Annual Report 2016

Group Business Activities

Financial Review 2016

HELLENIC PETROLEUM Group’s Adjusted EBITDA amounted to €731 million while Adjusted Net Income reached €265 million. The strong operating performance at the Group’s refineries, which benefited from the refineries’ increased availability resulted in a 16% increase in production, leading exports to 8.6 million tones. Increased production and sales offset the negative impact on profitability, compared to the previous year, from the decline in benchmark refining margins, which stood at levels above the last five years’ average. As a result, the Group maintained its operating profitability close to the historical highs of 2015. All Group activities recorded satisfactory performance, with Petrochemicals increasing their contribution to €100 million, as the significant increase in polypropylene production and sales offset the impact from the decline in international margins. The Group’s Greek marketing companies continued to increase their sales and market share, maintaining profitability at the same level as in 2015.

The results of the international marketing subsidiaries were affected by low margins in the Serbian and Bulgarian markets and resulted in a small decline in profitability.

Reported results benefited from the international crude oil prices recovery, which led to inventory valuation gains of €102 million, with EBITDA at €836 million and Net Income at €329 million, the highest performance in the Group’s history. It is worth noting that the decline in international crude prices led to inventory valuation losses of €301 million in 2015.

Fundamental figures for 2016:

€ m. 2016 2015
Turnover 6,680 7,303
Adjusted EBITDA 731 758
Inventory effect 102 (301)
EBITDA 836 444
Adjusted Net Income 265 268
Net Income 329 45
Capital Employed 3,903 2,913
Net Debt 1,759 1,122
Gearing Ratio 45% 39%

Liquidity & cash flows

During 2016, the Group successfully implemented its financial strategy, aiming at improving the balance sheet as well as reducing the financial cost.

In June 2016, the Group harmonized the debt covenants between the two Eurobonds (maturing in 2017 and 2019), as well as other facilities with commercial banks with similar terms. In addition, in October 2016, the Group continued to implement its financial strategy with the issuance of a new five-year bond amounting to €375 million, maturing in October 2021, with a 4.875% coupon. The issue ran in parallel with the tender offer for the purchase of May 2017 notes with a coupon of 8%, with offers of €225 million accepted by the Group.

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The new bond issue and the completion of the tender offer of the 2017 notes, coupled with a significant improvement in the debt covenants helped to improve the Group’s funding structure, extend the maturity profile of debt obligations and is expected to reduce the financing cost by more than €15 million annually due to the reduction in bond coupons (4.875% versus 8%).

Net Debt amounted to €1.8 billion, with a gearing ratio of 45%.

Petroleum products

Refining, Supply & Trade

Activity in Greece

In Greece, the Group owns and operates three refineries in Aspropyrgos, Elefsina and Thessaloniki which account for approximately 65% of the country’s total refining capacity and combine a storage capacity for crude oil and petroleum products of 6.65 million m3.

Τhe three refineries and their individual technical characteristics are described below:

Τhe domestic refineries are treated as a single, unified system. Crude oil purchases, production scheduling and sales forecasting are centrally prepared for the Group’s Refining System, with the objective of optimising profitability, while taking into account prevailing (Eastern Mediterranean/South-Eastern European) crude oil and product prices as well as domestic demand.

The Group’s ability, due to its refineries’ increased complexity, to process intermediate products (SRAR, VGO) and adjust its crude slate and oil processing levels, represents a key competitive advantage.

Products’ oversupply resulted in a decline of refining margins vs. 2015. Benchmark Med FCC margins reached $5.0/bbl (2015: $6.5/bbl) while Ηydrocracking margins averaged $5.0/bbl (2015: $6.5/bbl).

