© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good afternoon, ladies and gentlemen, and welcome to the conference call. We summarized the financial performance of Naftowy ORLEN for the third quarter 2021. It will be discussed by Daniel Obajtek, member of the management Board for PKN ORLEN for finance; as well as Mr. Zbigniew Leszczynski, member of the Management Board for Development.
I'll now give the floor over to Mr. Jan Szewczak.
Good afternoon, ladies and gentlemen. Welcome to today's conference relating to the third quarter of 2021. It is a great pleasure that I will inform you now that this has been the next quarter for us to report record-breaking results with a reservation that the results, record high results of the third quarter of the year were driven mainly by very efficient management of the company and not by the margins or increases in margins or recently, increases in fuel prices. These are the results for the third quarter of the year, that is mainly the summer quarter of 2021. Again, welcome to this conference. It will summarize the performance of PKN ORLEN for the third quarter.
Starting with the highlights in terms of our financial performance. Our performance was, as I said, record high, LIFO-based EBITDA came in at PLN 4.3 billion, which is up by PLN 2.3 billion year-on-year. And we have to remember that both this year and last year, our exceptional periods for us, exceptional years for us, given the pandemic crisis and the rebounding economy in Poland and around the world. So this gives us a lot of satisfaction because our performance was driven mainly by very solid work of both all the employees across the group and also by the management.
In terms of our net profit, we also reported a record high net profit in history of the company. And this is very important to emphasize that this does not include the one-offs. This is the net result cleared of the one-offs, and it came in at as much as PLN 2.9 billion, that is up by PLN 2.3 billion year-on-year. It must be emphasized that those levels of our financial performance are higher than even in the record high record-breaking years of 2014 and '15. These were the bull years for us and the macro conditions were, obviously, different than today's.
What is important as well, our LIFO-based EBITDA is well balanced as all of the 4 segments of our operations contributed to -- or practically contributed equally to our LIFO-based EBITDA figure for the third year -- for the third quarter of the year, generating value at around 1 billion each. We'll, obviously, discuss it in more detail later on. But the Refining segment contributed to PLN 1.2 billion petrochemicals, PLN 1 billion to retail contributed nearly PLN 1 billion that is PLN 0.9 billion.
And it must be emphasized that our power generation segment has also contributed very solidly and has been contributing for result for the fourth -- for the fifth quarter running and the results exceeded PLN 1 billion. In terms of net sales -- retail sales, it accounted for around 15 LIFO -- 15% of LIFO-based EBITDA and retail sales of fuels accounts for only 12%.
So all in all, this record high results reported by PKN ORLEN was due to this very solid and equal contributions of all segments. That, again, is a proof that our strategy to create a multi-utility group was a good one. This pays off and this philosophy of our group, PKN ORLEN's Group was the right one to take and to be followed. These results were supported by both good, solid macro result and higher sales volumes. Of course, we to understand that our downstream margin would [ go ] it up, and this is, obviously, a major increase. It is related, obviously, to the economic recovery, and it translates into a 2% increase on sales volumes by year-on-year.
And as far as crude throughput is concerned, we had the crude throughput at 8.3 million tonnes, that is up by 1% with the utilization ratio at 94%. This is a satisfactory result for us and make us fully satisfied. And it shows that in this very difficult environment, macro environment, we are faring well despite the ongoing pandemic.
As I said before, in the third quarter, we generated PLN 4.3 billion in operational cash flows. And what is important, we spent a major amount of PLN 2.5 billion on CapEx in previous years. A couple of years ago, we spent -- we wouldn't be able to spend that much throughout the year in comparison with the third quarter of the year in 2021. And what is also important, we paid out dividends to our shareholders at -- in the summer of this year at PLN 3.5 per ship.
So we had investments. We paid out dividends. And still, as a result -- and still, our debt level was comparable to last year's level and even going down slightly by around PLN 100 million. Also important for us, as the management, it makes us happy, which Daniel Obajtek, the CEO, has mentioned this time again. We were able to maintain our net covenants -- net debt-to-EBITDA covenant, which is at a very safe level of 0.69.
Let me remind you that our strategy mentions the level of 2.5, which is an acceptable level. So you can see that we are spending our funds sensibly and also our cost levels are quite reasonable, what is important in the third quarter.
