MGP - MOLGroup Italy · WtCC 2015 Mol Group is the main sponsor of norbert Michelisz ... of Slovakia’s capital – Bratislava. We are ... dered through our online shops and similar

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MGP April 2015 Sixth Issue

ExPandinG BordErs Customer focus on the road

GEothErMal ExPloration new pilot program launched in Jászberény

WtCC 2015 Mol Group is the main sponsor of norbert Michelisz

“MOL has grown from being a domestic champion to becoming one of Central Europe’s strongest companies, bearing in mind Slovnaft’s contribution”

oszkár Világi

slovnaftFlagship

April 2015 3

contents

In numbersFascinating facts and figures

WeLCOmeZsolt Hernádi, C-CEO and Oszkár Világi, Slovnaft CEO

IntervIeWA leader in innovation

InfOgraphICsA very complex refinery shown in a very simple way

grOup neWsProjects and developments worldwide

retaILExpanding borders – 2014 is a milestonein Retail history

hrNavigate pay and HR processes

neW assetsLDPE4 - Slovnaft’s biggest investment

We are DOWnstreamFerenc Horváth, EVP - GroupDownstream about themission and values

DeveLOpmentChanging strategies in Downstream

fLagshIp neWsMOL Group flagship moments

In revIeWIn focus: new safety programs

InvestOr reLatIOnsOutperforming MOL shares

treasuryExpanding horizons in treasury operations

e&pChallenges and opportunities - the directions of MOL Group E&P

CsrWTCC 2015 with Norbert Michelisz and MOL Groupvolunteering programs

sCIenCeGeothermal exploration pilot program

barreL per DayApple car?! Why not?

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interviewA leader in innovationOszkár Világi, Slovnaft CEO and Gabriel Szabó, Senior Vice President – Downstream

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infographicsSlovnaftA very complex refinery shown in a very simple way

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26 treasury expanding horizons in treasury operationsInterview with Zsuzsanna Ortutay, Group Treasurer

mOL group panorama – The Internal Magazine of MOL GroupPublished quarterly . magazine founder: MOL Group Corporate Communications . Executive Publisher: Dominic Köfner, Vice President - MOL Group Corporate Communications . magazine manager: Aranka Kiss . managing editors: Anna Hőgyész, Melinda Korpa, Tünde Szarka (HG Media) . Contributors: MOL Group HQ Editorial Board, Flagship and Operating Company Representatives . Publisher: HG Media – 1016 Budapest, Lisznyai u. 38. . Design: HG Media, Tamás Tárczy . photos: Fotógyár english editor: Jeremy Lovitt-Danks

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this issue: SLOVNAFT

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4 Mol GroUP Panorama

ProdUCtion CaPaCity

Slovnaft’s predecessor, the Apollo refinery, was founded in the 19th Century

2014 saLes€ 4.01 Bn 5.5-6 m TONS

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April 2015 5

welcome

*

*Slovnaft Partners

in numbers

In this issue we are focusing on our Slovnaft Flagship, a significant member of MOL Group. We say significant because, in a difficult European business environment, Slovnaft has dynamically grown and renewed, underpinned by a very respectable track record. The biggest exporter in MOL Group specialises in processing crude oil, producing motor fuels and petrochemicals, with distribution and sales to wholesale customers

as well as to retail customers using its quickly expanding service station network. This time around, MGP also gives an overview of the construction of the year’s key investment at Slovnaft – a new polyethylene LDPE4 production facility. It also surveys its retail strategy and its new service station acquisitions in the CEE region. We also provide the reader with a simple infographic to present Slovnaft’s impressive refinery

features which have been restructured and technologically upgraded to attain a very high complexity due to its high conversion factor and processing flexibility. Slovnaft’s refinery now ranks in the TOP 3 in Europe!Please welcome this new edition of our magazine, which makes MOL Group more visible for all of us.

Enjoy a pleasant read!

dEar Mol GroUP CollEaGUEs and MGP rEadErs,

Zsolt HernádiChairman & CEO

Oszkár VilágiSlovnaft CEO

BUsinEss CardIn March 2006 Oszkár Világi was appointed CEO of Slovnaft. Today he is Chairman of the Slovnaft Board of Directors and a Member of MOL Group’s Executive Board, as well as a Member of the MOL Plc. Board of Directors since 1 May 2011. He is also a Member of the INA d.d. Supervisory Board. Világi graduated from the Comenius University Faculty of Law, Bratislava and received his Doctorate in Law (JUDr.) in 1991.


interview

April 2015 7

a lEadEr in innoVation

ou entered the oil industry shortly after mOL bought into Slovnaft. How do you look back on this acquisition?

The strategic decision on the gradual take-over of the company, integration of staff and understanding of the priorities on both sides certainly played a very important part

in the process. The connection was crucial for both companies. Slovnaft was burdened at that time by heavy past investments and needed a strong partner. On the oth-er hand, MOL has grown from being a do-mestic champion to becoming one of Cen-tral Europe’s strongest companies, bearing in mind Slovnaft’s contribution.

refineries in Europe have been going through a turbulent period over the past few years. How is Slovnaft dealing with this situation?We’re witnessing a fundamental consolida-tion of the marketplace – the closing of re-fineries and the sale of service station net-works. A year or two ago, it seemed that the only way to success was Upstream explora-tion and production, not Downstream re-fining and marketing. However, the recent fall in oil prices has significantly impacted companies that were only focusing on Up-stream. The starting point from now on is to ensure a balanced portfolio of activities both in terms of oil extraction and process-ing. In each area, it’s very important to con-stantly change customary habits and come up with new ideas and practices. Innovation must therefore become the foundation of our business and thought processes. I think that Slovnaft, in this area, belongs among the leaders. For example, from the perspec-tive of the entire MOL Group, we launched LEAN and the migration to the new SAP sys-tem smoothly and successfully.

How do change and innovation affect the work of employees?Most people are aware that change is needed, but some have more difficul-ties than others in accepting change.

Once they become accustomed to a cer-tain comfortable way of working, it is very distracting if their daily working lives then have to change. LEAN was the per-fect example of this. After some time, however, these employees really start-ed to understand its principles and then even said they wanted to be part of the project. We also needed the same ac-tive approach of staff during the New Downstream Program. Again, I’d really like to acknowledge the work of our people, because Slovnaft did not only meet its objective within the Group, but exceeded it. The significant changes in-cluded the introduction of a new SAP in-formation system, which we managed to successfully implement at the end of last year. We welcome innovation and will continue seeking it everywhere.

Slovnaft’s strength is its refinery, one of the most modern in europe. What are your future plans in this area?Our refinery’s technology allows us to get up to 8.5 decilitres of valuable product from every litre of oil, which is well

above the European average. Large-scale investments are made in the refinery every year. We’re continuously modernising equipment and reducing its energy consumption. We pay close attention to environmental protection since not only do we sit on the banks of the Danube River, but we are also close to the centre of Slovakia’s capital – Bratislava. We are under the scrutiny of tens of thousands of residents so we try to interfere with their lives as little as possible.

And how is Slovnaft doing in product sales?Here, on the contrary to what I’ve just said, we want to become a part of the lives of the greatest number of Slovakians possible. For several years, we’ve been modernis-ing the look of our service station network and gradually improving its services as well. For example, last year we started offer-ing a selection of goods which can be or-dered through our online shops and similar initiatives are certainly in the pipeline. We fully support the MOL Group retail strat-egy of positioning a service station as not just a place in which to refuel, but also to make smaller purchases, enjoy a selection of tasty food, and take advantage of other useful services.

Are CSr activities also part of every large company’s strategy?Certainly. We want to be a responsible enti-ty not only in business, but also in society at large and in the country in which we operate as a whole. We care about supporting sport, the arts, talented young people and ecolog-ical initiatives. The results of these activities cannot be financially assessed, but they have extensive society-wide significance.

In every area it’s very important to constantly change customary habits and come up with new ideas and practices...

interview

LOCaL OperatIng COmpanIessloVnaFt transsupplys service stations and whole-sale customers with Slovnaft motor fuels. The company owns a total of 40 tanker lorries.• 129 empLOyees

VÚrUPruns test laboratories and is involved in the operation of the Hydraulic Groundwater Protection system, which protects Žitný Ostrov island against pollution.• 107 empLOyees

sWs VoJany operates a pumping complex for the extrac-tion, storage and transport of liquids import-ed from Ukraine and Russia and subsequent-ly shipped to European Union countries.• 37 empLOyees

For more than ten years, Slovnaft has been a member of mOL Group and one of its pillars. Slovnaft Chairman and CEO Oszkár Világi and Gabriel Szabó, Senior Vice President –Downstream agree that innovation is crucial in their business at present.

oszkár ViláGiSLOVNAFT CEO

CM EUroPEan PoWEr sloVakia produces and distributes power and heat to Slovnaft Group as well as operating the thermal power plant on the Slovnaft site.• 104 empLOyees

SLOVNAFT MONTÁŽE A OPRAVYis a single service company that, installs and repairs machinery and equipment and offers technical assistance, consulting and expertise to the parent company.• 440 empLOyees


interview

April 2015 9

lovnaft is a company clearly focused on Downstream. What is its current position in Central Europe where refinery

supplies exceed demand?Thanks to a solid and continuous investment program, Slovnaft has long been among the most complex European refineries. We’re the leader in domestic fuel sales and, at the same time, the largest exporter in the whole of MOL Group. To stay among the best, we have to be a modern company in all respects, mainly focusing on customer needs. We’re continuing to invest in technology. For example, we’re finishing the construction of a new LDPE4 polyethylene production plant, always studying product innovation possibilities, and expanding services to our retail customers. In the long run, MOL Group investment in the modernisation of the Druzhba and Adria pipeline connections will also ensure the stability of Slovnaft supplies. Slovnaft now has a fully-fledged alternative source of oil in the event of any threat to traditional oil supplies from Russia.

