Gdanska unlikely to find request for 3% of PKN granted
The latest twist in the ongoing saga of Rafineria Gdanska's privatization came last week when its outgoing president requested a 3% stake in Poland's largest fuel firm Polski Koncern Naftowy (PKN) be transferred to the oil refiner and retailer.
Such a move would roughly equate to a zl. 300 million ($73.82 million) capital injection for Gdanska. The firm wants to use the money to pay for restructuring and also to ease some of its debt burden.
Analysts, however, were doubtful the transfer would actually occur. "It's a stupid idea," said Michal Mierzwa, an analyst at COK Banku Handlowego.
He said Gdanska would sell the shares as soon as possible, causing the stock price of PKN, which is gearing up for its second public offering in July, to fall. Mierzwa said the Treasury Ministry, which wants the best price possible in the sell-off after PKN's very successful initial public offering (IPO) last year, is unlikely to find Gdanska's argument particularly convincing.
"The ministry must consider the situation; PKN's offering is more important (to it) than Gdanska," he said.
Prior to Gdanska president Wlodzimierz Dyrka's proposal, it had been assumed the Treasury Ministry would transfer 30% of shares in fuel transporter Dyrekcja Eksploatacji Cystern (DEC) to Gdanska. Those shares, Gdanska supporters had argued, would make the firm more attractive to potential strategic partners or investors on the Warsaw Stock Exchange (WSE) when it is privatized later this year.
However, last week the Transportation Ministry demanded that the Treasury Ministry delay DEC's privatization until Polish State Railways (PKP) is sold off. DEC is seen as being competitive to PKP cargo operations, analysts said. (See related story, page 4). In this light, Gdanska decided to strike while the iron was still hot, Mierzwa said.
"DEC is less valuable than PKN, obviously, and (Gdanska is) making the most of the situation," he said.
Dyrka's request came at the same time as he announced that he is stepping down from his position next month due to lack of political support for the company's restructuring process. While Gdanska has recently completed upgrading its refining capacity to 4.5 million tons of crude oil per year, it has debts to pay off and needs to expand its distribution network, said Krzysztof Urban, an analyst at Wood & Co.
"Obviously the logic behind (the request) is that banks will be more likely to accept PKN's shares as security and not necessarily those of DEC," whose value is unknown at present, he said. "And while it could be difficult to sell DEC's shares, PKN's are very tradeable."
However, any move to transfer the shares could run into opposition from the anti-monopoly office (UOKiK), analysts said. The body previously recommended that Rafineria Gdanska not be privatized on the WSE via an IPO. It argued that this would allow PKN, which already has a 60-70% market share in refining and 30-40% of the retailing business, to further enhance its dominant position by acquiring Gdanska shares. Gdanska is a far smaller operation, with around 3% and 20% of retailing and refining market shares respectively. Analysts said that UOKiK may interpret the share transfer as the first step toward a merger between the two firms.
The news followed an announcement that the holding company for state-owned fuel assets, Nafta Polska, was renewing its search for a strategic investor in Gdanska. Should that fail, Nafta Polska said Gdanska will be sold to a group of stable investors or debut on the WSE. The privatization is expected to be completed at the end of the year or in early 2000, with investment bank JP Morgan advising on the sale. Analysts said that the stake on offer is likely to run 30-45%.
Previous attempts to find a strategic investor in Gdanska at the end of 1998 failed because interested parties and the Treasury Ministry could not agree on price. However, this time round "the price of the company is the least important thing," said Piotr Wozniak, an analyst at CDM Pekao Securities. Potential strategic investors in Gdanska include Norway's Statoil, Germany's Aral and Sweden's Preem.
Wozniak said that the main stumbling block in negotiations is likely to be the cost of restructuring. Analysts predict that 75% of Gdanska's 1,600 strong work force are likely to be laid off when investors take control of the firm. "Paying huge sums for social guarantees should be settled" before agreeing on the final price, he said.
