Gov't rethinking oil sell-offs

A merger of leading oil firm Polski Koncern Naftowy Orlen (PKN Orlen) with the nation's second-largest oil company, Rafineria Gdańska (RG), is likely should the sale of the latter to a private investor not materialize, industry analysts said last week. "The treasury should have done it in the early 1990s," said Michał Mierzwa, fuel sector analyst at Erste Securities Polska. The Treasury Ministry's long-term ambitions for PKN Orlen were clouded last week as it pushed back a decision to April or May on selling a 17.6% stake in the oil refiner and retailer. Treasury Minister Wiesław Kaczmarek last week told Reuters news service that the PKN Orlen sale would hinge on talks to sell a 75% stake in RG to the U.K.'s Rotch Energy, which has been delayed over financing concerns. "If the deal with Rotch falls through, Kaczmarek would likely go to PKN's investors and say why (a merger) would be a good idea, and they would listen," Mierzwa said. "A merger between the two would make perfect sense from a logistical point of view," said Tomasz Mazurczak, head of research at Dom Inwestycyjny BRE Banku. Hungary's MOL had been in talks with the government to buy the stake in PKN Orlen after winning exclusive negotiating rights last year over Austrian concern OMV. That negotiation period expired Saturday, while OMV has said it would extend its bid until the end of January. "We will continue talks with both MOL and OMV," said Krzysztof Merel, spokesman for Nafta Polska, the state agency responsible for privatization of the energy sector. But Kaczmarek is waiting on the PKN Orlen stake until talks with Rotch Energy are concluded; they have been delayed over concerns that the potential new partner could not finance needed restructuring of the Gdańsk operation. "We'll announce at the end of next week (Jan. 19) whether the financing will be sufficient," Merel said. If the deal were to fall through, Kaczmarek said it would "drastically change the privatization of PKN Orlen," Reuters reported. Analysts interpret that as a possible marriage of the nation's top oil companies. "Consolidation benefits (would) include an improvement in (PKN Orlen's) competitive standing, synergies, and size," said SG Securities in a report released last year. The report also projected strategic buying of stock by Poland's regional rivals, Western or even Russian oil companies. "(PKN Orlen) has a lot of internal problems, and is prone to a takeover bid from companies like Russia's Gazprom, which has plently of money," Mazurczak said. "PKN is a perfect buy for them." Analysts said PKN Orlen's strong market position makes the company a good buy. "(PKN Orlen) is the last big attractive player," said a market analyst who asked not to be named. "It already has a near monopoly and isn't a market-share loser."