Global pressure on energy
In the near future, energy analysts see more ambitious international moves by Orlen, while at home there are fears of social and political upheaval as masses of energy sector workers, particularly in the coal industry, are laid off.
In the near term, Orlen intends to maintain its stance as a major player in Central European oil consolidation, acting on its 'Memorandum of Understanding' with the Hungarian oil company MOL, which has already managed to win dominating stakes in the petroleum leaders in Croatia and Slovakia. But the Orlen dream of creating an oil empire from the Baltic to the Adriatic by merging with MOL lacks financial logic, according to a recent report by Citigroup Smith Barney.
Nevertheless, in recent weeks the management boards of Orlen and Nafta Polska met to discuss the planned 'share swap' between MOL and Orlen as a first stage of the merger process. At the same time, the Treasury Ministry has suggested that cooperation between Orlen and EU-based companies is also possible pending the floatation of 13.3 million MOL shares on the Budapest Stock Exchange.
In August last year, the Romanian government announced a tender for the purchase of 33.4 percent of Petrom, its state oil concern, which by September was raised to 51 percent as new investors became obliged to buy a new share issue as part of the deal. As Orlen expressed its interest in taking part in the hotly-contested privatization (which included bids from Chevron-Texaco, BP and Shell), it revealed its partnership with MOL was motivated by the need to expand internationally with a strong partner, a partner that would eventually become integrated with Orlen as one enormous oil concern. An initial partnership transaction between the two companies was mooted at that time, but still remains incomplete.
Deputy Treasury Minister Tadeusz Soroka told the press earlier this month that MOL might extend the deadline this week for another month so all feasibility studies can be completed. "The Treasury Ministry supports this extension. Orlen has talked to MOL, and MOL could extend this deadline," said Soroka. "We think that this deadline should be extended at least until the end of May to prepare the necessary analysis."
But according to the Interfax news agency, MOL spokesperson Bea Lukacs maintains, "It's pretty sure that MOL doesn't want to delay the deadline, it's also pretty sure that MOL never said anything like that... We still believe that the deadline must be the end of April."
While Poland's new global player bids to expand, the country's traditional heavy industry plans to contract. The World Bank's country manager Roger Grawe and Finance Minister Andrzej Raczko signed a new loan arrangement earlier this month to assist with social mitigation for the restructuring of the coal industry. A zł.640 million ($160 million) loan will be available for the project in order to provide sustainable incomes for the thousands of coal and coke-coal workers expected to be laid off with EU membership.
"The coal industry as it exists today is a drag on the economy," says Jacek Wojciechowicz, the World Bank's representative in Poland. "We are doing what we can to provide alternative employment and businesses for the coal mining community."
A feature of the project is that it includes surface workers in the coal industry, a group that are often omitted from social mitigation planning. "Around fifty percent of these associated service workers are women," Wojciechowicz told the Business Journal. "The loan will be used to find ways in which restructuring coal industries around the world have provided entrepreneurship opportunities in other fields."
Originally, the World Bank funds were due in 2003, although because the organization was not satisfactorily informed about the government restructuring plan, the signing of the loan has been postponed. The publicly debated plan sees the reduction of coal output by 12 million tons per year, with around three-quarters of this figure coming from the Kompania Węglowa mining group, which is set to begin a sequence of controversial mine closures.
Unemployment caused by mine closures is expected to bring Poland further political difficulties, already identified by the World Bank as a significant cost incurred by EU accession states. "The World Bank must be politically impartial," says Wojciechowicz. "We must be in a position to support any government that wishes to reduce unemployment."
The mitigation project will fund income support payments for severance packages as well as work on helping the coal sector to become profitable, providing a motor for economic growth. International heavy industry companies such as steel giant LNM have already expressed an interest in acquiring Polish coal mines in order to supply recent investments in Polish steel plants.
The World Bank coal industry loan will be matched with a road maintenance project that will bring the entire package up to zł.1.2 billion ($300 million). According to a World Bank statement, 'The road network in Poland has been the victim of under-investment in maintenance, renewal and modernization.' Indeed, the social cost of road accidents is quoted as two percent of GDP.
The two loans, which indicate the two areas of the economy that the World Bank believes need to be reformed most quickly to create economic growth, bring total World Bank commitments to the country to approximately zł.22.8 billion ($5.7 billion) for a total of 39 projects.
Rising international coal prices have recently driven first-quarter net profits for the Kompania Węglowa mining company to zł.38 million. Experts attribute the price rise of coal to a rising demand for coal-using steel production accelerated, in particular, by Chinese growth.
