Judgment day
Profits have only come about thanks to some shrewd management, with enough focus to complement internal restructuring with outward expansion in the form of buy-ups and marketing drives.
Yet observers notice that the frequent allegations of management irregularities across the year, often voiced in the form of whispers to the press, have upset an otherwise smoothly running ship. At the time of an August 26 general shareholders meeting, the press speculated that Wróbel and his deputy Sławomir Golonka were about to be expelled from the company because of suspected share manipulation. Wróbel and Golonka lasted, participated in discussions about troublesome leaks to the press, and pressed on. Bad press has been blamed for Orlen's last stumble in the race for the 75 percent bid for Rafineria Gdanska (RG). As early as March, the head the Pomorskie region Ryszard Kurylczyk was quoted in the press as saying that Orlen's bid for RG had failed. But at the end of June, Orlen - and its bidding partner Rotch Energy from the UK - had secured exclusive negotiation rights to take the majority of the shares.
Then, within a month, it was announced that the refinery would become the core of a new and independent Lotos Group (LG), the company formed out of RG, Petrobaltic, Naftoport and a number of other refineries as a small rival to Orlen. Domination of the Gdańsk refinery would have re-secured Orlen's leading position in the domestic petroleum market; instead Orlen now competes with, and even considers partnering up with Lotos in some fields of specialization.
By mid-October, LG was proposing a number of co-operation projects to Orlen, which the market leader has not ruled out to date. Nafta Polska (NP), the main decision-maker in the sale of the 75 percent Rafineria Gdańska stake, insisted that the three southern refineries of Jasło, Czechowice and Glimar - that were due to join RG for the formation of LG - were offered a more secure prospect of demand for its products. Nafta Polska President Maciej Gierej - tipped to be Wróbel's successor - looks forward to an Orlen-LG cooperation in the sphere of paraffin production, in what would potentially be the second-largest paraffin company in Europe.
Orlen's interest in RG has been part of a reformation of the company this year, moving it away from the profile of a holding company towards a formidable European petrol brand. In mid-April, Orlen management representatives revealed that its 19.1 percent stake in Plus GSM mobile phone operator, Polkomtel, would be sold off to allow Orlen to concentrate on fuel.
Reducing personnel by 1000 workers and rationalizing logistics have helped profits reach record highs. In April, Gazeta Bankowa's survey revealed that this year Orlen was once again Poland's largest company, with annual revenues of zł.26.8 billion, ahead of TPSA and Polskie Sieci Energetyczne (PSE).
Robert Maciejko, Vice President and Director of The Boston Consulting Group (Warsaw) singles out Orlen's marketing strategy in explaining Orlen's success. "Re-branding has moved forward," says Maciejko, "...as well as store layout and assortment selection - (Orlen has) a focus in improving in this area in Poland and abroad."
This consumer awareness has complemented the purchase of 494 gas stations in northern and eastern Germany from BP Aral, representing another record, the largest international investment of a Central European oil company since the fall of the Berlin Wall. Two months ago, the president of Orlen (Germany), Jean Jacques Verschueren, announced a plan to increase market share by 10-15 percent this decade by investing €35 million each year, maintaining the modernization drive of its acquired German outlets that has boosted the power of the Orlen brand. The white-on-red eagle logo is being pushed as a mark of quality in Germany, while around 350 of the acquired German stations, of apparently lower standard, work under the 'Star' brand.
According to James Angelus, Director of USI International's Eastern/Central Europe operations, Orlen is improving its image and is "...probably the number one sponsor of ... community projects in Poland, sports and academics and entertainment, ranging from concerts to sports teams, and conferences of many different subjects."
The failure of Orlen's share bid at RG and its attempt to create a petroleum monopoly at home has freed up Orlen energies - and the circa zł.1.5 billion reserved for investments - to vie for arguably even stronger strategic investments elsewhere in the Central European region. In June, Orlen deputy CEO Janusz Wisńiewski, sensing trouble in the RG bid, singled out the Czech government's sale of its 63 percent stake in Unipetrol as Orlen's contingency investment. Polish government representatives had already traveled to Prague to add political pressure to the bid.
