Orlen's investment in Olefins III. Piotr Woźniak comments on the company's decision

On Wednesday, Łukasz Frątczak from TVN24 and Szymon Jadczak from Wirtualna Polska revealed in their report “Foreign Body” that at the cost of 3.7%. investment, Orlen lost exclusive control over the installation securing the financial future of the fuel giant

The reporters conducted a joint investigation into the background of the creation and construction of the Olefins III complex by Orlen. “We obtained previously unpublished contracts, documents and materials from meetings of the Orlen Supervisory Board in 2021-2023, as well as presentations and files of Orlen's internal team responsible for the construction of Olefin.”

On the same day, Orlen's management board decided to stop the Olefin III project in its current scope, the company announced in a statement. From now on, work will be carried out as part of the New Chemistry project, in a way that will enable rationalization of the necessary expenditure.

READ MORE ABOUT THE DECISION TO SUSPEND THE OLEFIN III INVESTMENT>>>>

Piotr Woźniak, former Minister of Economy and former head of the Polish Oil and Gas Mining, asked in “Wstańsz i pozna” about how to assess the decision of the Orlen management board not to continue the investment in Olefins III in its current form, said that it was a good decision, that's all only that “of course she is incredibly late.” – I would limit the responsibilities here to the management board itself, because there are two company bodies working together here, the management board and the Supervisory Board – he emphasized.

– The Supervisory Board has the most instruments to assess, as the Supervisory Board does, each and every department of the company's activity, including, of course, investment, by approving plans, approving budgets for these plans, and not to mention the strategy in general – said the former minister.

Woźniak noted that “every investment (…) generates costs, and they are serious.”

– For this period of delay, i.e. from the moment when new authorities came into the company until the moment when the decision was effectively made (…), appropriate costs were obviously incurred that can be calculated – said Woźniak.

The former minister emphasized that in order to count them, “you need to have in-depth knowledge and the relevant minister responsible for this has such knowledge.”

– In this case, it is probably the minister of state assets who should supervise this. It has its representatives, or at least one representative on the Supervisory Board, but so far it has not clearly benefited from it. Because it allowed for a delay of almost a year, if not more than a year – said the TVN24 guest. – And for incurring these costs, which are clearly inappropriate, of course it is known who is responsible and this has to be settled. Of course, keeping in mind that this entire investment was, to put it colloquially, inflated from the very beginning – he added.

THE MOST IMPORTANT FINDINGS OF FRĄTCZAK AND JADCZAK ABOUT OLEFINS III>>>

When asked to try to explain “why it costs so much” and where the costs come from, Woźniak emphasized that without in-depth knowledge we can only speak cautiously.

– It was known that the cost, i.e. the budget of this project was planned at the time of commencement at PLN 8.3 billion. Then it was quickly increased and it was known from the beginning, including those present on the Supervisory Board and the Management Board, that this was, to put it colloquially, a far-fetched cost, because it was much higher – said Woźniak.

He noted that the market need for products produced by factories such as Olefins is unquestionable.

– And there are a lot of them needed on the market, but unfortunately most of them are low-margin products – emphasized the former president PGNiG.

– It is quite a paradox of this industry that products for which there is constant and quite good demand are still low margin – explains the former president of PGNiG. – When planning the investment with a budget of eight billion zlotys, these margins were assumed at a very high, non-market level, significantly above the market level – he noted.

– Today we learned (…) that so far, as stated in this announcement, (…) PLN 13 billion has been incurred. And now it has been announced that the investment has been suspended, it has been given a new name and that it will cost PLN 34 billion. Previously, the market consensus and “common knowledge” was that this project would cost at least PLN 50 billion – said the TVN24 guest.

The former minister pointed out that the total investment so far is PLN 47 billion and this is “of course a difference from the rumored PLN 50 billion, but it is practically the same amount.”

– What changed after this decision? (…) De facto, we are dealing with the status quo, i.e. the budget is what it was. Apart from the fact that the statement was published in the media, the costs were what they were. (…) The investment was known from the very beginning to be a failure, he noted.

The former president of PGNiG drew attention to another aspect related to the profitability of the investment.

– Will this investment really be profitable, even after the PLN 47 billion? Well, I read in this announcement and noted here that EBITDA if this investment is completed will bring PLN 500 to 800 million annually. With a budget of forty-something billion, that means that it will pay off in about 70 years – he pointed out. – According to the current state of knowledge. And yet, according to a different state of knowledge, you cannot evaluate anything, because it goes beyond any rational evaluation. So if this is to be a 70-year horizon, then I have never in my history, and I already have enough voice to say it, have I planned anything for a longer period than the technical capacity of the installation itself – pointed out Piotr Woźniak.

The former Minister of Finance emphasized that “planning an investment that would pay off in 70 years or almost 100 years is burdened with an extremely high risk and, in short, is absurd.”

– Because it is well known that the technical capacity for any production (…) never exceeds 20 or 25 years. Therefore, during this period, before repayment, it will have to be renovated 4 to 5 times, which means, in fact, it will have to be rebuilt anew – he noted. – I don't know whether it was included in the calculations of 34 plus (billions – editor's note) the billions already incurred or not. And a whole series of questions that the owner, who is largely the State Treasury, has the right to ask – he emphasized.

Piotr Woźniak is surprised by the long delay in making the decision and would therefore ask a few questions.

– First of all, ask what happened this year that respected authorities, respectable and large companies came to the conclusion, which was at the beginning known to everyone, even a passer-by on the street and even a passenger, just a passenger of every tram, that this investment is unprofitable, they came to this conclusion after 12 months or better, he says.

Woźniak asked why Daniel Obajtek he was given a free hand to “spend such huge billions of zlotys” and whether, in his opinion, Obajtek could be charged with acting to the detriment of the company, he stated that “I would prefer not to formulate such allegations (allegations – editor's note).” He noted that he would like to know the justification for this investment.

– Only I want to know whether this justification (…) is a bunch of exclamation points or whether there is actually anything specific – thus most likely referring to Daniel Obajtek's entry on the X website.

– I repeat, when the new authorities entered the company, it gave me the impression that they were carrying out a 100% continuation of the policy of the previous authorities. Starting from the first meeting of the Supervisory Board, which implemented the entire program of the Supervisory Board meeting, (…), which was established by Mr. Obajtek. As for the last point, and in accordance with its intentions – said the former president of PGNiG. – Until yesterday, when we found out that Olefina's investment was a failure, which was known from the very beginning, when these authorities and even before these authorities managed to join the company, it was already known that this investment was simply and simply absurd. Who is responsible for this? – he added.

Finally, Woźniak said that “it's probably time to move it to the authorities that will properly assess it.”

– Meanwhile, we are dealing with a situation where, as you know, there was a wave of requests to abolish the immunity of Polish MEPs who were mentioned in various nefarious deals. I don't want to say that they are involved, because we don't know. But in relation to the president of Orlen, I said it right, no one even formulated such a conclusion – he noted, referring to the case of Marcin Romanowski, former deputy minister of justice and his activities with the Justice Fund. – Knowing full well that not only this investment, but a whole range of so-called Orlen's actions were simply on the verge of any common sense. But no one dared to submit a request to lift immunity, he noted.