The investment in construction of a new LDPE4 production plant is currently the largest in Slovnaft. The new line is due to start this autumn. What benefits will it bring you?Overall, we’ve invested more than EUR 200 million in the production of plastics and

around another EUR 100 million in relat-ed infrastructure. After its launch, LDPE4 will be one of the most modern polyethyl-ene production plants in Europe. It’ll be ca-pable of producing nearly 30 types of poly-ethylene and thus overall production will increase. With this extended product portfo-lio, Slovnaft can address new customers and, on the other hand, simultaneously will ben-efit from significantly lower energy intensi-ty in its petrochemicals production. I’m sure that the benefits this key investment brings will be felt throughout MOL Group.

Slovnaft started implementing the LEAN philosophy in its activities as the first in mOL Group to do so. Has it met your expectations?Although people’s initial reactions were rath-er negative, I was and still am convinced that we’re focusing on our own key resources and using them wisely. Finally, after two and a half years, it’s absolutely clear that LEAN has be-come second nature to several organisational units and that it’s bringing about real benefits with each wave, both financial and non-finan-cial. The key aspect of LEAN is its sustainabili-ty. This is what we need to focus on. Slovnaftians are open people who can now look at their work from a different perspec-tive, change their habits and actively come up with ideas for improvements. LEAN, as well as the Eiffel program, are responsible for this.

Slovnaft has changed over to a new company information system which has also affected Downstream. How do you assess this change?A large amount of man hours stand be-hind this project. When I saw how my colleagues spent time at work on week-ends and at night, during the cutover weekend, there were no negative vibes despite the fatigue. On the contrary, one sensed great motivation and team spirit. I was proud to be a Slovnaftian.

Slovnaft is the leader in its domestic retail market. What will the completion of the acquisition of Agip service stations in Slovakia bring?The inclusion of Agip service stations in our retail network will enhance the perception of the Slovnaft brand in Slovakia. This is a key el-ement of our strategy – to be the first choice for customers. By increasing the number of stations, the availability of our services will improve. We’ll get closer to our current cus-tomers and broaden our reach to potential ones. However, while physical proximity to customers is important, so is the need to get closer to them by meeting their needs. We’re working on it right now, regardless of the date of the acquisition’s completion. We’re changing our approach to customers and in-troducing new services that differentiate us from the competition. For example, we’ve

launched a collaboration with the lottery company, Tipos, as well as allowing custom-ers to pick up goods from the Datart online shop at service stations. We’re also currently testing other innovations.

Where does Slovnaft Downstream stand out from the whole of mOL Group Downstream?Slovnaft is a stable pillar of MOL Group Downstream. The results of the New Downstream Program proved this when, by joining forces, we managed to contribute to the collective result much more than we originally planned. MOL Group can rely on the Bratislava refinery’s complexity of technology and related know-how, as well as exploit synergies with the Százhalombatta refinery and TVK polymer production. There are already massive transfers of intermediate products between the production plants, for example.

This is a key element of our strategy – to be the first choice for customers. We’ll get closer to our current customers and broaden our reach to potential ones.

interview

the CzeCh repubLICSlovnaft Česká republika, MOL Retail Česká republika and Pap Oil operate in the Czech marketplace. Together, they have 142 employees. In this market, MOL Group is strongly present in the wholesale, active in distribution of fuels and lubricants and dynamically growing its retail business. After a recent acquisition, the network now has 192 service stations under the Slovnaft, Pap Oil and Lukoil brands. In the coming weeks, MOL Group plans to introduce the MOL service station brand to Czech motorists while maintaining the existing PAP Oil brand.

OperatIng COmpanIes IngermanyOne of the smallest representative companies in MOL Group, MOL Germany, with 14 employees, supplies its customers with MOL Group products if they are specifically requested. The concern really has a relatively strong position only in Bavaria.

austrIaThree companies operate in Austria: MOL Austria, Roth Heizöle and Rumpold Festbrennstoffe, specialising primarily in the wholesale of fuels, heating oil, lubricants and polymers. The companies have 173 employees in total. MOL Austria Group operates 75 service stations under the MOL, Roth and Rumpold brands. Storage capacity is located in Korneuburg with depots in Graz, Trofaiach and Linz. The Group operates mainly in Vienna, Lower and Upper Austria and Burgenland.

pOLanDIn Poland, MOL Group is represented by a wholesale company, Slovnaft Polska, which specialises in the sale of fuels and polymers. Trade in fuels is concentrated in the southern part of the country, but trade in polymers extends throughout Poland to the Baltic countries. The company has 35 employees. Slovnaft Polska is the largest importer of gasoline and one of the major importers of diesel in the Polish market.

GaBriEl szaBóSenior Vice President

– Downstream

BUsinEss CardGabriel Szabó joined Slovnaft Resource Allocation in 2001. He became, successively, Director - Finance & Accounting at Slovnaft Montáže a Opravy company, Manager - Slovnaft Corporate Services, Director - INA Procure-ment Services, Vice-President - MOL Group Corporate Services and finally Senior Vice President - Down-stream. Gabriel Szabó is a Bratislava University of Economics, Faculty of Economy & Business graduate.

sloVnaFtinfographics infographics

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10 Mol GroUP Panorama April 2015 11

M F“FriEndshiP i/adria” oil PiPElinE MOL Group and Transpetrol have finished the reconstruction and capacity expansion of the Friendship I/Adria oil pipeline section between Százhalombatta and Šahy in Slovakia. As a result of this strategic investment, Hungary, Slovakia and the Czech Republic will now be able to further diversify their energy supplies, thus significantly improving regional energy security. The total cost of the investment amounted to USD 80 million. This investment is of strategic importance, since it enables MOL Group to meet the oil needs of its Bratislava Refinery from the Adriatic. Consequently Hungarian and Slovakian security of supply has significantly improved while the degree of their previous one-sided dependence has consequently decreased. This section, with expanded capacity, may well contribute to the Czech Republic’s security of supply as well, for through this route Czech refineries can also receive crude oil from a new source.

TVK – PrODuCiNG ETHyLENE fOr 40 years Tisza Chemical Group, Tiszaújváros, has re-cently celebrated its 40th birthday. The oldest TVK unit is the Olefin-1 factory, at which pro-duction was launched at 13:13 hours on 13th February, 1975. During the past four decades, Olefin-1 has produced nearly 12 million tons of ethylene from approximately 40 million tons of feedstock. As part of the New Downstream program, the factory re-alised significant measurable savings of more than HUF 3.2 billion in 2014.

A EurOPEAN COmmiSSiON ViCE-presIDent Opens the 7th mOL grOup annuaL reCeptIOn At the end of January, MOL Group held its Annual Brussels Reception for the seventh time. The aim of the event was to bolster its relationships with EU decision-makers and officials. The highlight of the evening was the keynote speech delivered by Maroš Šefčovič, Vice President of the European Commission who is responsible for Energy Union – the number one EU decision-maker on energy is-sues. He outlined his vision of a European En-ergy Union whereby Central & Eastern Europe and its companies, such as MOL Group, play a key role in forming an integrated, competitive and secure internal energy market.

mOL’S NEW OFFiCE In the netherLanDsMOL’s newest financial shared service centre, MOL Group International Services B.V., opened in Amsterdam in March. The office is primarily there to serve as an administrative finance centre for international Upstream activities, embracing various tasks in the fields of accounting, taxation and treasury.

iNA’S NEW GrEEN petrOL statIOn In spLItAn award for the preliminary design of INA’s new green petrol station in Split has been presented at a press conference at the As-sociation of Architects’, premises. This is the second competition concerning architectural and urban design solutions for self-sustaining service stations that INA has held in collabora-tion with the Society of Architects. Construc-tion of the first green petrol station is planned in Zagreb at the current East Stupnik site. INA launched the “Energy for the future” project in 2013 to build completely self-sustaining service stations.

LOTO – A SySTEm WHErE everybODy WIns! LOTO is an acronym for the English expres-sion “Lock Out - Tag Out” which means locking out or shutting down, and tagging out or displaying notices or warning signs. The LOTO project was launched in 2015 in conformity with Group SD & HSE require-ments by MOL Flagships and MOL Flagship OpCos. The pilot project was carried out at comparable plants in MOL Hungary and MOL Romania. The LOTO system must be introduced in every business unit by the end of 2016 to ensure future maintenance jobs can be carried out at minimal risk.

news in brief

NnEW aPPliCation: “MolGroUPCards

station FindEr” After successfully launching our mobile phone application “Slovnaft Station Finder”, Card Products Business Support

introduced a new application for the whole of MOL Group – “Molgroupcards Station Finder”. This application is connected

to the molgroupcards.com website which provides useful information to MOL Group card customers covering more than

3,000 service stations across ten European countries. RrEstatEd sharEholdEr’s aGrEEMEnt in astana Continuing successful cooperation, in December of last year, an official signing ceremony took place in Astana to ratify the amended and restated Shareholder’s Agreement between Cooperatieve KMG EP U.A., MOL Caspian Oil & Gas Limited and First International Oil Corporation Limited in relation to the Fedorovsky block in Kazakhstan.