This year Orlen has proven itself to be a major player in the trend toward general Central European oil consolidation, and under the leadership of Wróbel, signed a 'Memorandum of Understanding', with the vision of uniting with the Hungarian oil company MOL, which has already managed to win dominating stakes of the petroleum leaders in Croatia and Slovakia. As mutual statements of intent with MOL suggest, Wróbel's dream of creating an oil empire from the Baltic to the Adriatic is achievable, and with the Hungarians' help, could link up to the Black Sea as well.
In August, 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 (including bids from Chevron-Texaco, BP and Shell), it revealed that 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 would see MOL and Orlen acquiring 10-15 percent of each other's shares.
Rafał Jankowski, an analyst with CDM Pekao warned in Parkiet that "One should expect local companies to now grow bigger by acquisitions of smaller enterprises and restructuring, rather than consolidation on the European level."
But by September 24, Orlen's supervisory board accepted the details of the Wróbel-led international expansion plan, revealed around a month later to consist of a draft of the merger contract that will be drawn up early next year. The draft will propose a share transfer of 10-15 percent of each company that will go into an entirely new, multinational venture. "We estimate that the merger should... be completed in 2005," said Wróbel at a conference on Thursday.
"The companies which will start operating first will have an advantage over the rest. I want PKN to be the frontrunner," said Wróbel in a statement to the press, reiterating his readiness to speedily use money left over from his Lotos Group bid war chest.
With constant attention to globalization, Orlen has also formed a partnership agreement with Basell, the Dutch chemical company with a presence in around 160 countries around the world, and the world leader in the production of polypropylene. Looking east, Orlen has started to discuss joint exploration projects with the Polish Oil and Gas Company (PGNiG) in Ukraine and Kazakhstan, and has agreed to purchase crude oil from Ukraine via the Odessa-Brody pipeline, with the prospect of extending it on to Orlen's "Eagle's Nest" in Płock and on the thirsty European Union.
In spite of being haunted by criticism of his ethics, Wróbel has lead a company that is creating Poland's world brand, and which is also an industrial empire of great value to the economy. James Angelus comments that one of Orlen's top achievements this year has indeed been to keep Wróbel with them this long, because his possible improprieties have been a price worth paying for the leadership that they have had over the last twelve months. PKN Orlen "...has managed to keep Zbigniew Wróbel as president, the visionary who is largely responsible for Orlen's successes this year, despite the two scandals he is allegedly involved in and the persistent rumors of his ousting," says Angelus.
According to Pawel Poręba of the PKN Orlen press office, "Mr Wróbel always says that people with vision have to be stronger than other people. That's the cost of being a visionary in these hard times."
For a month to date, the auditing firms Deloitte & Touche and Ernst &Young have been examining all transactions for the purchase of land for new petrol stations as well as the business of re-branding the company which was undertaken by Rekon Sevices Centers, 10 percent of which Wróbel owns indirectly. If incriminating, the result of the enquiry, as well as other documents evidencing management misconduct over the past year, will be too powerful to allow Orlen to keep Wróbel once again.
The result will have a major effect on Orlen's share price, the proposed sell off of a 28 percent tranche owned by the treasury and the company's future itself. As in every good epic, the most ambitious adventurer will finally fall when he scrambles too fast to reach his goal.
Yet observers notice that the frequent allegations of management irregularities across the year, often voiced in the form of whispers to the press, have upset an otherwise smoothly running ship. At the time of an August 26 general shareholders meeting, the press speculated that Wróbel and his deputy Sławomir Golonka were about to be expelled from the company because of suspected share manipulation. Wróbel and Golonka lasted, participated in discussions about troublesome leaks to the press, and pressed on. Bad press has been blamed for Orlen's last stumble in the race for the 75 percent bid for Rafineria Gdanska (RG). As early as March, the head the Pomorskie region Ryszard Kurylczyk was quoted in the press as saying that Orlen's bid for RG had failed. But at the end of June, Orlen - and its bidding partner Rotch Energy from the UK - had secured exclusive negotiation rights to take the majority of the shares.
Then, within a month, it was announced that the refinery would become the core of a new and independent Lotos Group (LG), the company formed out of RG, Petrobaltic, Naftoport and a number of other refineries as a small rival to Orlen. Domination of the Gdańsk refinery would have re-secured Orlen's leading position in the domestic petroleum market; instead Orlen now competes with, and even considers partnering up with Lotos in some fields of specialization.