Daily Refining Capacity in
Thousands of Barrels (Kbpd)
Annual Refining Capacity
(M/T m.)
Nelson Complexity
Aspropyrgos 148 7.5 Cracking (FCC) 9.7
Εlefsina 100 5.0 Hydrocracking 11.3
Thessaloniki 93 4.5 Hydroskimming 6.9
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In 2016, the refining industry recorded the highest output due to the high availability of all units and the macroeconomic environment. Increased production led to record product sales due to higher exports. This performance was mainly attributed to the improved operation of both Aspropyrgos and Elefsina refineries. The Thessaloniki refinery also performed well despite the planned turnaround in November, marking high levels of availability, while the synergies between the three refineries were significant, with substantial positive effects on profitability. The positive economic environment for European refineries in 2016 (strong international margins, strong dollar) as well as the continuous improvement in operational performance were the key drivers of Refining, Supply and Trading results.

HELLENIC PETROLEUM’s exports grew for the 7th consecutive year and amounted to 8,666 thousand tons, accounting for 56% of total sales, enabling the Group to maintain its position as one of the most export oriented in the Eastern Mediterranean region.

The Aspropyrgos and Elefsina refineries’ yield in terms of high value products (gasoline, jet fuel and diesel) remained at high levels.

As a result of the upgrades at the Elefsina and Thessaloniki refineries, the synergy capabilities between the Group’s refineries has increased considerably. The percentage of intermediate products and raw materials moving between the three plants exceeds 10%, with significant advantages and potential for optimization in production and marketing.

At the same time, planned investments were completed aiming at improving the energy efficiency indices, resulting in a significant reduction in energy consumption, which combined with the lower price of own fuel consumption, led to a material decline in energy costs. Additionally, the propylene production growth investment at the Aspropyrgos refinery also started contributing (propylene is the raw material used in the Thessaloniki polypropylene plant), thereby reducing propylene import needs. All the above contributed materially to the performance of the Group’s refineries, with the high added value yield being among the highest in the European refining sector, highlighting the competitiveness of our production base after the significant investments implemented in 2007-2012.

Financial Results and Key Operational Indicators:

2016 2015
Financial Results (€ m.)
Sales 5,992 6,644
Adjusted EBITDA 531 561
Performance Indicators
Complex refinery margin (FCC) $5.0 bbl. $6.5 bbl.
Sales Volumes (ΜΤ’000) 15,618 14,104

Crude Oil Supply

Crude oil supplies are centrally coordinated and are covered through term contracts and spot transactions. The oversupply of all types of crude oil continued in 2016, with a positive impact on pricing, especially for the heavier crude types in our region, mainly due to Iran’s return to the international market after the lifting of sanctions and high levels of crude exports from Iraq. HELLENIC PETROLEUM has taken advantage of international market opportunities as well as improved financial liquidity and has entered into direct agreements with suppliers (Iran, Iraq, Saudi Arabia, Egypt). In addition, the Group adjusted its supply mix, further reducing the market share from Russia from 34% to 17%, and Iraq from 28% to 24%, while boosting supplies from Kazakhstan (25%) and restoring the trade relationship with Iran (16%), after the lifting of the sanctions. Finally, supply from other sources such as Saudi Arabia (5%), Egypt (10%) and Libya (2%) remained stable. Both the Group’s ability to access and its refineries’ flexibility to process a wide range of crude oil types, proved to be particularly important in terms of driving profitability. The Group’s ability to respond to sharp supply shortages of specific types of crude oil also ensured for uninterrupted supply into the markets where the Group operates.

Refinery Sales (Wholesale Trading)

Oil products sales are carried by the parent company HELLENIC PETROLEUM S.A. to the fuels marketing companies in Greece, including subsidiary EKO, as well as to certain special customers, such as the country’s armed forces, whilst approximately 50% of production is exported. All of the Group’s refined products comply with the prevailing European standards.

In 2016, total sales from domestic refineries for products increased by 10% to 15.6 million tons, mainly due to a significant increase in exports.

