petrom s.a. – benchmarking with investment grade companies
Post on 20-Oct-2014
2.369 views
DESCRIPTION
Presentation by Sorana Baciu at TBLI CONFERENCE EUROPE 2008.TRANSCRIPT
Petrom S.A. –Benchmarking with Investment Grade Companies
Sorana BaciuDirector Corporate Development and Investor Relations
November 13, 2008 – TBLI Conference Europe 2008, Amsterdam
2 Petrom S.A. – Benchmarking with investment grade companies
Presentation outline
The Romanian Macro EnvironmentThe Romanian Macro Environment
Petrom in Romania Petrom in Romania
Petrom’s Role in Sustainable DevelopmentPetrom’s Role in Sustainable Development
A New Way of Looking at ThingsA New Way of Looking at Things
3 Petrom S.A. – Benchmarking with investment grade companies
Romanian macro environment:Economic growth to continue despite volatility
► EU member since 2007
► Continuous economic growth; 8.6% in 1H/08
► Large inflow of EU funds (EUR 33 bn estimated by 2013 i.e. >25% of 2007 GDP)
► Romanian market risk Perceived to be relatively high due
to the large C/A deficit and scarcity of global credit
Low level of public debt; relatively small budget deficits
Volatile FX environment; Inflationary pressures still remain
► Reform process supported by EU accession and all parties aligned
► Current government has only 20% of electoral support; elections in November 2008 Sources: EC Spring Economic Forecast, Eurostat and Petrom
1
0
4
8
12
16
Jan. 05 Jul. 05 Jan. 06 Jul. 06 Jan. 07 Jul. 07 Jan. 08EU-27 Romanian CPI Romanian PPI
0
2
4
6
8
10
2005 2006 2007 2008 2009 2010
0
40
80
120
160
200
GDP in EUR bn (RHS) EU-27 Romania
Romanian and EU-27 GDP development
Romanian and EU-27 inflation rates in %
4 Petrom S.A. – Benchmarking with investment grade companies
Sustainable Development in Romania
Romania has to overcome the economic and social disparities with the other EU members, and also to assimilate and implement the principles and the practices of sustainable development in the context of globalization
Progress in recent years, however the economy is still based on intensive consumption of resources, with a natural capital affected by the risk of irreversible deteriorations
An updated version of the National Strategy on Sustainable Development, in line with the objectives set by EU, currently under development
5 Petrom S.A. – Benchmarking with investment grade companies
Presentation outline
The Romanian Macro EnvironmentThe Romanian Macro Environment
Petrom in Romania Petrom in Romania
Petrom’s Role in Sustainable DevelopmentPetrom’s Role in Sustainable Development
A New Way of Looking at ThingsA New Way of Looking at Things
6 Petrom S.A. – Benchmarking with investment grade companies
Petrom has a high degree of physical integration
Exploration and Production
Refining and Marketing
Gas and Power
► 4.7 mn t oil production► 5.8 bcm gas
production► 894 mn boe P1
reserves
5.9 mn t crude oil processed
807 filling stations 4.6 mn t marketing sales
5.3 bcm gas sales volumes
860 MW power plant planned
All figures from 2007
7 Petrom S.A. – Benchmarking with investment grade companies
Continuous financial performance
EUR mn 2005 2006 2007 6m/08Turnover 2,972 3,715 3,689 2,254
EBITDA 767 1,022 934 700
EBIT 520 788 590 509Net income 391 649 534 453
Net cash generated from operating activities 755 874 688 n/aInvestments 309 834 1,147 922Employees at the end of period 43,546 32,837 26,397 34,120
•All P&L figures according to RAS, translated from RON to EUR at avg exch rate •All BS figures according to RAS, translated from RON to EUR at end year exch rate
8 Petrom S.A. – Benchmarking with investment grade companies
Privatization in 2004 was critical for competitiveness and sustainable development
Challenges prior to privatization
Restructuring and modernization
Current position
Increasing efficiency and competitiveness in all business segmentsImproved processes and safer operationsImproved profitabilityImproved compliance and HSE standardsConsolidated position in the domestic marketExpansion into the international marketDiversification of value chain
Comprehensive and focused strategy Significant investmentsState-of-the-art systems: Petrom Solutions, SAPIntegration into OMV – transfer of know-howImproved management structureAcquisitions and growth: Shell Gas, Ring Oil, OMV and MOL retail stations, Petromservice activitiesSustainable development: Power, Future Energy Fund