MMol GroUP For thE talEnts oF thE FUtUrE

Growww, MOL Group’s award-winning graduate recruitment program, is now in its ninth consecutive year. In 2015, MOL

Group offers more than 200 Growww positions varying from engineering, economics and IT to natural and social sciences at

Group Level across 12 countries. MOL Group has recruited 1,570 Growwwers since 2007. In 2015, more than 200 top talents can

start their career journeys with us. The program will officially start on 1 September. MOL Group continues its international

online student competition, Freshhh, from March 2015. Similar to Growww, it is one of the company’s winning talent acquisition

and talent development programs. Over the past eight years, Freshhh has attracted more than 15,000 students in 5,000 teams

from more than 250 universities and colleges in 76 countries. For the ninth time, Freshhh invites the most talented students in

teams of three to build a new oil corporation from scratch and make decisions on research and development projects to find rich reservoirs, build refineries for different products and find the best

product portfolio to gain maximum profits.

mOL Group’s uPPP program won Stevie Award mOL Group Corporate Communications has received the Bronze Stevie® Award in the 11th Annual

international Business Awards (iBA) series, the world’s premier business awards competition. mOL was awarded in the ‘reputation and brand management communications Pr campaign’ category for its uPPP

program, a new E&P talent acquisition and development program. The uPPP Pr campaign was developed by the F&H Porter Novelli communications agency. “We are delighted to be recognised by such a presti-gious, global organisation which validates mOL Group’s commitment to raising awareness of our talent

programs. Through the campain mOL Group successfully attracted almost 3,000 students from 27 selected universities in 14 countries”, – said Dominic Köfner, VP – mOL Group Corporate Communications.

From left to right on the picture:sánDOr fasImOn, COO - MOL Hungary; vIKtOr Orbán, Prime Minister of Hungary; rObert fICO, Prime Minister of Slovakia; OszKár vILágI, Chairman of the Board and CEO - Slovnaft; Ivan KrIvOsuDsKý, CEO - Transpetrol

From left to right on the picture: LI yOngLIn – General Director of FIOC; abat nurseItOv, COO – KazMunaiGas E&P; Imre LaszLóCzKI – Hungarian Ambassador to Kazakhstan


group newsgroup news

retail


ExPandinG BordErs

April 2015 15

2014 is a milestone in retail history: new

strategic directions have been set, aiming

for intense inorganic growth in CEE and

advanced utilisation of our selling points. here

is a short summary of the turning point.

n 2014 a sale-purchase agreement was signed with ENI for its down-stream business, including retail net-works in the Czech Republic, Slovakia

and Romania and Lukoil retail network was acquired in the Czech Republic.“These acquisitions are milestones in our retail growth strategy. MOL Group will be among the TOP 3 retail players on the Czech market. The Group significantly in-creased its retail coverage in Romania and made a great step to further enhance Slovnaft’s brand in Slovakia” – highlighted Lars Höglund, SVP - MOL Group Retail.

ncreased fuel sales, a growing market share after years of decline, the highest non-fuel sales ever and almost twice the number of active Bonus Club mem-

bers - these are just some of the results of the dynamic new “Restart” retail strategy which started about a year ago.Restart will be in place until 2017 and, in ac-cordance with MOL Group strategy, it has one clear aim: to become the brand with the best perception among consumers in the Slovakian retail market.“We needed to push the “reset“ button and position our company differently. Especially how we interact with customers, how we use communication and marketing effectively and how we build our network.

ong gone are the times when MOL Group was only repre-sented by 24 service stations under the Slovnaft brand in

the Czech Republic, with the Group mainly presenting itself as a wholesal-er. Enhancement of the brand’s pres-ence has been experienced over the past two years and currently, including companies joining MOL, our network comprises 192 service stations in the Czech Republic.With the addition of the Agip stations (the deal is still subject to the fulfil-ment of certain conditions), this num-ber will increase to 317. After pur-chasing the Agip network, MOL Group companies will account for more than 10% market share in the Czech Repub-lic. “This number does not meet our ambitions in any way. In the future, we will aim for about a 15% share, both in number of service stations owned and in sales volume. We also remain open to options which may present them-selves in the future” - says Dsupin.“In the coming years following the launch, the majority of service stations currently operated under the Pap Oil, Slovnaft and Lukoil brands will be re-branded to unify the network under the MOL brand. The only exception is the Pap Oil brand which will be partly maintained in certain parts of the coun-try,” Dsupin explains.The expansion of its retail business, however, does not mean that MOL Group companies in the Czech Republic will limit their activities in any way. We intend to continue to profit from our strong connection to the Slovnaft refinery in Bratislava, as well.

CustOmer fOCus On the rOaD

“We will introduce the MOL brand on the Czech market and start the journey to build our brand perception, while still keeping the currently operating Pap Oil brand”.MOL Group is committed to giving a rel-evant offer for the customers and to continuously innovate and develop its service stations. Retail aims to be the customer’s first choice in fuel and conve-nience retailing and to be a power brand in our core markets. It also wants to be seen as a growing stable cash and profit generator for MOL Group.

The main goal isto become the“Power Brand”in all our coremarkets.

LArS HöGLuND, SVP – mOL grOup retaIL

SLOVAKiA – FrOm DynamIC Change tO grOWthrADOSLAV ŠVEC, HEAD OF rETAiL, SLOVNAFT

Our new Restart retail strategybrings complex change.

CzECH rEPuBLiC - the mOL branD In the heart Of eurOpe

In the future, we will aim for about15% share, both in number of service stations owned and in sales volume.

It’s a complex change program that affects every single member of the team“ – com-ments Radoslav Švec, Head of Retail.Slovnaft Retail has ambitious goals for this year as well, not only by enhancing the ap-pearance of service stations, but mainly by improving services. “The customer is influ-enced by services, station design, offers of coffee and good food, and especially by tidy and willing staff” – added Švec. “As part of our growth, I should mention the acquisition of 41 Agip service stations which will help us fulfill our promises and commitments, not only towards customers, but also towards company shareholders“ – concludes Švec.

In 2015, as a result of integrating the acquired network, MOL Group will achieve a network of approximately 200 units in Romania. Following the successful rebranding of the newly-acquired network under the MOL brand, the company will continue to offer Romanian motorists high quality services such as the MultiBonus loyalty program. Moreover, fuel card partners will greatly benefit from this enhanced coverage, especially in Southern Romania.

COmpLeteD aCquIsItIOn Of enI servICe statIOns In rOmanIa

ATTiLA DSuPiN, COuNTry CEO – CzECH rEPuBLiC, SLOVNAFT ČESKá rEPuBLiKA, mOL rETAiL ČESKá rEPuBLiKA, PAP OiL

retaIL branDs

retail

HR


2015 gOaLs• implementing the new Group remuneration Policy at Flagship and OpCo level• building up global Benefits Strategy and focusing on Employee Wellbeing to ensure a

sustainable and productive workplace• move from the traditional Hr Controlling and reporting concept towards data-driven

hr decisions• further improve Hr processes’ effectiveness with the support of strategic Hr iT systems• strengthen international mobility management with further process improvements

further enhance the Group Compensation

and Hr operation area to support business

strategy by

April 2015 17

naViGatE Pay an d hr ProCEssEsThe building blocks of our competitive Hr strategy are among others excellence in Compensation and Hr Operation – an interview with Anikó Demeter, Head of Group Compensation & Hr Operations

our areas belong to your overall responsibilities: What kind of synergy exists among them? The areas build upon each

other to maintain and develop the basic HR pillars that enable better human resource processes in MOL Group. HR Controlling and Reporting provides reliable data sources for decision making, HR Process Development intends to improve HR processes e.g. estab-lish a reliable HR data management system on Group-level. The Compensation and Benefits area uses this data to establish a Group-level Remuneration Strategy to at-tract, retain and reward employees. Inter-national Mobility establishes the Mobility Strategy and manages the significant assignee population (350 assignees on Group-level), by building on the Remunera-tion Strategy, using HR IT developments and providing data about the assignment population to HR Controlling and Reporting.

What is the Group remuneration Strategy you mentioned? The basic aim is to support the business strat-egy in talent attraction and retention by pro-viding a fair, consistent and transparent remu-neration framework. It is quite a challenging area as people would rarely claim that they are entirely satisfied with their compensation packages. The key is to strive for and reach external and internal equity in pay and ben-efit structures. External equity means that MOL Group is able to hire talented people for appropriate jobs and retain them. We have to identify how aggressively we should take part in the rivalry in labour markets where MOL Group wants to compete and adapt other compensation strategies accordingly.

