Gov't angling to consolidate fuel sector

"We can forget about Rotch" With the Treasury Ministry entrenched in key management positions at Polski Koncern Naftowy Orlen (PKN Orlen), analysts said the agency is primed to pursue a fuel-sector consolidation strategy. The government's prolonged silence on a deal giving control of the nation's second-largest oil refiner, Rafineria Gdańska (RG), to the U.K.'s Rotch Energy, adds fuel to speculation that PKN Orlen's state-owned shares will remain in the Treasury Ministry's hands in the near term, industry watchers said. "We can forget about Rotch," said Michał Mierzwa, fuel sector analyst at Erste Securities. "It's not a credible company (for RG) and they don't have the money to finance the deal. They're not a sector investor." Martin Canavan, a consultant with Rotch Energy, said the company hasn't been told when to expect the government's decision on the sale of 75% of RG. "It could go either way," Canavan said of the decision. "We've put forward a good offer, and we're waiting for the outcome. But the tectonic plates of the (Polish fuel) industry have been shifting around since Friday." Six of the nine members of PKN Orlen's supervisory board voted to fire chief executive officer Andrzej Modrzejewski on Feb. 9, soon after he was charged with insider trading unrelated to his term at the oil company. Warsaw's prosecution office has refused to discuss the case with the WBJ. Treasury Minister Wiesław Kaczmarek - who spent much of last week rejecting insinuations about the timing of Modrzejewski's arrest - has said the conclusion of the Rotch-RG deal would impact the sale of a 17.6% stake in PKN Orlen to Hungary's MOL or Austria's OMV. Both companies say they remain interested in the stake, although MOL spokesman Denis Mochorovic suggested last week that talks between the government and his firm are stalled. Nafta Polska, the state agency handling the sector's privatization, has said it would make a decision by April 15. Analysts expect that Kaczmarek will likely move to consolidate the industry, before stakes in a combined PKN Orlen-RG firm would be gradually sold off. Beata Jarosz, Treasury Ministry spokeswoman, said last week that the agency is drafting a strategy for the nation's fuel sector to be released in "two to four weeks." Jarosz declined to provide details. "(Kaczmarek) just wants to sell at a good price … he can't get that now, so he prefers to wait," said Paweł Klimkowski, analyst in the capital markets department at LG Petro Bank. MOL's Mochorovic said sector consolidation wouldn't dampen prospects for closer ties with Poland. "If that's the strategy Poland chooses, then we would respect that," Mochorovic said. "The situation changes, but we would still be very interested in the Polish market." Kaczmarek in charge PKN Orlen officials last week referred all comment on company-related issues to the Treasury Ministry, which combined with Nafta Polska owns just 28% of the oil firm but - with the appointment of former Pepsi Co. executive Zbigniew Wróbel as Modrzejewski's successor, along with other key changes at the top - effectively controls it. Prior to the Feb. 9 shake-up, the Treasury Ministry had said openly it was buying PKN Orlen stock via sympathetic companies to strength its position in order to sack Modrzejewski, a Solidarity Election Action-era (AWS) appointment who Kaczmarek had called incompetent. Meanwhile, the Treasury's Jarosz insisted the agency would refrain from "any maneuvers in PKN Orlen's capital structure" until after its long-term strategy for the sector is released. On Thursday, the company's supervisory board is scheduled to vote on possible additional changes to the management board. PKN Orlen's 2001 net profit was reported last Thursday at zł. 336 million ($80 million), down 52% year on year. The figure was in line with company projections last month. Fourth-quarter 2001 profits also fell 20% year on year to zł. 84.7 million ($20.3 million).