Domestic sales fell by 7% to 4.4 million tons, mainly due to the weak demand for heating oil, affected by the mild weather in the first quarter of 2016. Aviation sales continued to rise and amounted to 700 thousand tons (+ 8%). A slight decrease of 5% was recorded in marine fuels sales, which reached 1.7 million tons, with total non-excise duty fuel sales at 2.4 million tons (+1%). The refineries’ increased production led to exports reaching 8.6 million tons, recording an increase of 25%.

Crude oil supply sourcing

International Activities

The Group’s international activities refer to the OKTA facilities in Skopje, FYROM, connected to the Thessaloniki refinery through a pipeline transporting high valueadded products (e.g. diesel). The refinery’s location is one of its significant competitive advantages for the domestic distribution of products through marketing companies, as well as exports to neighbouring Balkan markets.

In 2016, OKTA focused on the trading and marketing of petroleum products with sales of 753 thousand tons.

Fuels Marketing

HELLENIC PETROLEUM Group is active in the marketing and distribution of petroleum products, both in Greece through its subsidiary ΕΚΟ ABEE as well as internationally through its subsidiaries in Cyprus, Bulgaria, Serbia, Montenegro and FYROM.

The Group takes advantage of the significant synergies among its networks in Greece and SE Europe in the areas of marketing and commercial policy, through sharing best practices and successful products.

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Financial Results and key performance indicators:

2016 2015
Financial Results (€ m.)
Sales 2,336 2,712
Reported EBITDA 93 105
Adjusted EBITDA 101 107
Performance Indicators
Sales Volumes (ΜΤ΄000) – Total 4,668 4,672
Sales Volumes (ΜΤ΄000) – Greek network 3,538 3,494
No. of petrol stations - Greece 1,739 1,709
No. of petrol stations – International 300 295

Domestic Marketing

In Greece, the Group’s network of petrol stations amounts to over 1,700 under the EKO and BP brand brands,15 bulk storage and supply terminals, 23 aircraft refuelling stations in the country’s main airports, 2 LPG bottling plants and 1 one lubricant production and packaging unit.

In 2016, the merger, by absorption, of “EKO S.A.” by “HELLENIC FUELS S.A.” was completed. This move has been considered fit for purpose, as it is expected to optimize the corporate structure, reduce operating costs and further strengthen the Group’s position in the Greek market. The market share of the EKO and BP brands improved significantly in 2016 in most products. In transport fuels, the overall market share, taking into account industrial customers, exceeded 30% while EKO maintained its leading position in Aviation and Marine fuels. In retail, transport fuel sales increased significantly, while differentiated fuels also grew, resulting in increased profitability for the sector.

The emphasis on the development of company controlled network and the improvement of services provided through sites continued, with the number of company operated stations exceeding 180, with significant strategic benefits for the Group. A significant increase in sales and market shares was recorded in the aviation and bunkering sectors, mainly due to increased tourist traffic, while sales of lubricants and LPG also increased. In early 2016, the Group agreed with BP plc. to extend the exclusive use of the BP trademarks for ground fuels in Greece until the end of 2020, with the possibility of a further renewal until the end of 2025. In the context of the extension of the cooperation, the strengthening of the image of the BP network, as well as the provision of know-how for the import of high-tech differentiated fuels into the Greek market, were also agreed.

International Marketing

The Group operates overseas through its subsidiaries in Cyprus, Bulgaria, Serbia, Montenegro and FYROM, with a total network of c.300 petrol stations. In Cyprus and Montenegro, the local subsidiaries (from the acquisition of preexisting companies) hold leading positions in their markets. In Bulgaria and Serbia, where activities began greenfield, the Group’s subsidiaries recorded rapid growth after 2005 and are currently among the top five companies in their sector. In FYROM, the network of 25 petrol stations bears the brand name of the OKTA Group subsidiary. In 2016, increased demand, a higher number of retail stations, increased marketing operations and the introduction of new differentiated products led to an increase in retail sales in most of the international companies where the Group operates. Margins in Bulgaria and Serbia were lower due to intense competition from local refineries. The Group seeks to continuously improve the integration of its marketing subsidiaries with the Group’s refineries, in order to maximize economic benefits, through the continuous optimization of the supply chain. Increased sales volumes were recorded in Bulgaria due to the network expansion, successful marketing and differentiated products launches. Weak margins had a negative impact on profitability. Weaker retail margins, as well as decreased sales volumes due to higher competition, led to a decline in EKO Serbia’s profitability.

