Energy for life Annual Report 2019 We are everywhere, inextricably intertwined with the environment, people, energy. Petrol, Slovenska energetska družba, d.d., Ljubljana Dunajska cesta 50, 1000 Ljubljana Registration number: 5025796000 Companies Register entry: District Court of Ljubljana, entry number: 1/05773/00 Share capital: EUR 52,240,977.04 VAT ID: SI80267432 Telephone: +386 1 47 14 232 www.petrol.eu, www petrol.si Published by: Petrol d.d., Ljubljana Content and graphic design: SM Studio Marketing Editing and production: SM Studio Marketing Photos: Igor Andjelić and archive of Petrol d.d., Ljubljana Graphic art: Jani Bavčer March 2020 Annual Report of the Petrol Group and Petrol d.d., Ljubljana 2019 Petrol, Slovenska energetska družba, d.d., Ljubljana Dunajska cesta 50, 1000 Ljubljana Registration number: 5025796000 Companies Register entry: District Court of Ljubljana, entry number: 1/05773/00 Share capital: EUR 52,240,977.04 VAT ID: SI80267432 Telephone: +386 1 47 14 232 www.petrol.eu, www petrol.si Published by: Petrol d.d., Ljubljana Content and graphic design: SM Studio Marketing Editing and production: SM Studio Marketing Photos: Igor Andjelić and archive of Petrol d.d., Ljubljana Graphic art: Jani Bavčer March 2020 Statement of the Management Board Pursuant to Article 60 a of the Companies Act, members of the Management Board and the Supervisory Board of Petrol d.d., Ljubljana represent that the Annual Report of the Petrol Group and Petrol d.d., Ljubljana for the year 2019, including the corporate govern- ance statement and the non-financial statement, has been prepared and published in ac- cordance with the Companies Act, the Financial Instruments Market Act and International Financial Reporting Standards as adopted by the EU. As provided in Article 110 of the Financial Instruments Market Act, members of the Man- agement Board of Petrol d.d., Ljubljana, which comprises Nada Drobne Popović, Presi- dent of the Management Board, Danijela Ribarič Selaković, Member of the Management Board, and Ika Krevzel Panić, Member of the Management Board and Worker Director, declare that to their best knowledge and belief: ∙ the financial report of the Petrol Group and Petrol d.d., Ljubljana for the year 2019 has been drawn up in accordance with International Financial Reporting Standards as adopted by the EU and gives a true and fair view of the assets and liabilities, financial position, financial performance and comprehensive income of the company Petrol d.d., Ljubljana and other consolidated companies as a whole; ∙ the business report of the Petrol Group and Petrol d.d., Ljubljana for the year 2019 gives a fair view of the development and results of the Company’s operations and its financial position, including the description of material risks that the company Petrol d.d., Ljubljana and other consolidated companies are exposed to as a whole. Nada Drobne Popović Danijela Ribarič Selaković Ika Krevzel Panić President of Management Board Member of Management Board Member of Management Board, Worker Director Ljubljana, 9 March 2020 Danijela Ribarič Selaković Nada Drobne Popović Ika Krevzel Panić Member of Management Board President of Management Board Member of Management Board, Worker Director ENERGY FOR LIFE We are everywhere, inextricably intertwined with the environment, people, energy. We have a vision that will benefit the environment and people. We know how to realise it. We are happy we can do this. Being happy is art. 4 ANNUAL REPORT PETROL 2019 Contents Statement of the Management Board 2 Business Report 2019 Business highlights of 2019 8 Letter from the President of the Management Board 10 Business Performance in 2019 13 Strategic orientations 14 The Petrol Group in its region 18 Corporate governance statement and statement of compliance with the code 19 Non-financial statement 2019 34 Analysis of business performance in 2019 42 Alternative performance measures 47 Events after the end of the accounting period 48 Petrol’s Shares 49 Risk management 54 Business Activities 65 Sales 66 Energy and Environmental solutions 77 Production of renewable electricity 85 Mobility 86 Sustainable Development 89 Sustainable development 90 Employees 93 Customer satisfaction 105 The quality management system 109 Investments 111 Information technology 113 Environmental protection 115 Social responsibility 117 The Petrol Group 121 Companies in the Petrol Group 122 The parent company 123 Subsidiaries 125 Jointly Controlled Entities 132 Associates 134 Report of the Supervisory Board 137 Financial Report 2019 143 ANNUAL REPORT PETROL 2019 5 6 ANNUAL REPORT