy sources and the related modernisation of the energy sector in Poland and the rest of the region,” said Daniel Obajtek, president of the management board of PKN ORLEN.

Announced on July 29th, the merger plan provides for a ‘merger through acquisition’ to be carried out pursuant to Art. 492.1.1 of the Commercial Companies Code, by transferring all of PGNiG’s assets to PKN ORLEN in exchange for shares granted by PKN ORLEN to PGNiG shareholders. The merger shares issued to existing PGNiG shareholders will increase PKN ORLEN’s share capital.

The merger plan specifies the share exchange ratio; in exchange for their holdings PGNiG shareholders will receive new PKN ORLEN shares at a ratio of 0.0925 to 1, meaning that for each PGNiG share shareholders will receive 0.0925 PKN ORLEN share. The number of allocated shares will be a natural number, with PGNiG shareholders to receive payments for any unallocated fractions of merger shares, which will be retained by the new group. The payments will be made on the terms stipulated in the merger plan.

The PGNiG-PKN ORLEN merger is to grow the fuel and energy industry and will strengthen Poland’s energy security. Also, it is to increase investment opportunities and improve the negotiating power of the combined group, further enhancing the security of raw material supplies for Poland.

To remind, PGNiG received a record number of LNG cargo deliveries at the Swinoujscie terminal in June. This is the result of the intensification of LNG imports to strengthen Poland’s energy security.

PGNiG also said it will, starting next year, begin receiving 1.5 million tonnes of LNG per year from the Calcasieu Pass terminal under a long-term contract. In addition, the company has a long-term deal with Venture Global to receive 4 million tonnes per year from the Plaquemines liquefaction terminal in Louisiana.