At the same time, we also have to maintain internal equity so people, when talking to each other, feel they get fair salaries and benefits for the jobs they do and are recog-nised for the performance they deliver.

What is the biggest challenge for the cre-ation and implementation of this strategy?The increasing competition for talented people in the oil and gas industry, because there is a shortage in technical expertise and we are competing with oil majors. The other challenge is to keep internal consis-tency on Group-level considering the differ-ent countries where MOL Group is operating. E.g. in the Middle-East, markets are young and developing, competition is very intense and the environment is turbulent. In Russia, we operate assets in extreme work conditions that need to be compen-sated. In Aberdeen (UK), there is great competition for talents and MOL is a new market player, so we need to address that with a special compensation strategy.

Based on this remuneration Strategy, how are compensation and benefit packages defined for an employee? Every year, we buy external benchmark data on how much other companies pay in various markets and based on this we draw a map of how we want to position ourselves in a given environment and among present competitors. On the basis of this map we compare the current situation and propose corrective action. The annual salary increase cycle is managed with the aim to remain competitive, consider economical movements e.g. inflation, retain employees and appreciate individual performance.

How was the journey to establish this organ-isation and how do you see the next steps?We came a long way to establish this well- operating structure and we are certainly on the right track. We started to implement a focused, harmonised Group-level remuner-ation system, that is driven by fairness and consistency, instead of fragmented country practices. We have streamlined mo-bility management with sound foundations, and are moving towards an analytics-based HR that enables us to proactively drive deci-sions. We have interesting and challenging projects to develop ourselves further.

We have to identify how aggressively we should take part in the rivalry in the labour markets where MOL Group wants to compete and adapt other compensation strategies accordingly.

• hr ControllinG & rEPortinG Ensures Group-level HR data reporting from all companies, drives HR planning and forecasting and continuously develops the area towards HR analytics.

• intErnational MoBility ManaGEMEnt Establishes and operates the Mobility Policy to enable the effective management of around 350 assignees in 20 countries, ensuring expatriate comfort and alignment in legal and taxation environments.

• CoMPEnsation & BEnEFits Designs and implements tailored remuneration programs. Drives and advises job evaluations, organisational design, salary actions, benchmarking and drives short- and long-term incentive and benefit schemes.

• hr ProCEss dEVEloPMEnt Reviews and develops HR processes and HR IT solutions. Main projects for 2015: setting up a global HR database (SEED), further roll out of SuccessFactors supporting the Annual People Cycle and a new recruitment application.

PasqUalE GUaGlianonE HR PROCESS

ExPERT

BEáta MályUsz HR PROCESS ARCHITECT

tündE CsEr HR CONRTROLLING

ExPERT

GErGEly VUkiCs HR DATA REPORTING &

ANALySIS ExPERT

istVán zsolt takáCs GROUP COMPENSATION SENIOR ExPERT

BEáta JUhász GROUP COMPENSATION & BENEFITS ExPERT

adEla Miron GROUP

COMPENSATION & BENEFITS ExPERT

larisszalUChtErhand

InternatIOnaL assIgnment tax expert

JÚlia hadarits INTERNATIONAL MOBILITy REPRESENTATIVE

stEla starEINTERNATIONAL MOBILITy MANAGER

anna soós INTERNATIONAL

MOBILITy REPRESENTATIVE

VEronika horVáth INTERNATIONAL

MOBILITy ExPERT

Viktória lUkáCs INTERNATIONAL

MOBILITy ExPERT

team

The team is working on a wide array of Group-level topics, with a strategic focus on Group-wise Hr process development, and guidelines in terms of remuneration,

international mobility and Hr Controlling and reporting in strong cooperation with Flaghip Compensation & Hr Operation teams.

HR

new assets


ldPE4 in nUMBErsSince the late 1990s, the new LDPE4 polyethylene production unit is Slovnaft’s biggest investment. The total investment in petrochemicals is around Eur 300 million, of which more than Eur 200 million was spent on construction of the LDPE4 production unit itself – and Eur 100 million was used to fund the associated logistics and infrastructure, as well as for reconstruction of the steam cracker.

40 years the age of the current technology that will be replaced by the new polyethylene production unit

220,000 tons of polyethylene per year the production capacity of the new LDPE4 production unit

10,000 tons the amount of polyethylene that fits

into 28 new storage silos supplied by the Dutch company Jansen &

Dieperink. The silos are directly linked to the LDPE4 production line.

7 production lines will be replaced by the newly-formed unit

almost 30 types of polyethylene will be produced by the production unit

285 megapascals the operating pressure in the LDPE4 reactor, which was manufactured by the Austrian company BHDT. The reactor consists of 126 double-wall tubes with a total length of over two kilometres.

66 thermocouples to monitor the process

temperatures in the reactor, which can reach up to 310°C

1.5 tons the weight of each expansion valve providing super-fast reactor depressurization

19 megawatts the power of the electric motor in the hyper compressor, which creates an extremely high operating pressure. It weights 110 tons.

• aprIL: Accomplished mechanical completeness of the logistics section, two months ahead of schedule

• 1 august: A) Completion of eight smaller offsite projects that supply electricity, raw materials, media and necessary infrastructure B) Accomplished mechanical completeness of production section – launched testing of new production facility

• 28 august: The first hydrocarbons injection • enD Of nOvember: LDPE4 in commercial operation

2015 tiMElinE

WE arE doWnstrEaMLast June, mOL Group Downstream management discussed what was needed to be done to fulfil its vision and be successful. We asked Ferenc Horváth, EVP – Group Downstream about the mission and values.

Business is not just about what we need to do, but how we need to do it – the identity of the organisation is always defined by the values we hold and our behaviour. These values have been defined carefully so that everyone can be absolutely clear about what these six words mean: Safety, Qual-ity, Efficiency, Trust, Diversity and Innova-tion. These values fuel the positive change in MOL Group Downstream, which is inevi-table to fulfil our future vision and goals.

We aim to be become the first choice for customers in our core markets, fuelling growth while delivering added value for our people and shareholders.

Besides our vision and mission, it’s very impor-tant that we outline our strategic targets for the upcoming three years. Our new financial tar-gets, with the support of our Next Downstream Program, will achieve USD 1.3 billion - USD 1.4 billion EBITDA by the end of 2017.

I would also emphasise that all of us are respon-sible for driving change across the whole of our Downstream business, as well as for maximis-ing how well we work together – because to-gether, we are Downstream!

Our New Downstream Program, implemented in 2012-2014, made significant efficiency improvements across the entire area of operations. Working effectively together in this way is one of the main pillars of our success so we would like to thank people in person for the progress made so far by organising local celebrations around the Group.

Our new financial targets, with the support of our Next Downstream Program, will achieve USD 1.3 billion - USD 1.4 billion EBITDA by the end of 2017.

04 marCh MOL Romania (Bucharest)11 marCh IES (Mantova)16 marCh INA (Zagreb)23 marCh Slovnaft (Bratislava)26 marCh Tifon (Zagreb)27 marCh MOL Slovenia (Murska Sobota)31 marCh MOL HU (Százhalombatta)

9 aprIL Group celebration (Budapest)20 aprIL MOL Austria (Vienna)22 aprIL Energopetrol and Holdina

(Sarajevo)15 may PAP Oil and SN Ceska (Prague)27 may MOL Serbia (Belgrade)

neW Ds prOgram CeLebratIOn CeremOny sCheDuLe

In 2015

downstream


developmentdevelopment

ChanGinG str atEGiEs in dsThe operation of Downstream Production & Development have been inseparable. reorganisation and optimisation work has been ongoing to further strengthen cooperation between the two units.

you are merging the DS Production and Development units. What is the current status?

DavID puLLan: I guess it all started when we joined the Company. I joined two years ago and Miika had started a couple of months earlier. One of the things we saw upon arrival was that the Glocal project had been completed and that a lot of new organisations had come to life. However, one of the areas that had not been touched was Downstream Development. So when I arrived, my first job was to take a long

hard look at Downstream Development and think about how we could organise it better, to make it more efficient and more relevant for the future. I started looking at the whole thing from a slightly different angle, not just looking at Downstream Development but Refining too. That was when I started working much more closely with Miika to resolve how best to position Production, and how to change and integrate Development, to make the whole organisation work better. The organisational framework we then proposed is nothing very new. We had seen it operating successfully in other refineries around the world.

What are the major areas touched by these changes?mIIKa eerOLa: We still need to improve our leadership in safety and also systematically improve the safety status

of our processes. Regarding efficiency, it needs to be improved in terms of Solomon benchmarking results by 2018, especially in the key areas of reliability and energy efficiency. To achieve this, our roadmap has been drawn up and its core areas will be incorporated in the Next Downstream Program as well. To improve reliability and have fewer unplanned negative events in the future, we are changing the way our site organisations operate and really trying to achieve more effective collaboration between operations, maintenance and technology. To achieve a systematic and homogenous approach among the large group of people working in Production, we are using LEAN methodology to basically change daily operations across all our sites. We are also focusing on blue-collar training and in particular on training our panel operators with simulator training sessions.