Map and graphic

The Group’s companies Hellenic Petroleum Cyprus and Ramoil in Cyprus recorded growth in both volumes and profitability due to increased demand, network expansion and the launch of differentiated products. Increased demand and favorable weather conditions during the tourist season, coupled with the company’s retail network growth, led to increased sales volumes and profitability in Montenegro (JUGOPETROL).

Production and Trading of Petrochemicals/Chemicals

Petrochemical/chemical activities mainly focus on further processing of refinery products such as propylene, polypropylene, solvents and inorganics and marketing them in the domestic and international markets. Part of the production takes place in Aspropyrgos where propylene is produced, while most of the chemical units are located at the Thessaloniki refinery.

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The production of polypropylene is based on the Basel technology, which is considered as one of the best of its kind internationally. The propylene and polypropylene value chain represents the main activity for petrochemicals. Export activity is deemed as particularly important as 60-65% of sales volumes are directed to Turkey, Italy, the Balkans and the Iberian where they are used as a raw material in local manufacturing. Despite the unfavorable conditions in both the international and domestic markets, the 16% increase in sales volumes (from 221 thousand tons in 2015 to 256 thousand tons in 2016) fully offset the lower international PP margins (-18% compared to 2015) and led to an EBITDA of €100 million.

In this environment, HELLENIC PETROLEUM managed to fully utilize its production units, achieving record production levels in both Polypropylene and BOPP films.

Financial Results and Key Performance Indicators:

2016 2015
Financial Results (€ m.)
Sales 252 263
Adjusted EBITDA 100 93
Performance Indicators
Sales Volumes (ΜΤ ΄000) – Total 256 221
International Polypropylene Margin ($/ΜΤ) 592 743

Exploration and Production

In 2016, the Group’s main activities focused on Greece, as presented below:

The Group participates, with a 25% participation, in a consortium with Calfrac Well Services Ltd (75%) in the Thracian Sea Concession area, in the North Aegean (1,600 sq km).

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In addition, HELLENIC PETROLEUM participates as an operator through its 100% owned subsidiary HELPE PATRAIKOS (50%) in an international consortium with EDISON International SpA (50%) in the Lease Agreement with the Greek State in an offshore area in the West Patraikos Gulf, with a total area of 1,892 sq. Km: The Lease Contract was ratified by the Greek Parliament, Government Gazette Issue A, 221/03-10-14. The minimum committed work program for the first three-year research phase includes, among other things, the recording of 3D seismic studies of a total area of 800 sq.kms and 2D regional lines of 300 km.

The processing and interpretation of seismic records is expected to be completed in the first half of 2017. Geological and other studies are also expected to be completed by the end of the first exploration period in order to identify potential targets. All work has been carried out with absolute safety and respect for the environment and the local community, in cooperation with all stakeholders. The process of interpreting and processing the results is ongoing.

In the second exploration period commencing on October 3, 2017, the Contractor is required to carry out an exploration drilling.

Following the international tender, in February 2016, the Ministry of Production Restructuring, Environment and Energy declared HELLENIC PETROLEUM as the Preferred Bidder with a 100% stake in the exploration and exploitation rights for hydrocarbons in Arta - Preveza and the NW Peloponnese. The Lease Agreement is in final form and is expected to be signed and ratified by the Greek parliament.

