“Our vision is to facilitate the energy transition by changing our core business to maximize returns, while developing a diversified energy portfolio”
2020 was undoubtedly marked by the COVID-19 pandemic and its effects on a health, social and economic level, both globally and in our country. Our sector has been particularly affected by the impact of the pandemic, with the worst international refining environment. We faced significant challenges in terms of health and safety, with the protection of our people, customers and partners, in all facilities and workplaces being our first priority. We were able to respond successfully in these difficult circumstances, managing the challenges, adapting our priorities and achieving our key objectives, while maintaining positive operational results.
In addition, during the year, we accelerated the implementation of our strategy regarding the Group’s energy transition and the creation of a strong presence in the production of energy through renewable energy sources. The acquisition and development of the PV project in the Kozani region with a total capacity of 204 MW, the largest RES project in our country and one of the largest PV projects in Europe, was a key milestone for 2020.
Since the beginning of the pandemic crisis, the Group’s Management focused on the following 4 main priorities:
- Health and Safety in all workplaces
- Ensuring the smooth and uninterrupted operation of our facilities and supply of the market
- Ensuring liquidity
- Taking advantage of market opportunities
Based on the above, we developed a series of policies for the employees’, contractors’, customers’ and associates’ safety, which were implemented in all units, facilities, service stations and offices. We quickly shifted to remote teleworking for the largest percentage of employees, while during 2020, over 30,000 COVID-19 tests were conducted, allowing for the immediate detection and management of cases. In addition, the Group received the COVID Shield certification at Excellence level in all countries where it operates. The above allowed for the smooth operation of the entire range of our activities and for the uninterrupted supply of all our key markets. Our refineries maintained high production levels, with exports increasing by 11%, at a time when many refineries globally were forced to reduce or even cease their operations.
In addition, from the very first weeks of the crisis, we moved quickly to ensure the necessary liquidity for risk management purposes, but also to finance the Kozani project, while the refinancing of €900 million credit facilities was successfully completed with improved terms.
The Group utilised both its financial liquidity and its storage facilities to successfully materialise contango/storage trades during the second quarter, which led to a profit of $70 million in the second half.
In the second half of the year, the full turnaround of the Aspropyrgos refinery was successfully completed. Despite the fact that the Group carries out similar projects in all its refineries, this particular one presented special challenges, due to its size, complexity and the large number of employees and contractors involved, as well as the period it was implemented in.
Specifically, with a budget exceeding €130 million, the project was the largest of its kind in the Group’s history. Over half of the investment was directed to safety and environmental upgrades, with an expected reduction of 50% in the refinery's total particulate emissions (PMs).
In 2020, the international refining environment deteriorated significantly with benchmark margins falling to all-time lows. Travel restrictions led to the collapse of demand in the second quarter, which is estimated to have reached 20 million barrels per day. The sharp decline in demand resulted in a deep crude oil price drop, up to 70%, leading crude oil producing countries to drastically reduce output and supply, with prices gradually recovering by the end of the year. The combination of reduced product demand and crude oil supply has led to a large drop in refining margins, by over 70% compared to 2019, even at negative levels for long periods, with many refineries worldwide temporarily or permanently shutting down.
Respectively in Greece, fuel demand in 2020 was significantly affected by the repeated traffic restrictions, whereby demand was 7.9% lower compared to 2019, at 6.3 million tons, with auto-fuels dropping by 13%, while the decline in the aviation fuel market was even greater, exceeding 70%.
The Group's Adjusted EBITDA for 2020 amounted to €333 million, with Adjusted Net Income standing at €5 million. In an unprecedented environment for the Group's core activities, with the lowest historical refining margins, results are considered satisfactory. Despite the reduced refining availability due to the full turnaround at the Aspropyrgos refinery, as well as the significant drop in demand, production remained at 2019 levels at 13.8 million tons and the second highest exports performance historically. The above highlights the resilience of our core business model, which is based on modernized and complex refineries, storage, handling and distribution facilities that offer a significant competitive advantage, as well as our vertically integrated marketing and petrochemical activities, which secure a strong position in the Eastern Mediterranean regional market and increased value for all stakeholders.
Safe operation, with respect for the environment remains a top priority of the Group, aiming for continuous improvement. In 2020, we maintained our very good safety performance, while the improvement in our environmental footprint continued for yet another year, as reflected in the relevant indicators.
Aiming for a 50% improvement of our environmental footprint by 2030
The Group had already announced its new strategy in 2019, prioritizing the energy transition as the main part of its vision. Now, given the acceleration of developments and the significant disruption expected in the international energy sector in the near future, we have recently clarified our strategic initiatives, based on three pillars, so that we can achieve our objective of improving our environmental footprint in the next 10 years, with a significant restructuring of our growth investment plan.
The first pillar concerns the transition of our main activities to the new era. We aim to implement an ambitious program to reduce the carbon footprint of our industrial activities by approximately 30%, in terms of direct (scope 1) and indirect (scope 2) emissions. Realising this target will result from the implementation of a series of projects based on improving energy efficiency, sourcing electrical power for our facilities from low and gradually zero emission sources, as well as examining and implementing new technologies for substituting of oil products with more environmentally friendly raw materials or capturing and storing emissions during their production. We also intend to fine tune our planning regarding the reduction of indirect emissions (scope 3). In addition, in the next few years, we will accelerate efforts to improve competitiveness, with digital transformation and procurement reorganization projects. The above will result in significant financial benefits, further to the reduction of CO2 emissions.
The second pillar concerns the development of our industrial activities and focuses mainly on investments to increase capacity in petrochemicals and biofuels production. It is worth noting that the Group has a strong presence in the propylene-polypropylene value chain, with the regional supply deficit expected to increase, while petrochemicals are estimated to be the main source of global oil demand growth in the coming decades.
In addition, we intend to increase biodiesel capacity, fully covering the needs of our core markets with the production of raw materials. Significant emphasis will also be placed on the commercial side, both in terms of strengthening international oil trading, as well as in retail, by exploiting digital tools, expanding the products/services’ portfolio offering and EV infrastructure.
The third pillar focuses on the rapid development of our RES portfolio, with an initial medium-term goal of 600 MW of installed capacity by 2025 and 2 GW by 2030. Achieving the goal by developing 1.3 GW of projects in various maturity stages, as well as acquisitions in wind (onshore and offshore) and storage technologies, will contribute significantly to the improvement of the Group’s environmental footprint. RES growth will account for more than 60% of our expansion investments over the next decade.
Upgrading corporate governance and the new corporate structure are essential levers that will both enable and accelerate the implementation of our strategy
In the context of the implementation of the provisions of Law no. 4548/2018 and Law no. 4706/2020, HELLENIC PETROLEUM is entering a new era regarding corporate governance. We are taking the opportunity to establish best practices, after a thorough review in recent years, to the highest European standards.
The role of the General Meeting of Shareholders is substantially upgraded by electing the majority of the Board of Directors, with an appropriate framework and procedures for nominations, increasing the number of independent members and expanding diversity, as anticipated by a modern energy Group, with systemic importance for the domestic economy and a continuous presence in the capital markets.
In addition, we are considering alternatives in regards to redesigning the Group's structure, in order to better capture growth opportunities, through flexible and appropriate financing strategies, to highlight the value of the Group's portfolio and to improve our risk management framework.
Upgrading corporate governance and the new corporate structure are essential tools that will both enable and accelerate the implementation of our strategy.
The above would not have been possible without the support of our key stakeholders. We would like to thank our customers for their trust, our shareholders for their continuous support, but also the Group's employees, who under challenging conditions and with their continuous effort contributed to yet another successful year.