D. p.: To be able to adapt to the fast changing environment, we constantly reinvent ourselves. We have merged local Refining and DS Development organisations to create a new organisation that will have all the necessary technical skills to support plant operations and development. We are also in the middle of changing our work processes. For example, in the recently issued Project Management Guideline, a new process, the so-called “Stage-Gate” process, has been defined.

This will be the consistently-used process for developing and executing projects more efficiently. It will also help us to improve our use of CAPEx by standardising work processes and clearly defining roles and responsibilities. In addition, we have launched a structured work program, involving colleagues from many different organisations, to identify new, strategic projects to improve plant profitability. As part of this program in 2014 we initiated over 30 internal and external studies, and this year we have already started to propose new projects.

Have the changes already started?m.e.: yes. On 1 September 2014, at TVK and Százhalombatta, and on 1 January 2015 at Slovnaft. We would have liked to start it up at INA as well, but the realistic starting time is 1 January 2016. D.p.: We are also aware that we need to start changing workers’ mindsets, to think a little bit differently now the organisational change is done. One of the main concepts of the change was to push ownership down into the organisation, so now we need to figure out how we can all improve the way things should be done, together.

This is the key thing. If we change the organisation, we have to make sure that everybody understands what they now have to do differently.

m. e.: For example, the working day-to-day business calendar. Where people will sit to increase natural interaction, what they need to discuss, agree and follow up on. These fundamental sorts of things need to change as well.

What is the outlook for the short and longer term?D.p.: We are still in the consolidation phase. In Slovnaft, we only started in January so we are still in the process of finding the best way to make it work and who is responsible for what. In this phase, we have to share our experiences. There has already been positive dialogue between Slovnaft, TVK and Százhalombatta at meetings where their issues were discussed and the lessons learned shared.m.e.: New mindset, collaboration and leadership. Quick wins in reliability. UPTIME program for longer term improved reliability. The NxDSP program is also a good field test for improved collaboration and development between these two organisations.

If we change the organisation, we have to make sure that everybody understands what they now have to do differently.

MaxiMisinG FrEE Cash FloW GEnEration With FUrthEr EFFiCiEnCy iMProVEMEnt and add-on GroWth ProJECts

Go

als

201

7

norMalisEd FrEE Cash

FloWUsd ~900

Mn

ds CCs EBitdaUsd

1.3-1.4 Bn

Usd 500 Mn

CCs EBitda iMProVEMEnt

WholEsalE FUEl VolUME

150%oF oWn

ProdUCtion

rEtail FUEl VolUME

5.4 BnlPa salEs

daVid PUllan Miika EErola

We are merging local Refining and DS Development organisations to create a new organisation that will have all the necessary technical

skills to support plant operations and development.

An interview with David Pullan, Senior

Vice President – MOL Group Technology &

Development and Miika Eerola, Senior Vice

President – MOL Group DS Production.

C

A

M

an envIrOnmentaL InnOvatIOn aWarD fOr rubber bItumen at the 23rd Hungarian innovation Grand Prix, mOL and STrABAG won the ministry of Agriculture’s 2014 environmental innovation award for the development of road asphalt blended with rubber bitumen. The main benefits of mOL’s rubber bitumen include extending by 1.5 times the lifetime of roads, excellent adhesion to minerals which reduces roadway ruts and its improved resistance to traffic load, which leads to lower maintenance costs. in addition, it delivers reduced traffic noise and better traffic safety as a result of delivering shorter vehicle stopping distances. in 2013, mOL’s new rubber bitumen product won the House of Hungarian Quality Award and, in 2014, the right to use the trademark “Environmental-friendly Product”.

taKIng Over east OKányMOL Upstream’s portfolio in Hungary has been expanded with a new block. An East Okány conces-sion agreement has been signed to acquire the right to carry out explora-tion and production operations in the area for the next 30 years. The block covers a total of 400 square kilome-tres. Seismic acquisitions and the drilling of several wells are planned for 2015 and beyond.

hungarIan mOtOrWay vIgnettes at Ina servICe statIOnsINA Retail has introduced a new ser-vice at 13 selected service stations. As a result, it is now possible to buy Hungarian motorway e-vignettes for vehicles of up to 3.5 tons, and, what’s more, one can pay for them with the INA Card at selected stations.

a unIque yeLLOW CarD In CrOatIaAt the beginning of 2015, TIFON d.o.o. launched, alongside its regular yELLOW card, its first co-branded yELLOW card as an additional service to its customers. The agreement was concluded with the Police Union, who requested 2,500 cards for distri-bution to their members. To attract more customers, TIFON has also in-troduced free Wi-Fi at Tifon stations as part of the coffee bar service.

panta has reCeIveD a Dnv CertIfICatIOn The UNI EN ISO 9001: 2008 regulation is the basis for building and certifying the quality management system of any organisation. This certification is a kind of “licence” attesting to a company’s quality so that it becomes certifiable.

neW maJOr step In ItaLyNELSA, the IES subsidiary, has ad-opted Italian regulation D. Lgs 231/01 and its model, which governs the “administrative liability of legal enti-ties deriving from offences”. With this step NELSA has completed another important part of the integration process with MOL Group.

news in brief

CzECh tEaMs BUild sErViCE stations oF thE FUtUrEAt the beginning of the year, MOL Group companies in the Czech Republic - Slovnaft Česká Republika, MOL Retail Česká Republika and Pap Oil - moved to shared new offices in the Quadrio complex. This symbolic moment in their joint journey was marked by an opening event comprising team-building activities to help new team members get to know one another. The most important MOL brand activity was a game in which 14 teams of mixed employees from the three companies participated in building a service station of the future. Each group had 90 minutes to make a model of a MOL-branded service station using various materials and tools prepared for each team on the spot. Part of the task was also to record a “Making of...” video or take photos via an iPad which were later part of their presentations. All groups worked very hard and came up with unusual solutions and futuristic concepts of service stations. The three best models were awarded prizes.

Mol talEnt sUPPort Won thE sUMMa artiUM aWard

The MOL Talent Support Program, in conjunction with the New Europe Foundation, won the Summa Artium Award in the “Contemporary Art” category in 2014. The award was established 11 years ago to enhance and raise support for

various business and private cultural initiatives by using methods that had proven successful in Western Europe

and in the USA, as mutually advantageous to the business and cultural spheres. Since 2005, the MOL Talent Support

Program has supported a total of 1,877 projects and, through them, more than 3,500 talented young people in

the amount of HUF 430 million.

MMol Pakistan arranGEd EyE CaMP at anar ChEEna As part of its social responsibility efforts, MOL Pakistan arranged a one-day free Eye Camp on 22 January 2015 at the village of Anar Cheena in the Hangu District. The camp received an overwhelming response from people in the area who attended in large numbers. This initiative was organised in collaboration with the Al-Shifa Trust Eye Hospital, Kohat and the District Administration of Hangu.

IintErnational WoMEn’s day at Mol kalEGran

The oil and gas industry has long been seen as a ‘men’s world’. MOL Kalegran, a MOL Group

subsidiary in Kurdistan Region of Iraq, aims to increase the employment opportunities for those Kurdish women who want to serve their country

by working in the oil and gas industry. Accordingly, more and more female engineers and geologists

have been recently hired. Female employees now work in noticeable numbers in all technical and

functional departments of MOL Kalegran.

Ina WOn empLOyer partner CertIfICate agaIn

iNA has been awarded the Employer Partner Certificate for excellence in human resources

management for the fourth year in a row, thus confirming the high standard of iNA processes.

This award positions iNA among the Croatian companies that stand for best practices in the

field. iNA’s human resources management success was independently assessed through the evaluation of 45 management processes,

with high standards met in each, which is a prerequisite for certification.

Szabolcs I. Ferencz, SVP - Group Corporate Affairs and curator of the New Europe Foundation, receives the Award

at an awards ceremony held on Patron of the Arts Day.

I22 Mol GroUP Panorama April 2015 23

flagship newsflagship news

oUtPErForMinG Mol sharEs

Last year, MOL delivered a clean CCS EBITDA of HUF 511 billion (USD 2.2 billion), a mere 1% decrease versus 2013, despite the falling oil price and volatile macro environment. Downstream clean results were 31% higher than in the previous year, while Upstream exceeded the forecasted production level at 98 million barrels of oil equivalent per day in 2014. Parallel to the full year results, MOL also announced its strategic targets within the Next Downstream Program (NxDSP).


upstream

Downstream

gas midstream

Corp. and other(incl. intersegment)

270

2063759

157

356

-56 -3

516 511

-1%

Fy 2013 Fy 2014

CCs EBitda in hUF Bn

BE UP-to-datE aBoUt Mol GroUP

The MOL IR Department is continuously updating its website.

in FoCUs: nEW saFEty ProGraMs

mOL group is launching two new safety programs in April 2015, so we took the opportunity to ask zsolt Novotný, Head of Group Health & Safety, about the scope, aims and expected results of these initiatives.

ow would you describe these two programs in a nutshell?They are two separate industry-standard programs.

The Stop Card system aims to promote intervention by anyone noticing that a situation has become unsafe. Additionally, it reinforces employee and contractor awareness that they have the right and, indeed, the duty, to stop work when direct risk of personal injury is present and to then continue work only after conditions have been made safe. On the other hand,

the Job Safety Analysis (JSA) is a basic risk assessment tool to help identify and control hazards associated with each step of a hazardous or non-routine job.

