Gdanska likely to get strategic investor
The Treasury Ministry and Nafta Polska are expected to meet Tuesday or Wednesday to decide on the sale of oil company Rafineria Gdanska to a strategic investor, said Janusz Kwiatkowski, press spokesman for Nafta, the state-owned holding company for fuel assets.
Earlier reports that the board of Nafta would meet and pass on its decision to the Treasury Ministry by the end of the week were based on Kwiatkowski's comments to the press.
"I forgot that all of our directors would be in London" attending to matters related to Polski Koncern Naftowy (PKN) Orlen's second public offering, he said.
Kwiatkowski said he agrees with the consensus that Nafta Polska and the Treasury Ministry will act on the recommendation of privatization adviser JP Morgan when the board meets Tuesday.
A JP Morgan representative declined comment on how it would advise the government, but said that an initial public offering (IPO) would not be the best route for Poland's second-largest oil company. "Let's put it this way. The government's (official privatization) program expresses a clear preference for getting a stable investor or investors in the company."
Analysts said that an IPO would be especially unwise right now since PKN Orlen's second public offering might overshadow interest in the smaller company.
An initial attempt to sell Gdanska to a strategic investor in 1998 foundered when interested parties and the Treasury Ministry could not agree on a price. Since then, the ministry has vacillated between selling the company via an IPO on the Warsaw Stock Exchange (WSE) or continuing negotiations for a strategic investor.
Assuming consensus prevails, a handful of international oil companies that have expressed interest in Gdanska are waiting to enter a new round of talks. These include French Oil, Shell and Lukoil, but market rumors also point to Norway's Statoil and BP Amoco, said Michal Mierzwa, a regional oil and gas analyst at CA IB Securities. Sweden's Preem recently told the Business Journal that it was no longer interested in Gdanska. Analysts expect the offered stake to exceed 51%.
Aside from the international players, a consortium of 17 Polish oil companies, Konsorcjum Gdanskie (KG), is hoping to receive serious consideration as a Gdanska contender.
"We think that our offer is very good," said Maciej Powroznik, a spokesman for both KG and its affiliate, the Polish Liquid Fuels Chamber (PIPP). KG plans to offer $200 million for the anticipated 50%-plus stake and would eventually want to up that to 75%, he said.
Also, KG would be in a position to hand over 115 gas stations to add to Gdanska's current 100 or so, Powroznik said.
"The number of (Gdanska) stations is not enough to be competitive," he said, adding that PKN Orlen has around 2000 and BP has 130.
Analysts agree it would be in any investor's interest to develop Gdanska's weak retail arm, but as Wood & Co. analyst Krzysztof Urban noted, "It is important whether (the investor is) a large international oil company or a consortium of Polish gas stations. The difference will be huge."
That's because Gdanska needs cash, Mierzwa said. Increased investment is necessary to conform to European Union environmental specifications, expand and develop retail branches, and increase production capacity, he said.
Gdanska, which produces 5 million tonnes of oil per annum, recently upgraded its capacity by 10-20% Mierzwa said, but it still trails PKN Orlen, which recently injected $2 billion to up its production from an annual 12.8 million tonnes to 17.6 million tonnes by the end of next year. Gdanska would like to produce 9 million tonnes annually in five years, Mierzwa said.
One of the most important questions for Gdanska's future, as Mierzwa sees it, is whether a foreign investor would focus on Gdanska's retail outlets as a distribution network for its own oil, or improve refinery capacity. Whatever happens, competition could be intense in several years. "Currently, wholesale margins are high but in a few years' time we expect that in retail, margins will be high," he said.
