Gdanska privatization inches closer
It looks increasingly likely that a majority stake in the second largest fuel firm Rafineria Gdanska will be sold to a strategic partner by the end of the year, and that the firm's privatization scheme should be ready in the next few weeks.
Out of a potential 16 candidates, around five international companies in the sector are expected to make strong offers for the refiner and retailer and a list of bidders should be ready by the end of August, said Gdanska's new president Wojciech Zurawik last week.
"Over the next month an offer should reach potential investors," Zurawik told the Business Journal. "And by the end of August we'll have a list of (those) who are interested."
He added it is probable the strongest offers will come from companies based in the United States, Scandinavia and the Middle East. "But we don't know who they are right now," Zurawik said.
Previously, few companies have publicly declared their interest in Gdanska, except for Norway's Statoil, Sweden's Preem and Finland's Neste. The stake on offer is yet unknown, but will probably be more than 51%, analysts said.
Paul O'Gorman, general manager of Statoil Poland, which has been in talks with the Treasury Ministry in recent months, was not available for comment at press time. But Preem ruled out any prospects of its involvement this time around. "We are definitely not interested," said Kinga Lozinska, Preem Polska's vice president. And Neste Polska, too, excluded the possibility of any negotiations for the time being. "Right now we are not interested, although it (our interest) was the case in the past," said press spokesman Leszek Nowak.
However, analysts said that U.K.-U.S. giant BP Amoco, now the largest foreign retailer in the country with 118 stations, is a strong candidate. "BP Amoco is interested for sure," said Michal Mierzwa, a regional oil and gas analyst at CA IB Securities. Last week the firm refused to confirm or deny the possibility of its involvement. "At the moment we're not in a position to answer that question," said Dorota Adamska, BP Amoco's public relations manager.
Analysts have previously stated that any foreign interest in Gdanska is likely based on its potential as a storage facility. But Mierzwa added that Polish oil companies make their margins on wholesaling rather than through retailing, and therefore there is greater interest than before in keeping the refinery's operations running. Polski Koncern Naftowy (PKN), the country's largest fuel firm, already has a 70% share of the wholesale market.
Foreign firms "can't increase their prices because the market must remain competitive," Mierzwa said. "Therefore to buy the refinery and to take control of its wholesale activities is quite reasonable." He added that Gdanska's logistics operations and pipeline network are also attractive to investors.
The news is the latest in a long-running saga over how to privatize Gdanska, which started in 1998 when the Treasury Ministry tried to sell it to a strategic partner. But those negotiations foundered because the interested parties and the ministry could not agree on a price. Since then the government has toyed with the idea of selling the company via an initial public offering (IPO) on the Warsaw Stock Exchange (WSE). But that idea too has hit stony ground, with PKN already traded on public markets.
"There might be an oversupply of sector shares," said Ruslan Nickolov, an oil sector analyst at Nomura International. And there is also the possibility that a secondary offering in PKN scheduled for the second half of this year would overshadow any interest in Gdanska's IPO, he said.
Moreover, there is a further threat in floating Gdanska on the WSE since it would present PKN with the opportunity to purchase the company on the open market, Nickolov said. Analysts said that PKN's reasons for doing so would be to stymie foreign competition and expand its refining capacity. For this reason the idea has already attracted strong criticism from the anti-monopoly office (UOKiK). However, PKN is just coming to the end of a $2.2 billion capital expenditure program, which should increase its capacity by 40% to 16-17.8 million tons of crude a year, Mierzwa said. In contrast, Gdanska recently increased its capacity to 4.5 million tons per year.
Indeed, the threat of PKN's increasing dominance prompted the formation two weeks ago of Konsorcjum Gdanskie (KG), a Polish consortium comprising 14 private investors who intend to spend $200 million on purchasing a majority stake in Gdanska and investing in the company. This week KG intends to up its ranks to 22-23 members, said Andrzej Szczesniak, chairman of the Polish Chamber of Liquid Fuels, an association of independent retailers.
"We are afraid of the market being monopolized completely," Szczesniak said. "We want to integrate the biggest private Polish companies on the market."
But although KG is the only contender so far to have declared its interest in Gdanska's refining activities, analysts were dismissive of its chances. "They don't have the financial muscle to take it to fruition," Nickolov said. Mierzwa said KG's efforts rest not only on how much it is willing to pay, but also on its credibility against the foreign companies.
According to Polish accounting standards, last year Gdanska sold 3.29 million tons of crude oil for zl. 4.96 billion ($1.27 billion) with a net profit of zl. 115 million ($29.49 million). In contrast, PKN sold 12 million tons for a total of zl. 19.25 billion ($4.93 billion), while its net profit came to zl. 759 million ($194.62 million). However, according to international accounting standards, last year's PKN sales rose 18.5% from 1998 to zl. 13.28 billion ($3.41 billion), while its net profit shot up 22% to zl. 944 million ($242.05 million).