Already in November, actually, we will launch the production of an environmentally friendly propylene glycol in Europe's largest installation of that kind. And at the end of the year, we expect to bring on stream the first -- or Poland's first hydrogen hub which will produce high purity hydrogen for fuel cells with the capacity of over 350 tonnes of clear hydrogen. We do understand that modern state-of-the-art fuel sources of energy are very important and the world -- and that the world gives great attention to those sources, green sources of energy.
Bottom of the barrel unit at Mažeikiai was given also a go-ahead, as a result of which we will report higher yield of high-margin fuels at ORLEN Lietuva, at our refinery in Lithuania, which will translate into higher EBITDA by around PLN 350 million per year. And obviously, this is a major event for us as well. And we are also planning to close that investment by -- within the year.
ORLEN Patrycja, which is the automated parcel system, was also greeted in the market with 3,600 such machines around the world -- around the country, obviously, and this, obviously, is our very preliminary steps because we're only beginning to expand in this market. It's very interesting not only to us, but also to bigger environmental -- bigger international players.
And we are planning to have more and more such systems, both during this year and next year, we are planning to open around 250 such systems around the country. We are also -- we're also greeted with a lot of interest in terms of our new Skylight accelerator project. This is a program -- acceleration program for technological start-ups with an international outreach, targeted at young innovation companies from around the world. And the interest is really heavy. We had more than 100 start-ups applying in the first round, international start-ups. So this is an apple in our eye, obviously, because we do believe that in addition to business and growth prospects and aspects, we do believe that startups are also important in terms of science and development.
Other important decisions included a clearance from shareholders of LOTOS, and they expressed their approval for the acquisition of LOTOS. This is a major step for us, moving ahead our -- the process of our acquisition of ORLEN by November 14. We are supposed to select a partner to further implementation of EU commissions remedies. And we will report those proposals, obviously, to the European Union Commission to the EUC, which will, obviously, have still quite some time to take those decisions.
In addition, in terms of other highlights or new investments, we also decided to implement our hydro-treated vegetable oil unit at Plock. This is, again, state-of-the-art and environmental-friendly solution, and do we need this both for us and also for the Polish biofuels market.
We are nearing an end to offer an ecological l propylene glycol unit. This is, again, let me emphasize, Europe's largest unit of that kind with production capacity of more than 30,000 tonnes per year. We started the geotechnical research at the bottom of the Baltic Sea in the area where we plan to install our offshore wind farm and, obviously, on the connection to roads, which are necessary to -- for this wind farm to operate.
Other highlights of this particular project, we signed an agreement with GE Renewable Energy, which should strengthen our competitive edge in terms of our plans for new licenses at Baltic Sea. Obviously, there is a great competition in that area. And therefore, we are partnering with large and strong partners so that we have great prospects in terms of that particular area of our activity.
We also signed a letter of intent with PKP and PESA for the implementation of hydrogen technologies in transport. You probably have already seen the first hydrogen-driven locomotive with ORLEN's logo because this locomotive was built on our order. This is, again, a brand-new project and state-of-the-art project. And we do believe that this will be a great thing for the future, a great transport system for the future using railway infrastructure, but driven or powered by hydrogen.
We also were awarded for the ninth time running as the best -- for the best annual report and it shows that the institutions and regulators do welcome our reports, annual reports, which present our operations in a reliable manner. So this is why we were distinguished for the past year 2020.
These are the main highlights for the third quarter of the year.
Before I move on to more details, I would like to -- on behalf of Daniel Obajtek, the CEO of PKN ORLEN as well as the entire management board and managers of our company, we would like to thank heartfully to all employees across the group because without their involvement and engagement, this all would not be possible. So thank you for your hard work. And we do believe that this is because of you that we are the leaders of the market. And this is not very easy at times. This is not always a welcome. This is not always well evaluated, but this is necessary for our strategic security.
We are not a business only. We are a company that is very important for security and safety of this country as well as its economic growth. GDP is expected to increase this year, and we are contributing to it.
Slide #5 presents our macro environment. In the third quarter, downstream margin model -- downstream margin went up by 2.4 -- USD 4.4 per barrel up to nearly $10 per barrel due to a fivefold increase of the refining margin and also higher differential, Brent/Ural differential and also an increase in the petrochemical margin.
Margins for light and middle distillates as well as polyolefins went up. PVC, however, heavy fractions, finding fractions margins went down. So we can see that margins did not go up across the board, they're also declined, so we have to find a balance. We also had higher costs of own use due to an increase in the quotations and prices of crude oil. And you can see that those prices, this amazing increase -- extraordinary increase in the prices of electricity and also gas, this also affects our cost levels quite significantly.