The Life Saving rules were launched a bit more than a year ago, are they still valid?yes, absolutely. When we launched the Life Saving Rules, we developed a long-term implementation schedule of connected programs for each rule to make compliance with them easier. The Stop Card system will directly support the most important rule: “Comply and intervene”, while the JSA can be linked to the “Always obtain a permit-to-work” rule.

What am i expected to do if i notice an unsafe situation?First of all, please always intervene immediately; don’t just walk away from it. I believe it’s a hugely positive step in the life of any organisation when you reach a point where one simply doesn’t ignore unsafe situations any longer, but, instead finds it natural to intervene. I believe the Stop Card system will bring us closer to this point. People are also encouraged to fill in Stop Cards about such incidents so we may learn from our mistakes and avoid repeating them.

Let’s talk a little about the Job Safety Analysis. How will it change existing procedures?The JSA won’t replace the existing “permit-to-work” procedure; on the contrary, it will supplement it by inputting valuable information. We see this as an aid for those of our colleagues who are responsible for issuing work permits; they’ll have more knowledge about potential hazards and control measures of activities for which they need to issue a permit.

Who will have to prepare the JSA’s?A JSA must always be carried out by the party carrying out specific work. Mostly, it will be the contractor and Single Service Company teams who will carry them out before starting work.

if we were to meet again in one year’s time, what would you expect these programs to have delivered?I don’t believe any single safety program will work wonders and that is why we are applying a systematic approach to building up a robust safety management system consisting of connected, industry-proven elements. I am convinced that these two programs and together with the ones already launched (such as “Lockout/Tagout” and “Fall Protection”) and those scheduled for the coming years (“Gas hazard” and “Confined Spaces”) will significantly contribute to our journey towards an improved safety culture and the ultimate goal of zero accidents.

BUsinEss ExCEllEnCE throUGh hsETo further strengthen HSE culture, a new HSE Engagement Program has been launched at mOL Group – with external professional support. The program started with surveys – to collect the feedback of blue and white collar workers across the Group to map safety culture. results, improvement ideas – how to further strengthen the HSE culture - will be presented to Top management and incorporated into the program. through training workshops, the program will be cascaded down to every leader in 2015-16.

Please welcome our new MGP IR page, which has been launched to provide a short overview of MOL Group’s position and perception on the Capital Market. As employees of a Publicly Listed Company, it is important for all of us to understand what the likely drivers are behind the Capital Market’s views of MOL, especially concerning MOL’s share price and business outlook.

ádáM horVáthHead of Investor Relations

sharE PriCE PErForManCE 2015

“We have raised our EPS forecasts by an average of 4% over 2015-17, primarily because of better performance in R&M as MOL

announced its new Downstream improvement program of USD 500 million by 2017. Reaching the full USD 500 million could be challenging, but delivery on the first program was impressive.”

“We upgraded MOL to Buy with a new HUF 14,700 per share TP — We think the MOL share price (down more than 50% from its 2011 peak) already reflects the operational disappointments

of the last four years (loss of Syrian assets, downgrades of CEE production and Kurdistan resource base, and ongoing INA issues). Despite MOL’s business complexity and patchy track record, we see valuation upside backed by more realistic growth prospects in Upstream…and further potential to improve Downstream results with the new USD 500 million efficiency program.”“MOL’s fundamentals are improving

quickly, thanks to soaring refining and petrochemical margins, which are more than

counterbalancing the ailing upstream. The new downstream efficiency program targets a USD 500 million EBITDA boost by 2017…MOL’s upstream is suffering in this environment. However, due to the low cost and predominantly natural gas production, MOL still makes a relatively good return on upstream activity.”

“We still believe the group will be able to grow its production in 2015 as planned, we have significantly more doubts over

sustained growth from 2016…This, together with continued uncertainty over INA, is enough, in our view, to offset the positive momentum we expect downstream and as a result we rate the shares Equal Weight with…HUF 14,500 price target.”

PositiVE MarkEt rEaCtions to thE annoUnCEMEnt oF nxdsP tarGEts

In 2015 till mid-April, MOL’s share price increased by 21% (in USD terms), performing above its key benchmarks. Outstanding

performance was supported by the favourable downstream macro environment, announcement of NxDSP targets, increased analyst target prices and more favourable sentiment towards Hungarian

stocks after S&P’s rating upgrade on Hungary.

* MOL’s relative performance in comparison to the CETOP20 (Budapest Stock Exchange Central European Blue Chip Index) and DJEEO (Dow Jones Emerging markets Oil and Gas Titans 30 Index) in USD terms

** Relative performance to 50-50% weighted average of CETOP20 and DJEEO indices

2014 in nUMBErs

better Downstream and Hungarian macro sentiment

1/1/2015 1/2/2015 1/3/2015 1/4/2015

25%

20%

15%

10%

5%

0

-5%

-10

-15

MOL * CETOP* DJEEO*relative performance to benchmarks**

in review investor relations

treasury


The focus on opportunities in an ever-changing environment is key to decision making – interview with zsuzsanna Ortutay, – Group Treasurer.

ould you say that Group Treasury’s role in mOL group has changed in any way?yes, I would. Our key

task today is to ensure that adequate liquidi-ty is available to MOL Group - for each entity in the right currency at the right time. A need for this may arise for various reasons - acqui-sitions, operational reasons or unpredictable events in the external market environment. Treasury’s responsibility is to ensure secured funding even to overcome a financial mar-ket crisis. However, secured funding comes at a cost and it is our responsibility to find the right balance between the two.Although our traditional role still remains the central pillar of our activities, the “val-ue-adding” aspect has become more and more important. We’re essentially here to support the business, not only from the funding side, but to assist with credit risk management, provide insurance and pay-ment solutions, as well as support Business Development activities. As experts in our field, we can be drawn on to help. What I’d really like to see is that Treasury is not just brought in because internal regulations re-quire it, but that we are consulted because we provide really tangible solutions to complicated issues and valuable views on any possible risks.

it seems that centralisation is a key trend in the Group.I think that is certainly the case. We’re continuing to centralise certain activities so as to confront complex challenges pre-sented by the internal and external envi-ronment. In the areas of funding, dealing and liquidity management, concentration of knowledge and information at a central point enable timely and better supported decision-making. In payment operations, the enhanced roles of one or more service centres with higher levels of standardisa-tion and automation is the best way to in-crease efficiency.

your achievements have been recognised and awarded twice in the last few months. Can you share some details on these?A USD 1.55 billion loan deal signed by Group Funding at the end of October was awarded “Best CEE Deal of 2014” by Global Capital (ex EuroWeek) despite fierce competition involv-ing much larger transactions. We constantly look ahead and tap the market when it is advantageous to do so. Significant market interest made the refinancing of two facilities possible instead of just the one orig-inally planned. The significantly lower price level of this new deal decreased MOL Group’s funding cost while enhancing the Group’s ma-

turity profile. The deal also enhanced MOL’s excellent banking relationships since we man-aged to increase the number of financing banks whilst reinforcing existing commercial banking partnerships.The execution of the deal went very smooth-ly and quickly. The facility agreement was signed only one month after the commit-ted offers. We put the success of the deal down to careful preparation, audacity to ex-plore the limits based on a solid track record, and sticking to straightforward and trans-parent processes. MOL Group has also been awarded the “Corporate Recognition Award for Innovation & Excellence” in the field of

Corporate Finance and Funding by Trea-sury Management International (TMI) for the Group-level trade finance practice that we have been implementing over the past two years. Both awards celebrate market ex-cellence in these respective fields. Winning these reinforces our decisions and further boosts our will to try harder and aim higher.

What is the greatest strength of the Treasury team?A good treasury team has to have very deep technical knowledge and a high level of integ-rity. Our team has been strengthened both by new colleagues with extensive internation-

al experience in banking, insurance and cor-porate finance, and by young talented peo-ple from our flagship countries. We always try to find people with wide ranges of experience and background and it is my aspiration to in-crease international diversity even further.

What challenges do Treasury face nowadays?The financial crisis has changed the nature of Treasury’s roles. Managing risk and un-derstanding where exposure might be com-ing from have become increasingly impor-tant. Treasury also has to spend more time exploring new avenues of financing in order to diversify. Although very few of these new

opportunities might turn into actual transac-tions, to be able to select the right ones we need to know and be up-to-date about the whole menu of options. For headquarters cash management, the current low interest environment poses a challenge. Placing sur-plus liquidity into safe but liquid instruments is almost a mission impossible. The impor-tance of intra-group financing and the need for accuracy in short-term and mid-term cash flow projections have significantly increased so we work very closely with our Flagship and OpCo cash managers and our controlling de-partments to ensure the most efficient liquid-ity management scenario.

