Holding/Projects

Projects of the future and important Group services

In addition to our parent and holding company PCC SE, the Holding segment also incorporates a number of entities. It manages and controls projects aligned to the future – for example the construction of a production plant for silicon metal in Iceland which we commissioned in 2018. This reduces the administrative load on the operating businesses. The Holding segment also provides predominantly centralized, corporate services to the Group companies, for example in the fields of finance and information technology. The Holding segment is divided into three business units: Portfolio Management, Projects and Services.

Portfolio Management

The active portfolio management approach of PCC SE encompasses, firstly, the development of our operations and affiliates, and secondly, utilization of divestment opportunities. Our focus with regard to the development of operations is aligned in equal measure to the acquisition of new shareholdings and the leveraging of existing activities and projects. We are primarily concerned with positioning ourselves in less competitive submarkets and market niches. Our main investment engagement continues to be directed towards the developing economies of Central, Eastern and South-East Europe, although we are stepping up our activities in emerging markets on other continents, particularly Asia.

As indicated, however, PCC is also willing and able to sell operations and affiliates where disposal offers attractive gains and the funds thus released can be invested in the expansion of other core activities. The holding company will also dispose of portfolio entities where these are unable to offer satisfactory returns or fail to exhibit attractive development potential.

The following offers examples of the approach to portfolio management adopted by PCC SE:

Until June 2015, the company 3Services Factory S.A., the activities of which include operation of a data center, was allocated to the Projects business unit. In 2014, the data centre underwent its third expansion phase, achieving a significant increase in both sales and profits compared to the previous year. However, this company lies outside the core business activities of the PCC Group, and PCC SE therefore decided to dispose both of this participation and also of its minority shareholding in 3Services S.A., Katowice, the co-owner of the data centre. The closing of the sale took place as planned at the end of June 2015. This constitutes a further example of the strategy of active portfolio management adopted by PCC SE, whereby projects are developed to the point where they can also be sold on to other investors.

In June 2014, PCC SE successfully placed a minority package of shares in its Group company, PCC Rokita SA, on the Warsaw Stock Exchange, at the same time implementing a capital increase. Despite a difficult market environment, the private investor tranche was heavily oversubscribed, with the interest of institutional investors also substantial. By the end of 2014, the share price had risen by around 15% compared to the issue price of 33 złoty. PCC Rokita SA is the second Group subsidiary to be listed on the Warsaw Stock Exchange following PCC Exol SA (2012).

In December 2013, PCC SE sold 24.5 million of its shares (8.26% of the voting rights) in the surfactant manufacturer PCC Exol SA to an international investment fund. Still in possession of 87.45% of the voting rights, PCC SE retains significant majority control over this affiliate. The sale proceeds per share amounted to 2.3 times the book value. This transaction constitutes a purposeful continuation of the strategy adopted by PCC SE to create value and then to realize that value as opportunities arise.

At the beginning of 2013, the rapidly growing “PCC Consumer Products” subgroup was further expanded through the addition of participating interests and start-ups. The subgroup now has production and sales locations in Poland and Belarus together with a trading company in Russia.

In 2009, PCC SE concluded the sale of its Polish railway activities under the umbrella of the “PCC Logistics” subgroup to Deutsche Bahn AG. This divestment constitutes PCC’s biggest success to date in following its proactive portfolio management policy. Not included in the sale was PCC SE’s majority holding in PCC Intermodal S.A., a company active in the dynamically growing Polish market for container transportation and destined to be further expanded in the coming years.

Projects

The Holding segment pools together projects at the planning and construction phase before assigning them to our operating Group segments. In this way, we relieve the operating segments of the burden of project management while at the same time leveraging experience gained by the Group management from more than two decades of planning and project stewardship in developing new fields of activity.

The following offers a few examples of the project management activities performed by the Holding segment:

PCC SE’s plans to build an advanced production plant for silicon metal in Iceland date back to 2011. After several years of planning work and negotiations with investors, lenders, suppliers – for example of electricity from renewable energy sources – and potential customers, work to prepare the site in the north of Iceland began in June 2015, with construction starting at the end of June. The commissioning phase commenced with ignition of the first of the two electric-arc furnaces on April 30, 2018. The official start of production occurred with the first tapping operation performed on May 11, 2018. Start of the Heat-up process of the second furnace commenced on August 31, 2018. The plant constructor officially handed over the keys with the signing of the Final Acceptance Certificate (FAC) on October 30, 2019. The plant has an annual capacity of 32,000 metric tons. A portion of the quartzite mined in our Polish quarry serves as the feedstock for the facility, thus extending our value chain. We assumed majority control of this quarry in 2009. The silicon metal to be produced is already covered to a large extent by long-term purchase agreements with German companies from, for example, the aluminium industry. A majority of the funding has been provided in the form of a loan from KfW IPEX-Bank of Frankfurt/Main. More than a quarter of the investment finance was provided by the Icelandic company Bakkastakkur slhf. through a combination of a shareholder loan and preferred shares in our project company PCC BakkiSilicon hf. headquartered Húsavík, Iceland.

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A further project involves the construction of a plant for the production of ultra-pure dimethyl ether (DME) in Russia. DME is primarily used in the cosmetics industry as an odorless and environmentally friendly propellant, e.g. for hairsprays, as well as in the manufacture of polyurethane foam for building applications. The foundation for this project was laid by PCC SE in 2012 through the establishment of the joint venture OOO DME Aerosol with the Russian company JSC Shchekinoazot. Construction of our DME plant in Russia started in April 2017. The commissioning of the plant with an annual capacity of 20,000 tonnes took place at the end of 2018. The final performance test was successfully completed in May 2019.

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In 2012, PCC SE launched a project aligned to optimising its feedstock supplies by establishing PCC Organic Oils Ghana Limited in Accra (Ghana) as its first Africa project. This company – currently managed under the Specialty Chemicals segment – has started to build a position there in commodities provision. The long-term objective is to secure renewable raw materials such as palm kernel oil – which is extracted from kernels gathered by smallholders – for the surfactant production activities of our Group company PCC Exol SA in Poland. Palm kernel oil is an important feedstock in the production of fatty alcohols, which in turn form the basis of certain surfactants.

Services

In addition to project development and management, the Holding segment also provides Group services in the fields of finance, corporate development, information technology, environmental protection, research and development, and engineering/technology. Working from our chemicals site in Brzeg Dolny, for example, PCC IT S.A. provides IT services to internal and external customers – a perfect example of how we leverage synergies in order to generate added value.

Aside from the parent and Group holding company PCC SE, the Holding segment also includes the following affiliates: PCC IT S.A., PCC Apakor Sp. z o.o., LabMatic Sp. z o.o. and Ekologistyka Sp. z o.o., each of which is headquartered in Brzeg Dolny, Lower Silesia, Poland. The activities of all these portfolio companies, supplemented by the Headquarters business unit of PCC Rokita SA, have been managed under the Holding segment since 2013.

Investments in the Holding/Projects division

In the Holding/Projects segment, we manage projects geared to the future, such as the silicon metal plant in Iceland which was commissioned in 2018. This investment project is exemplary in that the two basic prerequisites for modern silicon metal production are already in place: high-quality quartzite as the primary feedstock from the PCC-owned quarry in Poland, and provision of the power needed from exclusively renewable energy resources.

Overview of investment projects