On the other hand, we had a lower rate of PLN versus U.S. dollar and euro. As far as fuel consumptions are concerned, we can say and see on Slide #6. You can see in the third quarter, we saw an increase in consumption year-on-year due to higher economic activity across the board, across all markets, except for Germany. And this is again a proof that GDP level in Poland is increasing dynamically, and not only in Poland but also in Lithuania and Czech Republic or in Slovakia.
Going back to our financial performance in more detail. An increase in our revenue was at 50% year-on-year in quarter 3 of the year. Due to, obviously, higher quotations of refining prices of refining and petrochem prices, but also higher volumes, sales volumes. This also needs to be -- always needs to be taken into account whether it was due to higher margins or higher volumes or maybe lower volumes. So we need to, as I said before, find this balance in between. And we do take care of that. We need to always take that in consideration, the reactions of the market and our customers and the situation of our customers.
Again, as I said, operational profit at PLN 4.3 billion and that is LIFO-based EBITDA, which was up by PLN 2.3 billion year-on-year, which is due to higher macro, higher sales volumes. A positive impact, obviously, of prices of crude oil. We had a positive impact on EBITDA, LIFO-based EBITDA, more than PLN 10 billion. And this all drove our EBITDA up to PLN 5.2 billion.
As a result, in the third quarter, our financial result was minus PLN 3 million. This was the result of the surplus of negative foreign exchange rate differences and net interest cost is positive, net impact of the settlement and valuation of derivative financial instruments.
Our net results for the third quarter of the year stood at PLN 2.3 billion and by -- and at over PLN 7 billion for the 9 months of the year. So it seems that if the fourth quarter stays normal, that is not an exceptional period in the market, we can expect that our net result can be very solid at the end of the year as well.
LIFO-based EBITDA by segment, as I said, Refining segment contributed to our LIFO-based EBITDA at PLN 1.2 billion. And this is a gigantic increase year-on-year. Petrochem more than PLN 1 billion, increasing by PLN 0.5 million. Our Power Generation segment that contributed PLN 1 billion. Again, this is a stable result, staying flat year-on-year. The Retail segment contributed nearly PLN 1 billion, that is, to be specific, PLN 948 million, going down slightly, but this is still almost PLN 1 billion, so this is a major contribution to our revenue and our profits.
In terms of energy and powergen, in terms of upstream, this is a record-breaking result going up by PLN 86 million versus last year. And corporate functions, we reported lower costs by PLN 931 million year-on-year. And this effect is mainly due to the time limitation of some liabilities of all-in Unipetrol minery shareholders and also lower donations for -- on COVID-19. And even though they were lower, we still have a lot of cost, and we still contribute a lot, financially speaking, in the fight of the pandemic.
This slide has already been discussed, but let me focus on Slide #10. We reported higher sales of fuels across the board, gasoline, diesel oil and jet fuel to see as well by 6%, combined with lower sales of LPG. LPG sales went down by 6%. In total, our sales went up by 5% year-on-year. And this is a good sign, obviously, showing that our economy is rebounding. I can say that our EBITDA level is well balanced, and we report high cash levels at PLN 4.3 million for the third quarter.
Since the beginning of the year, we generated more than PLN 13 billion in cash. And this, obviously, has taken place in the period of record high CapEx spending. In the 9 months of the year, as I said, our group spent more than PLN 6.6 billion on CapEx projects. As you know, and we have already announced this, we are planning to have a record high CapEx at nearly PLN 9.5 billion. This is what we will spend on the -- planning to spend on investments.
As far as refining is concerned, the operational data of the Refining segment will be discussed by Mr. Zbigniew Leszczynski. So I'll ask him now to take over from me and discuss the Refining segment.
Thank you very much. Ladies and gentlemen, as Jan Szewczak has discussed our financial results quite a lot, and we have already received a good commentary of the sources of those increases in our financial strength. So before I move on to the operational data, I'd like to comment or maybe present a picture of our performance for the third quarter of the year because in the third quarter of 2021, PKN ORLEN generated a result of PLN 2.9 billion. So this is a level that we managed to report the same profit as we would report for the 8 years when PKN ORLEN was run by the BOPs. Why am I talking about it? This is a sign that when the Polish economy is growing, we can also report higher profit. And if we can report high profits, we can pay out dividend to -- the dividends to our stakeholders, shareholders. So this solid result was driven mainly by finding Petrochem and power generation program -- segments in the third quarter.