April 2015 27

We’re essentially here to support the business, not only from the funding side, but also to assist with credit risk management, provide insurance and payment solutions, as well as support Business Development activities.

andrEa záMBóné PEsEl THEMATIC LEADER – CREDIT MANAGEMENT

zoltán Balázs MANAGER –

GROUP SUBSIDIARy MANAGEMENT

Bálint Pintér THEMATIC LEADER –

OPERATIONAL RISK & INSURANCE

zsUzsanna ortUtay GROUP TREASURER

zoltán FülöP THEMATIC LEADER – TREASURy PROCESS & INFRASTRUCTURE

ZOLTÁN SZűcS MANAGER – GROUP CASH MANAGEMENT

VEra száz MANAGER – GROUP FUNDING

ExPandinG horizons in trEasUry oPErationstreasury


E&PE&P

EMPloyEE EVEnts With thE EVPIn line with MOL Group E&P’s initiative to encourage and invite feedback and idea-sharing at all levels of the organisation, in 2015 a series of employee meetings are taking place with Alex-ander Dodds, EVP – Group E&P across various locations in MOL Group E&P. The first in the series of these informal events took place in March in the Budapest Headquarters, while the second is organised by MOL Kalegran in Erbil for the end of April.The aim of these sessions is to collect feedback and ideas from local employees about how to further improve the E&P organisation, while they are also provided with an opportu-nity to ask Alex their questions, whether these are business or operations-related, professional or private. All employees are invited to participate and free to submit their questions in ad-vance as well. These feedback lunches also serve as a means to measure how much the E&P Values and Behaviours have been adopted and embedded into different levels of the busi-ness. Key messages and lessons from each session are collected and incorporated into the planning of further anchor programs, leadership development and mentoring initiatives.

ChallEnGEs and oPPortUnitiEs

ow did the low oil price envi-ronment change mOL group E&P’S strategic directions for the coming years?

The low oil price environment did not change our directions – in fact our strategic targets have remained the same as defined last year. We need to close the capability gap in the field of Health, Safety and Environment and strive to achieve our zero incident target; we have to deliver the 200 kbdoe production target in the shortest possible timeframe (aiming for 10-15% annual production growth), in the most efficient way and delivering the best eco-nomic returns. It can only be achieved via 100% effective and efficient annual CAPEx delivery. The sustainability of our produc-tion requires 100% reserve replacement. Finally, we retain the flat to declining unit OPEx target for our producing assets. These goals do not change with the oil price, but our path to success and how we accomplish these targets are certainly influenced by the macroeconomic environment. MOL Group E&P is in a good place com-pared to many of its industry peers thanks

tives has laid the groundwork for us to pursue further inorganic opportunities. However, let me clarify that we are in no rush to acquire new assets. This just reflects that we are prepared if the oil price falls further and al-lows for certain flexibility for MOL Group E&P that not all industry players are fortunate to have. For example, we have good prospects for acquisitions in Pakistan and the North Sea that are also accelerated by the low price, but all potential assets are measured against the ability to pass the potential threat of a further plummeting oil price. Simultaneously, we are aware that this difficult environment poses a challenge for some of our partners to meet expectations from their investors and shareholders. So once again, this is a time for close col-laborations and careful decisions – with a purpose to maintain our cash flow for now and for the future as well.

How is this approach reflected in the reviewed E&P strategic imperatives and actions?We have discussed what we have achieved and where the weaknesses are in our organisation, along with the biggest oppor-tunities – and we revised our imperatives

accordingly. Our decision to delete impera-tives like ‘Rationalize Upstream planning and decision-making processes‘ and ‘Improve E&P business processes, build an organisa-tion that is understood by all’, was driven by the fact that these have been addressed as part of the E&P 200KBDOE Program’s Operating Model workstream, as well as by the recent organisational changes. We also defined new imperatives to place more focus on the Portfolio part of our strategy: ‘Optimise development and producing assets’ and ‘Establish a winning portfolio and rebalance the risk profile’. Improving delivery in our organic portfolio requires us to ‘Bridge the capability gap’. Finally, we de-veloped an action plan for each of the new strategic imperatives, which is indeed a list of exact deliverables with an assigned owner from the Group E&P leadership team. The areas E&P needs to further work and improve on are people development, teamwork, communication and growth, project management, business development, and balancing our portfolio. Leadership account-ability is key, hence each imperative and the related actions were assigned to a Group E&P leader. This approach ensures that progress – or the lack of it – is measurable and tracked,

in February, mOL Group Exploration and Production set out to redefine its strategic directions and decide how to best equip E&P to deliver on its strategic goals in the changing economic environment. ádám Homonnay, Vice President – Group E&P Business Support talks about the upstream opportunities for 2015 and beyond.

Mol GroUP E&P’s stratEGiC dirECtionsand the organisation has clear accountabili-ties in place for delivering on its strategy.

What is needed internally for mOL Group E&P to successfully take on the action plan? Teamwork and collaboration remain first priorities for successfully delivering on the E&P strategy, the prerequisites of which are to develop open communication, trust and understanding across MOL Group E&P. These remain key for addressing the weaknesses of the organisation. MOL Group E&P still has to work on improv-ing its professional efficiency and to bring out the best in the organisation, we need to rely on the feedback and ideas of our people. Our colleagues have a responsibility to contribute their ideas to the fine-tuning of Upstream processes – and our managers need to lead this discussion and operate a framework of the feedback-cycle efficiently. So here is the task for our leaders: provide feedback constructively and invite the same from your teams. This empowerment initiative is mainly driven by the new E&P values and behaviours and implementation is ensured by manage-ment’s commitment to various anchor programs, including mentoring, employee events, and team-building initiatives.

MOL Group E&P is in a good place compared to many of its industry peers thanks to the company’s financial stability and strong balance sheet, but we must bear in mind that the development of the oil price is unpredictable for all.

to the company’s financial stability and strong balance sheet, but we must bear in mind that the development of the oil price is unpredictable for everyone. So, while we are pursuing both organic and inorganic growth, our focus is now on making careful and correct decisions.

What are mOL Group E&P’s perspectives for growth?MOL Group E&P has taken a step forward with respect to developing its organic pro-duction in 2014. Production stability in the Central-Eastern European region paired with overall OPEx reduction and efficiency initia-

WtCC 2015 With no rBErt MiChElisz

mOL Group continues as Norbert michelisz’s main sponsor for WtCC 2015.

OL Group is set to continue its successful partnership with Zengő Motorsport and the Hungarian racing driver

Norbert Michelisz. “We are delighted to support Norbert as he is one of the best racing drivers in the WTCC and we fuel his ambition to become world champion. This is a truly ideal partnership since – just like us – Norbert Michelisz is challenging his competitors through his courage, discipline and ambition” – explains Dominic Köfner, Vice President of Group Corporate Communications.

the ambItIOn tO grOW DrIves bOth mICheLIsz anD mOL grOupNorbert Michelisz and MOL Group share the ambition to compete on an international field. Michelisz followed an unusual track to enter motorsports by training himself through simulation games. “I have constantly been challenging myself in order to achieve my lifelong ambition: to be the best. MOL Group provides me with maximum support because ambition and a challenging attitude are key values to the company” – said Norbert Michelisz, WTCC driver. He finished fourth in the 2014 WTCC season after achieving seven podium results in 2013. In 2015 he began his fourth season of the WTCC supported by MOL Group with a very good start: in WTC race one in Argentina, Norbi was the best non-constructor driver.

I have constantly been challenging myself in order to achieve my lifelong ambition: to be the best.

FUElinG aMBition With thE EnErGy oF PositiVE ChanGE

8 marCh Termas de Río Hondo, Argentina19 aprIL Circuit Moulay El Hassan, Morocco3 may WtCC mOL group race of Hungary 2015 16 may Nordschleife, Germany7 June Moscow Raceway, Russia21 June Slovakiaring, Slovakia28 June Paul Ricard, France12 JuLy Vila Real, Portugal13 september Motegi, Japan27 september Shanghai, China1 nOvember Buriram, Thailand22 nOvember Losail, Qatar

WtCC CalEndar 2015As the primary sponsor, mOL Group holds naming rights to the WTCC race of hungary 2015

did yoU knoW?MOL Group member company Panta Distribuzione S.p.A. is the official fuel supplier for WTCC.

Štefan Svitko has been the most successful Slovakian motorcycle rider in the Dakar Rally for quite some time and he delivered clear proof of this when he achieved the fifth position overall in 2015 with an outstanding performance. Slovnaft has supported him since 2007, with Štefan winning the Slovakian

Championship several times and being three-time European Champion. Štefan first participated in the Dakar Rally in the Enduro Category in 2010, receiving the title “Best Dakar Rally Newcomer”. Since Štefan has already proven his talent and skills this year, we will continue to support him in 2016 as well.

MOL Romania has supported the Károly Borbély/Gergő Szabó Rally Team since 2012. The team has already captured second place in the Romanian National Championship, the most prestigious competition of the motor sports family in Romania. This year on 12-15

February, they also achieved an outstanding result in the Swedish Rally, which is famous event in this sport. The pair previously delivered a fantastic performance in the European Championship race in San Marino, where they finished in 6th position.

2015 – 5th POSiTiON , 2014 – 9th pOsItIOn He uses the following Dynamic lubricants: MOTO 4T GP, MOTO GT Racing and Moto Chain O-x.

