Dear shareholders,
2023 was yet another successful year for the Group, with the first phase of the Vision 2025 strategic plan completed and having a positive impact in terms of operational performance and profitability. At the same time, notable progress has been made in ESG matters, with increased participation and contribution to society’s needs.
Business Environment
In 2023, the global economic growth continued to decelerate due to the impact of tight monetary policies implemented by central banks, high inflation and a slowdown in global trade activity. At the same time, the geopolitical environment remained volatile, primarily driven by tensions in the Middle East. The global economy expanded by 2.6% in 2023, a decrease from the previous year’s growth rate of 3.0%. In 2024, it is projected that global economic growth will further decelerate to 2.4%, reflecting the persistent tightness in financial conditions and the ongoing effects of strict monetary policies on global disposable income and trade.
In the oil market, global demand increased by 2.5 million bpd to 102.1 million bpd, while in 2024 it is expected to increase further by 2.2 million bpd, reaching 104.4 million bpd. Crude oil prices fell in 2023, with Brent crude averaging $83/bbl, down 18% y-o-y.
Refining margins declined from the previous year’s all-time highs, but remained strong compared to the most recent five-year cycle (2015-2019), prior to the pandemic. They were primarily driven by demand for main products, as well as the sanctions imposed on Russia and the geopolitical tensions in the Middle East in 4Q23 which affected products supply and led to redirection of trade flows.
An important development was the recognition by energy companies and policy makers that fossil fuels are part of the solution and should contribute to the energy transition. Extreme and unfeasible solutions have a detrimental effect on the environment, while compromising energy costs and security.
Domestic demand for oil products amounted to 6.6 million MT in 2023, -3% y-o-y due to a drop in heating oil consumption. Excluding heating oil, demand increased by 4%. Aviation and marine fuel demand reached 1.45 million MT (+7%) and 2.7 million MT (+3%) respectively.
Financial Results
Having reported a record-high profitability in 2022, primarily driven by exceptionally high international refining margins, 2023 financial results were shaped at lower levels, but, still represented the second-best performance in the Group’s history, with Adjusted EBITDA reaching €1,237 million and Adjusted Net Income amounting to €606 million.
Profitability was driven by operational excellence and the implementation of our strategic plan, which are more controllable and predictable than a volatile international commodity environment. Our initiatives include the strengthening of the International Marketing business, expansion into new markets for either fuels products or RES projects and a substantial renewal and development of our human capital, supporting an ongoing cultural shift across the organization.
Considering the strong performance and outlook, the Board of Directors will propose to the Annual General Meeting the distribution of a total dividend of €0.90 per share, the second highest in the Group’s history. Using the 2023 year-end share price, the total dividend represents a higher than 12% dividend yield.
Additionally, the successful completion of the transaction involving the placement of 11% of the share capital to both international and domestic investors by the Group’s major shareholders in December 2023, represents a vote of confidence in our financial performance and prospects.
Implementation of «Vision 2025» strategy
During 2023, the Group recorded progress in all strategic areas and has implemented significant initiatives that will deliver value upon their completion in the coming years.
In our core business, our objective is to further enhance operational excellence and accelerate projects that profitably promote energy transition, through a series of initiatives that contribute to reducing the Group’s carbon footprint. In this context, we are progressing projects that improve energy efficiency and increase energy autonomy at the refinery facilities. In terms of sustainable fuels, we are implementing a Hydrotreated Vegetable Oil (HVO) co-processing unit, while investments are being considered for the first Greek Sustainable Aviation Fuel (SAF) production unit, the implementation of a CO2 capture project, as well as the production of green hydrogen and synthetic fuels. Furthermore, we are progressing the expansion of the polypropylene production plant, which, in addition to enhancing economic value, reduces our reliance on fuel sales and further improves the environmental impact of our business. In Fuels Marketing, we are focusing on improving the business in Greece and expanding the network internationally. At the same time, the development of electric chargers’ network and e-mobility services is accelerating, both at our petrol stations and at other strategic locations, with the aim of providing enhanced services to end consumers.
In the RES business, HELLENiQ Renewables has significantly accelerated the expansion of its portfolio in 2023, positioning itself as a leading player in both the Greek market and selected international markets. Specifically, through the completion of a series of agreements in Greece, Cyprus and Romania, it had achieved an installed capacity of 356 MW by the end of 2023, along with projects under construction or in advanced stages of development with a total capacity of 0.7 GW. The current pipeline has increased further to 4.3 GW, with growing aspirations for our international footprint as well. The progress achieved to date credibly supports our claim of attaining an operational capacity of over 1 GW by 2025 and more than 2 GW by 2030. It is important to note that these targets exclude our offshore wind parks business, for which we have entered into a strategic partnership agreement with RWE Renewables.
In the E&P business, the processing of 3D seismic data in offshore areas, specifically the “Ionian”, “Block 2” and “Block 10” areas, has been successfully concluded. Additionally, the processing of 2D seismic data in two offshore areas in Crete has been completed, while their interpretation is in progress. In the “Southwest of Crete” offshore area, a 3D seismic acquisition has also been completed, followed by data processing and interpretation.
The implementation of our digital transformation program continued throughout 2023, with a total investment of €50 million to date. The program yielded an annual benefit of €44 million for 2023, which is projected to exceed €50 million by 2025. This program stands as one of our most efficient and essential investments, fundamentally transforming our operational practices.
Sustainable Development – ESG
Against a backdrop of increasing challenges encountered by societies, individuals, and businesses, it is our responsibility to make a significant contribution through effective management in order to foster an environment that generates maximum value for all stakeholders. Within this framework, and building upon our ongoing and constructive engagement with all stakeholders, we have incorporated the principles of sustainable development into the Group’s strategic approach across all dimensions (environmental, societal, and corporate governance), in accordance with the UN’s Sustainable Development Goals.
One of our foremost priorities is to reduce the environmental footprint of the Group’s activities, aiming to decrease the carbon footprint of both direct and indirect emissions (scope 1 and scope 2) by 30% by 2030, while developing options to mitigate indirect environmental emissions (scope 3). At the same time, given the nature of our activities, the health and safety of our employees and partners, is also a top priority. In 2023, we achieved a 7% reduction in the carbon intensity index compared to the previous year, improved safety indicators by 14%, and received higher ESG ratings from international organizations.
On behalf of HELLENiQ ENERGY Group’s employees and cognizant of our responsibility, we are committed to strengthening our resolve, with the objective of maximizing value creation for both our shareholders and society.