But let me remind you that this solid result was, obviously, driven by the liquidation of -- elimination of the gray zone by the current Polish government. So there is no Mafia anymore, and the fuel sector in Poland can generate higher profits as a result.
Moving on to operational data. Let me start with the Refining segment. In the third quarter of the year, the Refining segment reported nearly PLN 1.2 billion of LIFO-based EBITDA, which is up by PLN 1.5 billion year-on-year. The major driver of this solid result is a positive macro effect due to higher margins on middle and light distillates and the weakening exchange rate of PLN versus U.S. dollars as well as settlement of CO2 futures with a portfolio of PLN 150 million.
On Slide #10, we can also see that there was an offset of these positive effects due to higher use -- on used costs and also hedging transactions due to higher prices of both crude and products in the third quarter. As Mr. Szewczak has already said, we reported higher gasoline sales by -- of both gasoline -- of gasoline, diesel oil and jet as well as heavy fuel. However, LPG went down by 6%. And in total, our sales went up by 5%.
On the next slide, we will continue the presentation of our operational data in the Refining segment. In the third quarter, we -- our crude oil throughput was at PLN 8.3 billion, that is PLN 1 billion -- PLN 1 billion up at PKN ORLEN, mainly due to optimization of oil throughput. We had a decrease of 0.1 million tonnes, and we had higher yield due to higher availability of the H-Oil installation in the third quarter of the year.
At ORLEN Unipetrol, crude oil throughput was comparable year-on-year. However, we reported at ORLEN Unipetrol higher fuel yield by 3% year-on-year due to higher share of low-sulfur types of crude oil as well as lower range of maintenance shutdowns. And ORLEN Lietuva, we had an increase of 0.1 million tonne year-on-year in terms of oil crude throughput due to the macro environment since August '21 as well as higher fuel yield by 6% year-on-year due to higher share of low-sulfur types of crude oil as well as usage of semi products.
In the third quarter, we sold 6.7 million tonnes of refining products that is up by 5% year-on-year. We also had -- we had higher sales in Poland by 4% due to higher consumption in the market as well as in Lithuania, we sold 10% more due to better macro environment. On the other hand, in the Czech Republic, it went down by 2% due to limited export to the German market due to both logistics and market constraints caused by floods.
Moving on to the petchem segment. Our Petrochemical segment in the third quarter contributed more than PLN 1 billion in LIFO-based EBITDA which is a twofold increase year-on-year and comparable to previous quarter. And this contribution was nearly 20%. Obviously, macro was a positive contributor, especially higher margins of polyolefins, olefins, PTA and PVC. The weakening PLN versus euro exchange rate as well as the settlement of CO2 contracts of futures within transactional portfolio in the amount of PLN 135 million despite those high margins.
We were not able fully cap the market potential due to planned maintenance shutdowns as well as gradual recovery of full capacity at port after the maintenance shutdowns. In the third quarter, our sales volumes went down by 2%, especially in terms of olefins going down by 9%, fertilizers by 2%, fixed PVC by 3%, and PTA by 8% combined with higher sales of polyolefins going up by 23%.
On Slide #13, we'll continue the discussion of our operational data in Petrochem. Our Petrochem sales stood at 1.3 million tonnes going down by 2%, as I said before, due to lower sales in Poland by 7% and Lithuania by 5%, while in the Czech Republic, it went up by 9% due to better operational parameters of the PE3 installation, new installation, as well as higher availability of products in the comparable period -- compared to the period -- last year's period.
Let me remind you that in the third quarter, we were -- this was a time for us for planned maintenance shutdowns of olefins units in BOP and Plock. So both our polyolefins and metathesis, unit received less products to operate. And in the Czech Republic, we had constraints in terms of ethylene production as our PE3 maintenance shutdown voice plant.
In the next slide, you will see our, again, major segment of power generation. And power generation, just as Petrochem segment reported PLN 1 billion -- more than PLN 1 billion in terms of LIFO-based EBITDA staying flat year-on-year. Grupa Energa contributed to this result considerably. We had a positive macro impact year-on-year as a result of an increase in electricity quotations as well as a settlement of CO2 features within our transactional portfolio of PLN 196 million combined with the negative impact of higher gas and CO2 prices.
