Credit Update June 2014
Contents • Introduction – Group Overview • Strategy update • Industry & market developments • Credit update • Strategic business units (SBUs) • Appendix 1 1
Group’s Profile • Largest SEE independent downstream Group, with investments in Power & Gas – € 10b Turnover with 14 MT of product sales, with strong export orientation (50% exports) – Leading Greek market position covering c. 60- 65% of local wholesale market fuels demand – Regional footprint through subsidiaries; coastal refineries provide supply chain advantage • Completed its strategic investment plan, with positive cash flow impact – A € 2bn investment plan with € 150-200m of incremental cash flow opportunity at mid-cycle margins; no material capex requirements – Asset portfolio allows upside on recovery of refining margins and Greek market • Successfully implemented a transformation competitiveness improvement plan on Group structure and operational model – Transformation initiatives added c. € 270m annual benefits with additional opportunities of € 130m over the next 18-24 months • Consistent delivery of strategic targets; improving balance sheet – Achievement of strategic targets, despite Greek crisis & industry “black swans” – Continuous support from local and international relationship banks throughout crisis – Completion of capex cycle allows deleveraging from higher than target gearing – Opportunities for value monetisation (DEPA/DESFA sale process) 2 2
Complex refining asset base and leading domestic market share; Group positioned to benefit from Greek market recovery and refining industry upturn Group operational footprint • Complex refineries (Nelson index 9.6) ROMANIA BOSNIA • Balanced sales channel mix with exports at SERBIA BULGARIA MONTENEGRO 50% of total sales FYROM ALBANIA • Leading market position with c.60-65% of GREECE TURKEY Greek wholesale domestic market and c.30% of retail Refining Marketing • Regional footprint with international Power & Gas CYPRUS subsidiaries • 30% of capital employed in non-refining Nelson/Solomon complexity benchmark margins margin driven returns from Marketing, 4* -3* Petchems, Power and NatGas 5* 13.9 11.3 9.7 8.8 6.9 5.0 Aspropygros Elefsina Thessaloniki NCI Solomon *$/bbl, average 2010-13 3
Shareholding & Governance Controlling shareholders’ agreement supported successful transition from state to private sector Group, divestment of remaining 35% held by the Greek State as part of the privatisation Corporate Governance Shareholding structure Board of Directors: Retail Int’l institutionals 6% • Consists of 13 members (3 executive and 7% 10 non executive) appointed as per GR institutionals 9% Articles of Association 43% POIH • Board Committees (Finance / Audit / HR) Executive Committee: 35% • Key management executives with Greek State responsibility for strategy and operations Management structure: • SBU structure ensures focus on key business issues • Regional portfolio controlled centrally 4
Assets overview Core business around downstream assets with activities across the energy value chain DESCRIPTION METRICS Exploration & • Exploration assets in Egypt, Greece, Montenegro Production • Recently upgraded refining asset base: • Capacity: 16MT – Aspropyrgos (FCC, 148kbpd) • NCI: 9.6 Refining, Supply – Elefsina (HDC, 100kbpd) • Market share: 65% – Thessaloniki (HS, 93kbpd) & Trading • Tankage: 7m M 3 • Pipeline fed refinery/terminal in FYROM • c.1,800 petrol stations Domestic • Leading position in all market channels (Retail, • 30% market share Commercial, Aviation, Bunkering) Marketing • Sales volumes: 3MT • • Strong positions in Cyprus, Montenegro, Serbia, c.280 petrol stations International • Bulgaria Sales volumes: 1MT Marketing • Advantage on supply chain/vertical integration • Basel technology PP producer and seller on the • Petrochemicals back of refineries integrated value chain Capacity (PP): 220 kt • > 50% exports in Iberia, Italy & Turkey • • Second largest IPP in Greece (JV with Capacity: 810 MW Edison/EdF) (CCGT) Power & Gas • 35% in Greece’s incumbent NatGas supply • Volumes (2013): company (under privatisation) 3.8bcm 5