At the same time, the evaluation procedure of the bids submitted by HELLENIC PETROLEUM for 3 offshore areas in Western Greece was completed in the context of the international tender for 20 offshore blocks in Western Greece and Southern Crete. In particular, HELPE submitted bids for Block 2 together with the French company Total (Operator) and the Italian company Edison International, as well as for Blocks 1 and 10 with 100% participation. In the last quarter of 2016, the consortium comprised of Total 50% (Operator), Edison (25%) and HELPE (25%) was declared as Preferred Bidder for Block 2 and the Lease Agreement was agreed on March 17, 2017. At the same time, the Ministry of Production Restructuring, Environment and Energy declared HELPE as Preferred Bidder for the exploration and exploitation rights for hydrocarbons in Block 10, in Kyparissiakos Gulf area. The negotiation of the relevant Lease Agreement is in progress.

HELLENIC PETROLEUM is following developments in the field of Hydrocarbon Exploration and Production in Greece, through continuing the study of exploration data in offshore areas in Western Greece and the North Aegean.

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Power Generation & Natural Gas

Renewable Energy Sources (R.E.S.)

HELLENIC PETROLEUM RENEWABLE ENERGY SOURCES S.A. (HELPE Renewables) was founded in 2006 and is a 100% Group-owned subsidiary. The Company’s objective is the production, distribution and trade of energy products from the exploitation of renewable energy sources as well as the study, trading, construction and installation of renewable energy systems (wind, solar, biomass etc.)

Hellenic Renewables has set the goal of developing significant installed wind, photovoltaic and biomass power in the coming years, diversifying the energy portfolio and contributing to balancing the Group’s greenhouse gas emissions balance. The reduction in its carbon footprint will be at least 250,000 tons per year, offsetting a significant proportion of CO2 emissions corresponding to the refinery and gas-fired electricity generation activities.

HELPE Renewables already operates PV parks located on owned land with installed capacity of 1.4 MW as well as a 7 MW wind park in Pylos, Messinia.

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5 power and heat generation units via biomass combustion (from agricultural residue) with a total capacity of 25 MW and 4 other PV projects with a total capacity of 11.6 MW are in various stages of development. With regards to the 3 out of the 4 PV (total capacity of 8.6 MW), HELPE Renewables participated in the first PV competitive tender process, pursuant to the provisions of Article 7 par. 8 of Law No. 4414/2016, organized by RAE in December 2016, which resulted in the company being awarded all of the projects for which it submitted an offer, as presented below:

  • PV project with a total capacity of 3.6 MW at HELPE’s Aspropyrgos refinery.
  • PV project with a total capacity of 4.0 MW at HELPE’s Thessaloniki refinery.
  • PV project with a total capacity of 1.0 MW at the Industrial Park of Kavala.

HELPE Renewables intends to complete those projects during 2017.

During 2016, the company activated 7 PV net-metering systems with a total capacity of 70 kW at 7 EKO and BP fuel stations. The company continuously assesses investments in own production for own consumption at the Group facilities, which are connected to the LV and MV networks.

Moreover, HELPE Renewables, in partnership with LARCO, is developing a portfolio of 143 MW photovoltaic, as well as wind and hybrid projects.

Power Generation and Trading

The Group is active in the production, trading and supply of electricity in Greece through its participation (50%) in the Elpedison B.V. joint venture (the remaining 50% is held by EDISON International). Elpedison B.V. Group includes the 75.78% participation in the share capital of Elpedison S.A. (Elpedison S.A. resulted from the absorption of Elpedison Energy S.A. by Elpedison Power S.A.). ELLAKTOR (22.74%) and HALCOR (1.48%) are also shareholders.

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ELPEDISON S.A. is currently the second largest independent power producer in Greece with a total installed capacity of 810 MW, comprising a 390 MW gas-fired plant in Thessaloniki, since 2005, and a 420 MW gas fired plant in Thisvi, since 2010.