Gas prices in the third quarter went up fivefold compared to last year, and they are remaining at record high results also in the fourth quarter. So the energy sector looking for cheaper substitutes, not only in terms of coal, but also petrochemical products, other petroleum products. And this, obviously, contributes to the prices of electricity, and therefore, a strong and well-diversified multi-utility company or groups, so to speak, in ORLEN, is so important in Poland in terms of our security in the electricity security -- energy security.
Slide #15 presents our operational data for our Power segment. As you can see, it's produced 3.4 gigawatts of energy. In terms of electricity, with -- it's a good part of a portion of this electricity from renewable sources and gas. Electricity production increased by 6% due to high production of Ostroleka power plant due to higher demand from Polish power networks [ PC ], with higher production of Wloclawek hydropower plant as well as an increase of our renewable energy sources going up by more than 0.1 point gigawatts of energy year-on-year.
Electricity sales went down by 8% year-on-year, mainly due to lower sales of wholesale -- both wholesale and retail. Electricity distribution, on the other hand, went up 3% to 5.6 terawatt hour due to higher economic activity as well as higher number of electricity or energy connection points. CO2 emissions in the energy segment stood at 2.2 million tonnes.
The next segment we will discuss is Retail. In the third quarter, retail contributed to LIFO-based EBITDA at nearly PLN 1 billion, going down by 8% year-on-year due to lower fuel margins. And as we said before, since Jan Szewczak said before at the very beginning, our performance -- solid performance in the third quarter were driven mainly due to solid results reported in the power generation segment as well as Petrochem and Refining segment.
This time, retail contributed to our performance to a lesser extent, reporting a decrease by 8% this quarter due to, as I said, lower margins and fuels. We reported higher sales and higher cost of operation of our fuel stations. As we said before, the costs of our service stations are going up for a number of reasons, including the rise in salaries and wages. Our margins went down in Poland, while they went up in Germany and in Czech Republic and staying flat in Lithuania.
So as we said, the margins were down in Poland. And they stayed flat in Lithuania going up by -- going up in Germany and in Czech Republic. We had lower sales volumes of diesel oil and LPG and higher sales volumes in gasoline. Lower fuel margins were reported also as presented on the slide. We are increasing our network in terms of alternative fuel points. Currently, we have 421 alternative fuel points going up by 239 year-on-year.
On Slide 17, we continue the discussion of operational data of our Retail segment. And let me add that at the end of the third quarter, we had 200 -- 585 fuel stations going up by 12 year-on-year. In Poland, in the Czech Republic and Slovakia, 80% of our fuel stations have the stock cafe format. We opened 12 more locations for nonfuel sales. And at the end of the quarter, we had 2,252 stock cafe locations. The volumes went down mainly due to lower sales in Poland as we had to go down from a very high level of the previous year when the restrictions on movement or mobility around the country were eliminated.
Our market share increased in Czech Republic and Slovakia and decrease on all other markets. We are continuing to expand in terms of our nonfuel locations. As I said, we had an increase in Poland and the Czech Republic and Germany, it stayed flat. Our customers can, obviously, use EV chargers. In Poland, we have 321 of such EV, electrical vehicle chargers. And we also have 2 hydrogen stations in Germany and 44 CNG stations in Czech Republic.
In the third quarter, our upstream segment, just presented on Slide #18, generated a record-high LIFO-based EBITDA at PLN 130 million, which is -- which represents an almost threefold increase year-on-year, mainly due to higher prices of all hydrocarbons, and it translated into a higher impact of margins than last year. Our average production went up by 200 of barrels, equivalents year-on-year, including 0.1 in Canada and similar level in Poland.
Our sales went down by 6% year-on-year, mainly due to an unplanned shutdown of infrastructure at an average at our external customer in Canada. The next slide presents operational data for upstream. We have 100 -- or we have PLN 10.1 million in total reserves. In the third quarter, our investment spending at upstream was at PLN 74 million. In the upstream segment, we focus on the most prospective projects.
And on Slide #19, you will see detailed information of our operational activity at Miocen, Edge and Plotki areas in Poland as well as Kakwa, Ferrier and Kaybob in Canada.
I would like to end the discussion of our operational data at that point. And now I'll give the floor over to Mr. Jan Szewczak, again.
Thank you very much. So going back to our financial strength and our cash flows on Slide #21. As we said before, generated PLN 4.3 billion of cash flow, operational cash flow and taking account of PLN 400 million in terms of the settlement of deposits securing our hedging instruments as well as PLN 1.2 million in terms of our working capital increase and the spending on our CapEx at PLN 2.5 million.