PETROL 2019 Business Report 2019 The future We reach for the future and make it our present. We get to know the secrets of little things. We strive for the secrets which will make our lives easier on this planet. We are curious for the good of all people and the planet. We explore and bring new-found secrets to everyday life. To be happy. We and our descendants. ANNUAL REPORT PETROL 2019 7 Business highlights of 2019 RESULTS 2019/2018 THE PETROL GROUP Unit 2019 2018 Index Sales revenue1 EUR million 4,375.9 4,318.1 101 Adjusted gross profit2 EUR million 472.9 442.6 107 Operating profit EUR million 128.1 128.6 100 Net profit EUR million 105.2 91.8 115 Equity EUR million 811.3 747.5 109 Total assets EUR million 1,859.6 1,730.8 107 EBITDA2 EUR million 196.5 180.7 109 EBITDA/Adjusted gross profit2 % 41.6 40.8 102 Operating costs/Adjusted gross profit2 % 73 76 97 Net debt/Equity2 0.4 0.4 111 Net debt/EBITDA2 1.8 1.7 110 ROE2 % 13.5 12.7 107 Added value per employee2 EUR thousand 65.6 64.8 101 Earnings per share EUR 51.2 44.7 115 Share price as at last trading day of the year EUR 375.0 310.0 121 Volume of petroleum products sold million tons 3.7 3.5 106 Volume of liquefied petroleum gas sold thousand tons 176.4 157.3 112 Volume of natural gas sold TWh 21.5 19.9 108 Electricity sold TWh 22.6 19.9 113 Revenue from the sale of merchandise and related services EUR million 466.5 465.7 100 Number of service stations as at last day of the year 509 500 102 Number of employees (including third-party managed service stations) as at last day of the year 5,275 4,857 109 1 Previously, revenue from the sale of goods also comprised excise duties charged when making a sale and these used to be part of the cost of goods sold. After re-examining this method of presentation, it was determined that it is more appropriate to present revenue from the sale of goods and the cost of goods sold without excise duties. The main reason underlying this change was to ensure better comparability of the financial statements with other companies and the industry, which do not present excise duty as part of revenue. This allows for better analyses and comparisons. In 2019 the accounting policy for recognising realised commodity forward contracts for electricity sales was changed. In accordance with an IFRIC clarification, which became effective in March 2019, these contracts shall be recognised at fair value, whereas they used to recognised at nominal amount before 2019. All the changes are specified in the financial report on pages 170 - 172. The 2018 sales revenue was adjusted accordingly. 2 Alternative performance measures (APM) as defined in chapter Alternative Performance Measures on page 47. 8 ANNUAL REPORT PETROL 2019 Number of service stations Volume of petroleum products sold 600 4,0 3.7 548 3.5 495 500 509 3,5 3.4 3.3 500 487 3.2 3,0 400 2,5 300 2,0 1,5 200 million tons 1,0 100 0,5 0 0 2016 2017 2018 2019 2022 2016 2017 2018 2019 2022 strategy strategy EBITDA Net debt to EBITDA ratio 250 233.0 3.5 200 196.5 180.7 3.0 2.6 159.6 143.8 2.5 2.3 150 1.9 2.0 1.8 1.7 100 1.5 EUR million 1.0 50 0.5 0 0 2016 2017 2018 2019 2022 2016 2017 2018 2019 2022 strategy strategy (Op. kazalnik Neto dolg/EBITDA za leto 2022 ob upoštevanju MSRP 16) Net profit Breakdown of the petrol group’s investments in 2019 150 37% Sales in SEE 115.9 29% Energy and environmental 100 91.8 105.2 solutions 81.1 72.7 19% EUR million 50 Sales in Slovenia 6% Other 0 5% Mobility 2016 2017 2018 2019 2022 strategy 4% Production of renewable electricity ANNUAL REPORT PETROL 2019 9 Letter from the President of the Management Board Dear shareholders, business partners and co-workers. The Petrol Group is one of Slovenia’s largest companies, playing an increasingly prominent role also in the wider region. It operates in the highly competitive markets of energy and trade. This, in conjunction with our environ- mental efforts, makes for business conditions that are in- deed very demanding. In 2019 our guiding principle was to co-create products, services and ideas which contribu- te to having a better world that is also more pleasant and more advanced. Risks are an inherent part of the Petrol Group's opera- tions. Good risk management enables us to respond in a timely and appropriate manner, which is why it is the focus of our attention. Key risks the Company is facing are thus identified, assessed, monitored and controlled. Doing business eventually boils down to numbers, and the Petrol Group ended the year 2019 with strong results. In 2019 the Group generated EUR 4.4 billion in sales revenue, up 1 percent from 2018.