On the supply side, in 2016, ELPEDISON was one of the largest alternative independent electricity suppliers with sales of 1,000 GWh and a 2.4% retail share in the LV and MV customer segments, with particularly rapid growth over the course of the year.

ELPEDISON B.V.’s results improved with EBITDA profits more than doubling to €40 million, as the company’s two units significantly increased production due to the improvement in the competitiveness of Natural Gas as a fuel for electricity generation and the establishment of flexibility remuneration scheme for producers using Natural Gas.


Hellenic Petroleum S.A.

Natural Gas

The Group is active in the natural gas sector through its 35% participation in DEPA S.A., with the remaining 65% owned by the HRDAF. DEPA Group is active in supplying natural gas in Greece through import pipelines and the Revithoussa LNG terminal, as well as in the trading of natural gas to selected end-users (annual consumption> 100 GWh). DESFA, a 100% subsidiary of DEPA, manages and develops the National System of Natural Gas Transmission. Following the unbundling of distribution and supply activities, DEPA holds a 51% share in local supply companies (EPAs), who supply Natural Gas to customers with an average annual consumption <100 GWh through the low pressure gas network and distribution companies (EDAs) who manage the low pressure distribution network.

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Finally, DEPA also participates in international gas transportation projects.

On 16 February 2012, HELLENIC PETROLEUM S.A. and the Hellenic Republic Asset Development Fund (“HRADF”) agreed to launch a joint process for the sale of their share in DEPA Group, with a view to sell 100% of its supply, marketing and distribution activities, as well as the 66% participation share in the high pressure gas transportation network (DESFA S.A. - 100% subsidiary of DEPA S.A.).

The sale process resulted in a binding offer from SOCAR (National oil and gas company of Azerbaijan) for the purchase of the 66% participation in DESFA, on 21 December 2013 for which a Share Purchase Agreement was signed; the closing of the transaction was subject to the approval of the European Commission competition authorities.

With the passing of November 30, 2016, i.e. the deadline for the fulfillment of the condition precedents, the sellers (HELLENIC PETROLEUM and HRDAF) are now reviewing their options in order to get the best value out of their participation in DESFA.

DEPA S.A.’s results improved - sales increased by 31% compared to 2015, reaching 4 bcm. - and contributed €36 million to the Group’s results despite the negative impact of provisions for the BOTAS dispute and bad debts in the last quarter of 2015.

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ASPROFOS, a Group subsidiary, is the largest Greek engineering and consulting services provider in South-Eastern Europe. It operates in accordance with internationally accepted standards and practices, certified by ISO 9001, ΕLΟΤ 1429, ISO 14001 and OHSAS 18001.

In 2016, it employed 204 highly qualified professionals. ASPROFOS directly supports the Group’s investments particularly in the fields of refining and natural gas, through the provision of a broad range of technical, project management and other related advisory services while seeking to continuously differentiate the range of its services, and broaden its client portfolio to include mainly international clients.

In 2016, the Company’s turnover reached €11.2 million through the provision of services to 155 projects, the most important of which are outlined below:

  • Licensing and Technical/Engineering Services for the TAP pipeline and detailed design of section 1 (from 0 to 180 km)
  • Detailed study and supervision of the construction of the 3rd LNG tank at the Revithousa terminal, on behalf of DESFA
  • Detailed Study and Supervision of the construction of cryogenic installations at Revithousa gasification terminal
  • Detailed study upgrading fire protection infrastructure for the tanks at Megara terminal
  • Detailed design and integration of the basic design for the new reboilers in the light ends unit at Thessaloniki refinery
  • Advanced Basic and Detailed design (FEED) and preparation of tender documents for the detailed study and construction of a JET A1 pipeline in Sri Lanka
  • Feasibility Study and Basic Design for a CDU Heat Recovery Unit at Jordan’s refinery
  • Basic Planning for Docking requirements and Distribution of Petroleum products and LPG in Ploche, Croatia, for VTTI (VITOL)
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