In terms of 9 months of the year, this will show you a certain perspective for the entire rents after 9 months of the year, we generated nearly PLN 10 billion in terms of our profit and then PLN 9.9 billion, to be specific, in terms of LIFO-based EBITDA. A LIFO effect stood at PLN 3 billion, with working capital increase at PLN 1.1 billion. Our CapEx already stands at PLN 6.6 billion after 9 months of the year, let me emphasize.
We paid out dividends to our shareholders. Obviously, this is what the shareholders focus on. And this was a major dividend at PLN 1.5 billion. We also spent PLN 1.5 billion on the purchase of CO2 emission rights and property rights. So let me focus on this particular element. We have secured cost of CO2 emissions effectively at EUR 30 per tonne by the end of 2023, practically in the second quarter of 2021, that is this year. We generated nearly PLN 500 million in profit in terms of the settlement -- the measurement of these contracts. So this can show you the scale of our saving versus what we would have to spend if we bought produced those emission rights at EUR 60-something per tonne and maybe in the future around EUR 100 or even more than EUR 100 at the end of the year. This is what is expected at the end of the year.
So this has been, again, another quarter -- fourth quarter running when we report -- we have reported such solid result in terms of hedging of CO2 emission prices, which are highly speculative. And obviously, they have a major impact on the prices of energy feedstocks and fuels all around Europe. And this can -- this makes us very satisfied because we are very happy that we don't have to spend several billions of PLN for those certificates and for the emissions -- due to emission policy, which we would have to spend if we were to buy at today's prices.
As the Management Board and together, obviously, with the CEO, Daniel Obajtek, we had to take that decision early at -- early on. And this decision at that time, was very forward looking. And it was a very bold decision on the one hand. On the other hand, some would say it's even -- it was even risky at the time. But this, obviously, proved to be a very great decision and it shows that the scale of our responsibility and the scale in which we can predict certain events that today would seem quite unlikely to happen, but it did happen. We did not expect -- nobody expected that the emission rights went up by hundreds of percents actually, if we consider a 5-year period. Nobody would expect that, but we did. And we took this very courageous step and this made us very strong, and it has a great impact on our high -- record-high results.
So thank you to all the teams. Thank you for being involved in that process and present and prepared that recommendation, based on which we took that decision.
On Slide #22, you can see our net -- our debt -- net debt which went down quarter-on-quarter to PLN 11.4 billion. And this is due to positive effect of operational cash flows. And obviously, it was reduced by PLN 1.5 billion in dividend payout. Lease payments, obviously, lease liabilities at PLN 0.2 billion as well as around PLN 300 million in terms of the net effect of foreign exchange rate differences, because we, obviously, can see that there are major movements in terms of foreign exchange rates. And obviously, these affect our operations. And the obligatory reserves in the balance sheet of PKN ORLEN amounted to PLN 5.4 billion.
And then, again, I have emphasized that this covenant is very important to us that its net debt to EBITDA is at a very safe level of 0.69, whereas in the strategy, the level assumed is 2.5. That is -- that makes us very satisfied. We have a great safety margin. We have a very diversified and healthy source of financing. You can see on the pie chart, we have green eurobonds, corporate bonds, ESG corporate bonds. So as you can see, we have all the opportunities and use all the sources of financing.
We also have very positive investment ratings both from Fitch and Moody's. So we have this passport to the world of the largest companies that are recommended based on those ratings.
As the very first company in Poland, we issued green eurobonds at PLN 500 million, as we said before and reported in our current reports. This is a very difficult process we need to go through. There are very strict procedures in Poland and around the world to be able to issue green eurobonds as an industrial company. But this all confirms our financial strength.
On Slide #23, you can see our CapEx figures and our CapEx for the 9 months of the year stood at already PLN 6.6 billion and our annual plan is PLN 9.5 billion. And we are analyzing all the investments, very thoroughly, we are evaluating them in terms of the proportion of the costs. And we can obviously see that costs are skyrocketing in terms of all feedstocks. Even those that seemed probably innocent and which will not bring us any problems such as steel or cement or wood. But unfortunately, all those prices went up and skyrocketed.