ŠtEFan sVitko’s latEst rEsUlts in thE dakar rally:

2015: ŠTEFAN SViTKO’S BEST DAKAr

THE KárOLy BOrBéLy/GErGő szabó raLLy team In rOmanIa

MorE MotorsPort

CrOatIan mOtOrspOrt INA is a strong supporter of Croatian motor sport. Last year, the INA Ultra Racing Team won the team title in its very first season in the Croatian hill climb challenge. Moreover, the 41st INA Delta Rally will be held in September 2015, the biggest Croatian rally of all and one of the major sport events in Zagreb this year. It actually starts from INA’s HQ building! INA is the golden sponsor of the European Championship Hill Climb Race in Buzet.In addition, INA also sponsors races in the only Croatian circuit race track, Grobnik.


corporate responsibility & sponsorship corporate responsibility & sponsorship

April 2015 33 32 Mol GroUP Panorama

GEothErMal ExPloration Pilot ProGraMin February 2015, CEGE Ltd. – 71% owned by mOL, 29% by Australian Green rock Energy Ltd. – received mining Authority approval for its Jászberény Geothermal Exploration Technical & Operational Plan.

ith this official permit in hand, the company can now begin executing a two-year geothermal

exploration work program in the 390 km2 concession area at Jászberény, Hungary. Field work commenced in March 2015, with the shooting of 118 new magnetotelluric points covering the whole concession area. Drilling of the approximately 3,000 metre deep geothermal production well is scheduled for Q3-Q4, 2015. The following year’s work program will include short-term capacity and interference tests of the new production well and, later, between the two wells. A long-term circulation test of the connected production and reinjection wells will be conducted afterward. Currently, completing of well design and obtaining permits are the most important tasks.Beyond its straightforward contribution to Sustainability Development efforts, this renewable project offers clear synergies within MOL’s capabilities. MOL has unique knowledge of CEE geology and also has

outstanding experience in executing subsurface projects. In specific geothermal questions, MOL experts are supported by German geothermal professionals. The two-year exploration period can be extended by one year if there are further opportunities in the concession area. The total approved CAPEx of this exploration project exceeds HUF 3.1 billion. If it is a technical and financial success, this pilot project can give rise to further, even larger scale geothermal projects.

What is MaGnEtotEllUriCs (Mt)?it is a geophysical method of analysing the quality of geological structures up to a depth of eight kilometres, from the surface. The concept is based on measuring the electric and magnetic components of the Earth’s natural electromagnetic field which chiefly depends on seven-year long solar activity periods. The result of an mT survey is identification of the specific resistivity distribution of underground media, which can be represented in vertical cross sections along lines measured, and in mapped views showing specified horizons in depth.

thE Goals oF thE Pilot ProJECt arE to: explore the geothermal potential of the entire concession area identify potential geothermal project opportunities select one suspended HC well for thermal fluid reinjection purposes drill one production well execute the necessary well tests

kEy statistiCs:

Expected temperature at wellhead:

150°C Expected flow rate:

7,000 m3/dayexpected salt content:

35�

MaGnEtotEllUriC sUrVEy – 2d rEsistiVity sECtionThe result of an MT survey along a cross section where the deep blue and purple colours indicate a geothermal reservoir in the basement rocks.

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sciencecorporate responsibility & sponsorship

think loCal, aCt PErsonalMol GroUP VolUntEErinG ProGraMs

mOL sLOvenIJa EmPLOyEES’ CHAriTy prOJeCtLast year, MOL Slovenija em-ployees held a voluntary col-lection of materials for the benefit of three organisa-tions active in the local com-munity. Employees delivered food, toys, school supplies and other gifts to organisa-tions that chiefly aim to help families and kids in need:Varna hiša Pomurja, Dnevni center za otroke in mladost-nike and Anina zvezdica.

maKIng It easIer tO get tO sChOOL MOL Kalegran, the opera-tor of Akri-Bijeel block in the Kurdistan Region, intends to improve educational con-ditions in the area and has started renovating roads and bridges connecting students with their schools. Ahmed, an 11 year-old student, said “Before, we had to trudge through several kilometres of mud to reach class, but now we jog to school along a proper road.”

iNA – GiVE A CHANCE Of a neW LIfeAt a blood-drive event or-ganised in cooperation with the Ana Rukavina Founda-tion, INA and the INA Volunteers Club, 59 col-leagues joined the regis-try of voluntary haemato-poietic stem cell donors and became part of a family of over 47,000 Croatian citizens who have joined the regis-try since 2006. Since then, thanks to the Croatian regis-try, 44 people have been giv-en the chance of a new life.

iN-HOuSE vOLunteerIngIES has fully implemented the Group’s motto to “drive change” by inviting employ-ees to take part in a team-building exercise dedicat-ed to directional structure renewal. Employees re-ceived DPI and instructions for their activities and then removed all posters, pic-tures and furniture featuring the old IES logo in the build-ing, prepared walls and then painted them white. This symbolic activity aimed at making everyone part of the new IES.

nEWs in BriEF

hungaryMOL Group established the

Volunteer’s Club in 2014. A beautiful green park and cycle path have been

recreated and 100 children’s living and learning conditions were improved.

CrOATiA, iNA – rECOGNiSED THrEE TimES By THE VOLUNTEER CENTRE OSIJEK AWARD

Activities by INA Volunteering Club:• reforesting devastated areas

• providing shelters for abandoned animals• helping homeless people

• providing assistance to the elderly and disabled people

sLOvaKIa – “Our CiTy“ PrOJECT30 Slovnaft employees were involved in several activities, including amongst others:• cleaning the Little Danube • helping schoolchildren build a mud house

rOmanIa– 2ND PrizE iN THE “BEST iNTErNAL CSr CAmPAiGNS” CategOry at the 2014 rOmanIan Csr aWarDs gaLa In the same year, as part of the MOLunteers Program, colleagues at MOL Romania built a playground in Șumuleu Ciuc, while in Sânsimion 550 trees and flowers have been planted.

iTALy – “LET’S CLEAN uP THE WOrLD”

80 IES colleagues joined the local initiative to clean up the shores of Lake Mantua as

the very first opening action of the Green Belt program in Italy.

“KöSz!” (THANKS!) prOgram In buDapest

The New Europe Foundation has initiated a new grants program called “KÖSZ!”

(THANKS!) to encourage collaboration between NGOs and educational

institutions.

next issue: MOL Flagship

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he excitement is understand-able. The sectors Apple have entered so far have seen pretty big changes as a result. If they could replicate this

with cars, then that would be a major hit!

That is, IF they can do it. First off, they will need better batteries.

A breakthrough in electric cars depends first and foremost on when and who will come up with an AFFORDABLE car battery with a range of 4-500 kilometres. Batteries are now hugely expensive, so electric cars either cost an awful lot or have limited range. At recent average market prices, a 500 kilometre range car would need a bat-tery costing about USD 26,000 - more than the full cost of most cars. Ideally, a battery would have to cost around USD 7-8,000 to become a real ‘killer app’.

STEP-By-STEP CHANGE Or rEVOLuTiON?Tesla’s battery cost is already well below the industry average. Tesla accomplished

this by not building its own specialised bat-tery, but by stringing together widely avail-able cheap cells, similar to those in laptops.Moreover, Elon Musk, Tesla’s founder, has ambitious plans to build a battery giga-factory in the next few years, where costs could be brought down even fur-ther. This would make Tesla available to a much wider market.

This is also the level that Apple may aim for if they want to make electric cars. At these levels, they could already pro-vide meaningful competition to gasoline and diesel fuelled cars.

The big question is whether this cost level is attainable without a technological breakthrough. Elon Musk’s giga-factory is a bet that there will not be a break-through, just current batteries getting cheaper. Apple did not start any of their prior revolutions by creating new hard-ware from scratch, but rather by being masters of timing.

WHO WiNS THE ELECTriC rACE?Many argue that large car manufactur-ers will win the electric car race. We wouldn’t be so sure. Tesla seems terribly sexy and if they manage to reduce their costs, they may achieve a breakthrough. On the other hand, Apple’s financial strength, brand value and system inte-grator capabilities can bypass much of their initial shortcomings.Manufacturing electric engines is, after all, a simple and mature technology. Control of the battery and engine (and self-driving?) are software issues, fields in which the traditional car manufacturers have no advantage at all.

One thing seems certain: the electric car race will leave consumers better off.

barrel per day

aPPlE Car!?

The Expert’s Column. The Chief Economist Team’s insight and guide to today’s trends and tomorrow’s developments. Read more at barrelperday.com

barreL per Day

Apple’s plans to have their own brand of car have been making the rounds in the media recently. Apple have been hiring engineers from car manufacturers; some say they could start producing cars by 2020.

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How about first making a phone battery that lasts more than half a day?

PétEr siMon VarGhaChiEF EConoMist, Mol hUnGary

in order to show how much the electric car business depends

on battery costs (and how much it differs from phones),

take a look at the chart below! This compares the shares of

battery costs for a Tesla S car and an iphone.

upper estimateLower estimate tEsla s iPhonE 6

BattEry Cost as a PErCEntaGE oF rEtail PriCE

The Tesla battery cost (kept secret) could be between $14-22,000 with the car costing around $95-100,000. In comparison, iPhone batteries cost a mere $3-5, a tiny fraction of the phone’s cost.

BattEry Costs oF a tEsla Car and an iPhonE CoMParEd


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