Over 80,000 people are employed by Kompania Węglowa, which was created out of the Bytomska, Rudzka, Gliwicka, Nadwislańska and Rybnicka mining groups.
In the near term, Orlen intends to maintain its stance as a major player in Central European oil consolidation, acting on its 'Memorandum of Understanding' with the Hungarian oil company MOL, which has already managed to win dominating stakes in the petroleum leaders in Croatia and Slovakia. But the Orlen dream of creating an oil empire from the Baltic to the Adriatic by merging with MOL lacks financial logic, according to a recent report by Citigroup Smith Barney.
Nevertheless, in recent weeks the management boards of Orlen and Nafta Polska met to discuss the planned 'share swap' between MOL and Orlen as a first stage of the merger process. At the same time, the Treasury Ministry has suggested that cooperation between Orlen and EU-based companies is also possible pending the floatation of 13.3 million MOL shares on the Budapest Stock Exchange.
In August last year, the Romanian government announced a tender for the purchase of 33.4 percent of Petrom, its state oil concern, which by September was raised to 51 percent as new investors became obliged to buy a new share issue as part of the deal. As Orlen expressed its interest in taking part in the hotly-contested privatization (which included bids from Chevron-Texaco, BP and Shell), it revealed its partnership with MOL was motivated by the need to expand internationally with a strong partner, a partner that would eventually become integrated with Orlen as one enormous oil concern. An initial partnership transaction between the two companies was mooted at that time, but still remains incomplete.
Deputy Treasury Minister Tadeusz Soroka told the press earlier this month that MOL might extend the deadline this week for another month so all feasibility studies can be completed. "The Treasury Ministry supports this extension. Orlen has talked to MOL, and MOL could extend this deadline," said Soroka. "We think that this deadline should be extended at least until the end of May to prepare the necessary analysis."
But according to the Interfax news agency, MOL spokesperson Bea Lukacs maintains, "It's pretty sure that MOL doesn't want to delay the deadline, it's also pretty sure that MOL never said anything like that... We still believe that the deadline must be the end of April."
While Poland's new global player bids to expand, the country's traditional heavy industry plans to contract. The World Bank's country manager Roger Grawe and Finance Minister Andrzej Raczko signed a new loan arrangement earlier this month to assist with social mitigation for the restructuring of the coal industry. A zł.640 million ($160 million) loan will be available for the project in order to provide sustainable incomes for the thousands of coal and coke-coal workers expected to be laid off with EU membership.
"The coal industry as it exists today is a drag on the economy," says Jacek Wojciechowicz, the World Bank's representative in Poland. "We are doing what we can to provide alternative employment and businesses for the coal mining community."
A feature of the project is that it includes surface workers in the coal industry, a group that are often omitted from social mitigation planning. "Around fifty percent of these associated service workers are women," Wojciechowicz told the Business Journal. "The loan will be used to find ways in which restructuring coal industries around the world have provided entrepreneurship opportunities in other fields."
Originally, the World Bank funds were due in 2003, although because the organization was not satisfactorily informed about the government restructuring plan, the signing of the loan has been postponed. The publicly debated plan sees the reduction of coal output by 12 million tons per year, with around three-quarters of this figure coming from the Kompania Węglowa mining group, which is set to begin a sequence of controversial mine closures.
Unemployment caused by mine closures is expected to bring Poland further political difficulties, already identified by the World Bank as a significant cost incurred by EU accession states. "The World Bank must be politically impartial," says Wojciechowicz. "We must be in a position to support any government that wishes to reduce unemployment."
The mitigation project will fund income support payments for severance packages as well as work on helping the coal sector to become profitable, providing a motor for economic growth. International heavy industry companies such as steel giant LNM have already expressed an interest in acquiring Polish coal mines in order to supply recent investments in Polish steel plants.
The World Bank coal industry loan will be matched with a road maintenance project that will bring the entire package up to zł.1.2 billion ($300 million). According to a World Bank statement, 'The road network in Poland has been the victim of under-investment in maintenance, renewal and modernization.' Indeed, the social cost of road accidents is quoted as two percent of GDP.
The two loans, which indicate the two areas of the economy that the World Bank believes need to be reformed most quickly to create economic growth, bring total World Bank commitments to the country to approximately zł.22.8 billion ($5.7 billion) for a total of 39 projects.
Rising international coal prices have recently driven first-quarter net profits for the Kompania Węglowa mining company to zł.38 million. Experts attribute the price rise of coal to a rising demand for coal-using steel production accelerated, in particular, by Chinese growth.
Over 80,000 people are employed by Kompania Węglowa, which was created out of the Bytomska, Rudzka, Gliwicka, Nadwislańska and Rybnicka mining groups.