We spent most of our CapEx on Petrochem and Energy. That is our strategic growth segments as well as Refining segment. The main projects, growth projects realized in the third quarter of 2021 include the construction of this braking unit at Plock, construction of propylene glycol unit at Trzebinia. Moving on to Petrochem, we extended the olefin capacities at Plock and polyolefin projects, PE3. This is a priority project in power generation. We modernized our existing assets and connected new clients in ENERGA Group. In retail, we opened new fuel stations. You can see the numbers. We opened 8 fuel stations, and we closed 10 fuel stations. We opened 12 nonfuel locations in terms of nonfuel sales as well as nearly 150 alternative fuel points.
This will be all. We will now discuss our macro environment and this will be discussed by Mr. Zbigniew Leszczynski, again.
Thank you very much. A couple of words now about the current macro environment in the fourth quarter and then in the coming macro environment. The fourth quarter, the model -- downstream margin went down to USD 8.6 per barrel due to record high prices of natural gas and a low petrochem margin, which, obviously, still stays at a high level, combined with a twofold increase in refining margin and also a high differential Brent/Ural, differential quarter-on-quarter.
Compared to the third quarter, the prices of crude oil went up and that the margins for diesel oil went up by 9%. The margin for gasoline went up by 9%. For heavy fuel oil, it went under 4%, whereas the Brent/Ural differential went up by USD 2 per barrel, but the petrochemical margin went down by EUR 130 per tonne, quarter-on-quarter.
In terms of our outlook for the future, we expect that in the fourth quarter, the price of crude will stay at about $85 per barrel. And we also expect stabilization of refining margins at about 4 -- or USD 3, USD 4 per barrel, we expect high petrochemical margins to stay at today's high levels at about 100 -- or EUR 1,100, EUR 1,200 per tonne.
In terms of gas in the European market, we observed record high quotations of gas and the viability of the prices of those products. This product is major and amazing. But we are expecting them to flat out in the future.
In terms of electricity, the price of electricity are high across all of Europe. From the end of the year, it has gone up, mainly or specifically due to higher CO2 emission prices as well as higher natural gas prices and with other higher result -- our record-high, actually, result.
The economy is rebounding after the pandemic and the GDP forecast for our major markets is optimistic. Therefore, we expect -- and fuel demand is also expected to go up and also for the petrochemical products.
In terms of regulation or regulatory issues in the last quarter and the next quarter, nothing has changed.
So that would be all. Thank you very much for your attention. And now is the time to move on to a Q&A session.
Thank you very much for the presentation and discussion of financial operational data, and we'll now move on to the questions, which we received from journalists by e-mail.
[Operator Instructions]
[indiscernible] asks about the stage of works in terms of the acquisition of PGNiG. When can we expect the closure, finalization of the process?
Our analytical team has been working from the morning, since the very morning with the market analysts on it. And the most frequent questions do not relates to our record high results, but about the prices of gas. Well, we do not have the so-called gas pillar, that is the gas segment. But obviously, we are aspiring towards it and we want it.
And with respect to the composition of PGNiG, I can say that we are in the -- we are underway. This is underway, and we are working very much on it. The clearance for this acquisition also, obviously, depends on the Polish antimonopoly office. But what we are doing is we are doing our best to prepare it in terms of analytical, technical, operational work in order to make sure that this is well prepared that we -- in order to pave the way to that merger acquisition and we count on those synergy effects. We expect that they will be significant.
So right now, we're waiting for the decision, the clearest decision of the Polish antimonopoly office.
Again, another question from [indiscernible]. As you have announced, have you finalized the cooperation with centers under ORLEN centers green energy? And if so, what are the major decisions? And if not, when can we expect those decisions?
In terms of the major decisions and outcomes, we always communicate them as soon as possible. As we have announced, the negotiations with centers are underway, and they relate to our partnership, it relates to SME reactors. And this is a project that is an innovative project and the negotiations are very complicated. However, we do believe and we keep fingers crossed for this project, because it has great potential. After the negotiation process and after we have developed the final terms and conditions, we'll, obviously, communicate them as soon as possible as we always do.
There was a question about PGNiG. And about the merger process with LOTOS, again, Mr. [indiscernible] asks about it, Mr. [indiscernible], when will you announce the -- your partner -- the selection of a partner in terms of the acquisition of LOTOS? And how many companies are you negotiation -- are you negotiating with?
And again, a question from [indiscernible], a related question. Can you confirm that by November 13, you will be able to apply to the European Commission? Can you postpone that turn or that date? And are you able to finish the talks and negotiations with your partners in terms of remedies? Is it possible?
This is an element, a major element of our strategy, building a multi-utility group. It is being continued and we are nearing its completion. Obviously, we are aware that the decisions or final decisions are taken by the European Commission. As I said before, we have time until November 14, when we are to present our decisions to the European Commission.
