Zakłady Azotowe Puławy - Mission Strategy Development

We are a company operating in the chemistry sector. By pursuing constant development and improvement, building competitive advantages, increasing effectiveness and perfecting our procedures in the human resources area, as well as shaping the Company’s internal and external relations, we work to INCREASE THE COMPANY VALUE.

Strategy for 2007–2017

The objective of the “Double ZAP Strategy” is to build the Shareholders’ Trust and Satisfaction. Through the Asset Activation and the Potential Improvement initiatives we are going to achieve dynamic growth of the Economic Value Added (EVA ), with a resulting increase in the price of the ZA Puławy stock, as measured by two in-house indices for chemical companies listed on the Warsaw Stock Exchange and on the CEE capital markets.

The Strategy assumes the following objectives:

Increase our operating scale by domestic and international mergers and acquisitions.
Develop our product portfolio.
Diversify raw-material supplies; this will involve investments in Poland and abroad.
Optimise the Company’s resources, through changes and improvements within the organisation.
Implementation of these objectives is divided into two phases.

Phase I is scheduled until 2009 and will include:

- Continued implementation of the investment projects specified in the Company’s Prospectus.
- Increase in the Company’s scale of domestic operations by capturing non-organic growth opportunities.
- Investment in the production line: oxygen generating plant – ammonia – urea (revamping and modernisation), designed to increase the annual urea production capacity by another 200 thousand tonnes.
- Modernisation of the Melamine I Unit.
- Establishment of the Chemical Industry Development Centre to support the development of new technologies by Polish scholarly institutions. Cooperation will be established with domestic universities of technology, research institutes and design offices, in order to promote innovative actions and projects with use of EU funds earmarked for this type of activities.
- Actions aiming at optimised utilisation of our resources will be taken in the area of the Company organisation; they will include development and implementation of Value Based Management and Balanced Scorecard, changes in the corporate culture, introduction of a new ERP system, review and optimisation of the existing assets of subsidiaries (taking advantage of the boom on the construction market), re-branding, all of which will be supported by actions undertaken in the Public Relations and Investor Relations area.

The Company plans to invest PLN 950m in the execution of Phase I objectives. We have prepared a multi-option plan of financing for Phase I. The plan provides for the use of the proceeds from the issue of Series B shares, debt financing (within the limits of the Company’s creditworthiness) and other financial structures (including SPVs). The planned expenditure is within the Company’s current estimated creditworthiness.

Moreover, the Company has launched and will continue new projects in the following areas:

- Development of the product chains with a view to generating high margins, and actions undertaken to gain access to more cost-effective sources of raw materials, including in particular domestic sources of natural gas.
- Strategy for power generation, connected with biomass, biogas-works and wastes utilisation.
- Caprolactam (production capacity increase).
- Development of low-weight products.
- Environmental protection (electrostatic precipitators and nitrogen monoxide emissions reduction).
In Phase I, synergies are expected in the following four areas: technology and production, marketing, organisation and growth.

Phase II is scheduled for 2010–2017

This Phase will involve implementation of the new product projects developed in Phase I, supported by the Chemical Industry Development Centre, and expansion of the existing production capacities (to be financed with the funds generated in Phase I).

Phase II is planned to include also certain initiatives classified as Major Projects:
- New product chain: methanol – urea – melamine – resins.
- Development of caprolactam processing towards high-value-added products.
- Locating production facilities in areas with access to low-cost feedstock (both domestically and abroad, including the Middle East).