Our Group in numbers – key financials (FY13) € million, IFRS 2009 2010 2011 2012 2013 Income Statement Sales Volume (MT) - Refining 15,885 14,502 12,528 12,796 12,696 Net Sales 7,424 8,477 9,308 10,469 9,674 Segmental EBITDA - Refining, Supply & Trading 269 338 259 345 57 - Marketing 92 114 66 53 68 - Petrochemicals 20 50 44 47 57 - Other -19 -28 -6 0 -5 Adjusted EBITDA * 362 474 363 444 178 Adjusted associates’ share of profit 18 30 67 69 57 Adjusted Net Income * 150 205 137 232 -117 Balance Sheet / Cash Flow Capital Employed 3,927 4,191 4,217 4,350 3,905 Net Debt 1,419 1,659 1,687 1,855 1,689 Capital Expenditure Incl. Refinery upgrade program 614 709 675 521 112 Free Cash flow -561 17 165 25 404 (*) Calculated as Reported less the Inventory effects and other non-operating items 6
Key segmental financials Non-refining segments make a significant contribution to Group profitability; FCF at 12-15% of ACE over the last years (adj. for refinery upgrade). HELLENIC PETROLEUM € 178 m Adjusted EBITDA: € 3,905 m Capital Employed: € 420 m Free Cash flow: POWER & REFINING PETCHEMS RETAIL INTERNATIONAL GAS € million Adjusted EBITDA 57 57 25 44 57* Capital Employed 2,517 129 527 400 692** Free Cash Flow 267 36 53 64 n/a FCF % of CE 11% 28% 10% 16% n/a * Income from associates (reported below EBITDA) ** investment in associates *** Segments include Intra-segment transactions 7
Contents • Introduction – Group Overview • Strategy update • Industry & market developments • Credit update • Strategic business units (SBUs) • Appendix 8 8
2007-12 Strategy review Delivery of strategic targets despite prolonged crisis; new refineries amongst most competitive in the Med • Completed Elefsina and Thessaloniki upgrades 1 Upgrade Refining Assets successfully • € 150-200m additional cashflow opportunity (benchmark margin driven) 2 • Enhance vertical integration Doubled domestic market share - BP network • Increased benefit of regional integration • Refocus E&P 3 Manage Portfolio for value • Power generation portfolio JV • Refining improvements (DIAS) 4 • Marketing competitiveness Improve competitiveness • Procurement (BEST 80) • Cost structure • Reduced headcount by 21% by 2012 5 Fit-for-purpose • Established Group culture organisation • Shared services 9
2013-2017 Strategy Update Refocuses on operational excellence; maximise cash flows to deleverage BUSINESS TARGETS FINANCIAL TARGETS Realise full benefit of the new 1 1 Improve profitability investment Consolidate market position 2 2 Deleverage Group leveraging on new asset base 3 Enhance competitiveness 3 Diversify funding mix improvement momentum 4 Leverage business portfolio 4 Reduce funding costs Develop our people and continue to 5 build culture of excellence * Assuming mid cycle margins 10
Recent results reflect new refinery start-up process and record low margins. Company performance rebased post investments and competitiveness improvements; further upside driven by Greek economy and margin recovery. Adjusted EBITDA projected evolution ( € mil) 400-700 40-60 20-30 70-100 Medium term 2013 margin 50-60 ($2.1/ bbl) performance driven by 300-350 178 refining margins. 2013 Elefsina Performance Greek market 2014 runrate Performance Margins and Medium Term optimisation Improvement FX* Cash Flow profile pre and post-investment plan** ( € mil) Post-upgrade Investment phase 400 (700) 400-700 (100)-(150) 250-550 EBITDA Capex Pre Tax Free Cash (300) Flow EBITDA Capex Pre Tax Free Cash Flow (*) $1/bbl sensitivity in margins results to € 90m, assuming full utilisation of refineries and € /$ at 1.3 11 (**) assuming mid-cycle margins
Elefsina Refinery Upgrade Full residue conversion, with 75% middle distillates yield, positioning Elefsina as a top net cash margin refinery in the Med basin Product slate New refinery schematic 17% 25% Other 11% 11% 24% Jet 64% Diesel/Gas oil 47% Fuel oil Pre upgrade Current Solomon complexity index: 13.9 European Med refineries Net Cash margins* Refinery utilisation (%) 95 8 Elefsina 83 6 76 71 4 2 0 -2 *Wood Mackenzie 2018 Net cash margin projection, Med basin refineries -4 Q412 1H13 2H13 1Q14 12
Operational improvement projects reduced overhead gearing FY14 target for additional benefits exceeding € 80m, with a further € 50m earmarked for 2015; 1Q14 on track with plan, at € 18m on incremental contribution Middle distillates yield of Evolution of transformation initiatives ( € m) Group Headcount (FTEs) Aspropyrgos Hydrocracker % 5.138 16 400 4% 12 3.680 -28% 2014 target: > € 80m 290 2008 2013 2011 2013 18 45 227 Propylene production (MT’000) Procurement savings vs spent (%) 16 163 30% 125 7% 9 2009 2013 2011 2013 2008-12 2013 1Q14 YTD Medium Term Target 13
Contents • Introduction – Group Overview • Strategy update • Industry & market developments • Credit update • Strategic business units (SBUs) • Appendix 14 14
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