But we have a number of maybe seemingly small but very important hurdles such as the shareholders' meeting of LOTOS which needs to support our decisions in terms of remedies. This did happen. It made us happy. This is a declaration that LOTOS and the shareholders of LOTOS support the acquisition. And we also had an agreement with trade unions.
Time and again, during our meetings, at the Polish seaside, Gdansk specifically where LOTOS is headquartered. We stressed time and again that their employees are a very valuable capital for us, and we will abide by all the agreements, taking care of the interests of the employees in the context of the remedies. In terms of our negotiations with the partners, yes, we are still negotiating with the partners. We want to negotiate those conditions to make sure they are as good as possible.
It is not very easy, especially that we have to consider those exorbitant increases in prices and also very volatile situation. And we do hope that this process will be finalized and we will be able to sign those agreements with selected investments and that we will be able to present that to the European Commission for the final decision, probably to the merger between PKN ORLEN and LOTOS. This is a very fundamental question.
And the European Commission, the process can take around 3 months. This is what we expect. But obviously, this is only our maybe wishful thinking because we have no idea what the European Commission -- what the works on European Commission will look like because they are bound by no constraints in that area. But we keep our fingers crossed that this very difficult merger process is completed soon.
We have to remember that these are the 2 entities with such a high share of -- shareholding of State Treasury. But this has not been seen in Poland before. It was rather that the companies were split piece by piece in recent years. We, on the other hand, want to build something new and build something big. But obviously, we cannot point you to or we cannot specify the final date of that process. This depends on the very procedure and the decision of the European Commission. But we are very happy to see those agreements and arrangements at the shareholders meeting of LOTOS, which -- or who include, for instance, the funds that are mainly profit-oriented, but also trade unions at LOTOS.
And now moving on to the last question. [indiscernible] asks whether PKN ORLEN expects a decrease in refining margins for naphtha products due to high increases of fuels and fuel stations.
All these question appears time and again considering today's situation in global markets where we see very high prices of crude oil. And let me remind you that this is to a big extent, to a large extent, the consequence of very high gas prices also in Europe. We are not very happy about it. We are not happy to see such high gas prices. This has a major impact on the increasing prices of crude oil, and we expect that those prices and the future stop growing that in the quarters to come, they will remain stable. But in terms of the margins itself, the margins are generated at very similar levels quarter-by-quarter.
So it seems that in the last quarter, those fuel margins was actually lower in Poland than in previous quarters. Therefore, we are doing our best to make sure that the price of fuels in Poland is as low as possible. We are a major player in Poland, but not the only player.
Let me remind you also that in Poland, the prices of fuels, and it's worth mentioning, are among the lowest in Europe and only in Bulgaria and in Romania, the prices of diesel oil and gasoline are lower than in Poland. But in countries such as Greece, prices are very much higher and go beyond our prices by far. The same applies to Hungary, obviously, in Germany, in France or in the Czech Republic and Lithuania.
So those prices as I said before, are consistent with the quotations of crude oil as well as the prices of finished goods and us, as speaking ORLEN, we are doing our best, our utmost to make sure that the prices of fuels are as low as possible.
And based on the information we have presented to you, this is the task that we are implementing, and we have been implementing and the results of our retail segment showed us that it was lower, our performance was lower than in previous quarters. And we have to also remember that the costs of running a fuel station are very high. They must cover the functioning of the fuel station. They must cover fixed cost overheads and also salaries of our employees.
So again, just as in previous quarters and in the future also, we will do our best to manage this process as optimally as possible. It is also pointing out that PKN ORLEN has as much as -- but also maybe this seems a lower share compared to other players. But we have 60% of our share from external markets, from foreign markets. And I've mentioned before that retail represents around 15% to our performance in terms of our performance figures. And we know that this is a very sensitive product.
We are aware of the fact that there are some financial opportunities -- we are aware of the fact that the customers of Poland needs to face. But you must remember that we are a stock exchange company. We function on market terms. And we are doing, obviously, our best to buy all the standards, but we are also doing our utmost to keep those prices at a rational level. And anybody who troubles around Europe, they know and they see that in countries with similar financial situation that those prices are quite high and quite different and they're higher than Poland.
Thank you very much for the discussion and presentation of the financial and operational performance. Thank you for answering the questions. Thank you to all of you who are watching and listening to us live. Thank you very much.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]