Obsolete assetsOutdated equipmentOperational inefficiencyLack of ITUnderinvestmentBureaucracyExcessive regionalizationOverstaffingMassive HSE deficitsGovernment interference
9 Petrom S.A. – Benchmarking with investment grade companies
Petrom: Significant economic influence in Romania
Substantial impact on other sectorsof the economy (over 5,600 suppliers)
3.1% of Romanian gross fixedcapital formation
Employment
Approx. 27,000 employed by Petrom SA(total maintained employment of 90,000 = 2.2% of Romania’s employment)
Capital investments
Support of economic growth
Petrom is the largest Romanian company by:
Turnover and profit No.of employees Stock market capitalization Contributions to the state budget
Petrom sales to GDP ratio 3.8% (total 7.8% including indirect effect)
Government budgetcontributions
11.7 % direct contribution to state budget (RON 5.7 bn)
Output
Data as of December 31, 2007 and referring to Petrom SA
10 Petrom S.A. – Benchmarking with investment grade companies
Petrom - Role Model Company in Romania
►Performance journey►Management commitment►Size and impact on the Romanian economy
We have to lead the way towards sustainable development in Romania
11 Petrom S.A. – Benchmarking with investment grade companies
Presentation outline
The Romanian Macro EnvironmentThe Romanian Macro Environment
Petrom in Romania Petrom in Romania
Petrom’s Role in Sustainable DevelopmentPetrom’s Role in Sustainable Development
A New Way of Looking at ThingsA New Way of Looking at Things
12 Petrom S.A. – Benchmarking with investment grade companies
Petrom – the road towards corporate sustainability
Corporate GovernanceCodes of Conduct and
ComplianceStakeholders dialoguePetrom Future Energy
Fund
Triple Bottom Line
Energy efficiency investments
Brazi Power PlantPetrom Future Energy
FundCorporate Social
Responsibility
Corporate Social Responsibility
Health and SafetyHuman Capital
Development
EconomicEconomic EnvironmentEnvironment Social Social
13 Petrom S.A. – Benchmarking with investment grade companies
Questions 1:
What is the relation between the corporate governance and the
sustainability strategy of a company?
14 Petrom S.A. – Benchmarking with investment grade companies
First things first:Improved corporate governance in Petrom
Complex current ownership structure
► Property Fund (state-owned) to be listed on BSE
► 8% of Petrom to be sold to employees by AVAS (state-owned)
No golden share Privatization agreement provides
for certain shareholder rights of the Romanian state
Dual management system (Supervisory Board with 3 state shareholding representatives)
Improved stakeholders relationship Management focus on core businesses, divestment of non core assets Financial discipline
Free float6.21%
EBRD 2.03%
Property Fund
20.11%
AVAS 20.64%
OMV 51.01%
Triple Bottom Line
eco
nom
ics
envir
onm
ent
soci
al
15 Petrom S.A. – Benchmarking with investment grade companies
Petrom corporate governance structures
SupervisoryBoard
9 Members
Executive Board
7 Members
GeneralShareholders
MeetingOne Share – One Vote
Reports
•Authorized to convene meetings
•Reports
•For
mally app
rove
s
acts
ann
ually
•Formally approves
acts annually
•Authorized to convene meetings
•Reports
•Appoints members•Supervises managementSupervisory
Board9 Members
Executive Board
7 Members
GeneralShareholders
MeetingOne Share – One Vote
Reports
•Authorized to convene meetings
•Reports
•For
mally app
rove
s
acts
ann
ually
•Formally approves
acts annually
•Authorized to convene meetings
•Reports
•Appoints members•Supervises management
Elects Supervisory BoardDecides upon capital measures and dividendsReleases Articles of Association
Appoints the Executive BoardControls the Executive Board Supports the Executive Board in its decisionsDecides upon conflicts of interests
Determines the strategy Directs the businessDetermines structure and organizationImplements corporate regulations and reporting systems Actively meets public relations demandsPrepares meetings of supervisory board and submits reportsInforms and negotiates with representatives of the work force
Triple Bottom Line
eco
nom
ics
envir
onm
ent
soci
al
16 Petrom S.A. – Benchmarking with investment grade companies
Corporate Governance: Open communication to investors – the premises for a liquid capital marketPetrom provides ad hoc and regular information on financial and non-financial topics:
► Company strategy► Directors dealings in company’s
securities (shares, bonds, derivatives, etc.)
► Financial situation (according to IFRS etc)
► Conflicts of interests – related party transactions
► External mandates/functions► Independence and its criteria for
supervisory board► Social performance report► HSE performance and systems
Triple Bottom Line
eco
nom
ics
envir
onm
ent
soci
al
17 Petrom S.A. – Benchmarking with investment grade companies
Code of Conduct – living our values
Petrom Corporate Governance System is based on:
► Company values: Pioneering, Professionalism, Partnership
► Own statutory requirements► UN Global Compact
Framework, by the adherence to the OMV Group Code of Conduct
► Austrian Corporate Governance Code
Petrom actively participates in adopting a
Corporate Governance Code in Romania
Triple Bottom Line
eco
nom
ics
envir
onm
ent
soci
al
18 Petrom S.A. – Benchmarking with investment grade companies
Dedicated resources to promote future energy
►Dedicated team in Petrom with clear tasks regarding the identification and the financial project support
►Strong partnership with OMV Future Energy Fund
►Main directions of actions: ► Renewable energy (e.g. geothermal, wind, solar, biomass)► Reduction of GHG (e.g. carbon capture and storage
combined with enhanced oil recovery)► Energy efficiency (e.g. nanotechnology)
Green light for five projects: geothermal potential in Romania, CO2 capture combined with EOR, nanotechnology, low energy building, biogas
Triple Bottom Line
eco
nom
ics
envir
onm
ent
soci
al
19 Petrom S.A. – Benchmarking with investment grade companies
Corporate social responsibility – the core of our sustainability
► Main goal: Become a responsible company that acts as a role model in Romania
► CSR strategy aligned to business strategy, embedding the corporate vision, values and objectives
► Management support and involvement
►Budget: approx. around EUR 20 m during 2006-2008
Triple Bottom Line
eco
nom
ics
envir
onm
ent
soci
al
Highest commitment for corporate responsibility projects in Romania
20 Petrom S.A. – Benchmarking with investment grade companies
Improving health and safety
Total number of lost working days incidents (LWDI) and fatality incidents for Petrom and contractors, 2005 - 2007
50
50
31
3
6
3
62
47
49
7
7
5
0 20 40 60 80 100 120 140
2005
2006
2007
Petrom LWDI Petrom fatality Contractor LWDI Contractor fatality
Focus on safety (personnel and operations)
► Personal protection equipment: 90% changed over last 3 years
Change of mentality 300,000 hours on HSE
training and campaigns in 2007
Compliance: Investments, integrated pollution prevention and control, environmental management accounting, Annex P
Carbon management and CO2 trading: Challenge and opportunity
Triple Bottom Line
eco
nom
ics
envir
onm
ent
soci
al
21 Petrom S.A. – Benchmarking with investment grade companies
Developing an efficient organization
► Redefine corporate culture:• Develop and implement company
value: Pioneering, Professionalism, Partnership
• Code of conduct
► Manage change project: • Increase cooperation across the
businesses and consolidate change• Define matrix management principles
followed by successful implementation
► HR - staff and management:• Further initiate and implement
development programs (focus on local managers);
• Programs to attract and retain talent• Significant training budget
Triple Bottom Line
eco
nom
ics
envir
onm
ent
soci
al
22 Petrom S.A. – Benchmarking with investment grade companies
Achieving potential and securing the future
Security of supply SustainabilityCompetitiveness
Stabilize and increase production
Step up exploration efforts
Regional E&P expansion Expand gas storage
capacities Access to international
gas markets (Nabucco) High Romanian market
coverage with high quality oil products
Significant investments for restructuring and modernization
Efficiency potential Competitive refinery EU quality standards for
products and services Improved HSE
performance
Energy efficiency Closing the
performance gap of refineries
Biofuels blend Gas-fired power plant Entry in renewable
energy market/ leverage large asset base
Reduce carbon intensity
23 Petrom S.A. – Benchmarking with investment grade companies
Questions 2 & 3
Is sustainability an investing criterion for the companies listed
on less developed capital markets?
Is a Sustainability Index possible at BSE?
24 Petrom S.A. – Benchmarking with investment grade companies
Capital markets reward sustainability
Petrom fact sheetMarket capitalization on October 30th, 2008: RON 9.5 bn (EUR 2.6 bn), 18.2% of BSE market capitalization; Closing price on October 30th, 2008: RON 0.1670 (67% down YoY)Highest market capitalization: EUR 10.3 bn (February 1st, 2006)20
30
40
50
60
70
80
90
100
110
120
PETROM BET
Q4/07 Q1/08 Q2/08 Q3/08 Oct. 08
John Prestbo, President of Dow Jones Indexes: “Companies pursuing growth in the triple bottom line tend to display superior market performance with favourable risk return profiles”
Petrom shares and BET index evolution
(Dec. 2007 – Oct. 2008)
25 Petrom S.A. – Benchmarking with investment grade companies
Presentation outline
The Romanian macro environmentThe Romanian macro environment
Petrom in Romania Petrom in Romania
Petrom’s Role in Sustainable DevelopmentPetrom’s Role in Sustainable Development
A New Way of Looking at ThingsA New Way of Looking at Things
26 Petrom S.A. – Benchmarking with investment grade companies
Our journey has just started
Thank you!