By mid-October, LG was proposing a number of co-operation projects to Orlen, which the market leader has not ruled out to date. Nafta Polska (NP), the main decision-maker in the sale of the 75 percent Rafineria Gdańska stake, insisted that the three southern refineries of Jasło, Czechowice and Glimar - that were due to join RG for the formation of LG - were offered a more secure prospect of demand for its products. Nafta Polska President Maciej Gierej - tipped to be Wróbel's successor - looks forward to an Orlen-LG cooperation in the sphere of paraffin production, in what would potentially be the second-largest paraffin company in Europe.
Orlen's interest in RG has been part of a reformation of the company this year, moving it away from the profile of a holding company towards a formidable European petrol brand. In mid-April, Orlen management representatives revealed that its 19.1 percent stake in Plus GSM mobile phone operator, Polkomtel, would be sold off to allow Orlen to concentrate on fuel.
Reducing personnel by 1000 workers and rationalizing logistics have helped profits reach record highs. In April, Gazeta Bankowa's survey revealed that this year Orlen was once again Poland's largest company, with annual revenues of zł.26.8 billion, ahead of TPSA and Polskie Sieci Energetyczne (PSE).
Robert Maciejko, Vice President and Director of The Boston Consulting Group (Warsaw) singles out Orlen's marketing strategy in explaining Orlen's success. "Re-branding has moved forward," says Maciejko, "...as well as store layout and assortment selection - (Orlen has) a focus in improving in this area in Poland and abroad."
This consumer awareness has complemented the purchase of 494 gas stations in northern and eastern Germany from BP Aral, representing another record, the largest international investment of a Central European oil company since the fall of the Berlin Wall. Two months ago, the president of Orlen (Germany), Jean Jacques Verschueren, announced a plan to increase market share by 10-15 percent this decade by investing €35 million each year, maintaining the modernization drive of its acquired German outlets that has boosted the power of the Orlen brand. The white-on-red eagle logo is being pushed as a mark of quality in Germany, while around 350 of the acquired German stations, of apparently lower standard, work under the 'Star' brand.
According to James Angelus, Director of USI International's Eastern/Central Europe operations, Orlen is improving its image and is "...probably the number one sponsor of ... community projects in Poland, sports and academics and entertainment, ranging from concerts to sports teams, and conferences of many different subjects."
The failure of Orlen's share bid at RG and its attempt to create a petroleum monopoly at home has freed up Orlen energies - and the circa zł.1.5 billion reserved for investments - to vie for arguably even stronger strategic investments elsewhere in the Central European region. In June, Orlen deputy CEO Janusz Wisńiewski, sensing trouble in the RG bid, singled out the Czech government's sale of its 63 percent stake in Unipetrol as Orlen's contingency investment. Polish government representatives had already traveled to Prague to add political pressure to the bid.
This year Orlen has proven itself to be a major player in the trend toward general Central European oil consolidation, and under the leadership of Wróbel, signed a 'Memorandum of Understanding', with the vision of uniting with the Hungarian oil company MOL, which has already managed to win dominating stakes of the petroleum leaders in Croatia and Slovakia. As mutual statements of intent with MOL suggest, Wróbel's dream of creating an oil empire from the Baltic to the Adriatic is achievable, and with the Hungarians' help, could link up to the Black Sea as well.
In August, 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 (including bids from Chevron-Texaco, BP and Shell), it revealed that 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 would see MOL and Orlen acquiring 10-15 percent of each other's shares.
Rafał Jankowski, an analyst with CDM Pekao warned in Parkiet that "One should expect local companies to now grow bigger by acquisitions of smaller enterprises and restructuring, rather than consolidation on the European level."
But by September 24, Orlen's supervisory board accepted the details of the Wróbel-led international expansion plan, revealed around a month later to consist of a draft of the merger contract that will be drawn up early next year. The draft will propose a share transfer of 10-15 percent of each company that will go into an entirely new, multinational venture. "We estimate that the merger should... be completed in 2005," said Wróbel at a conference on Thursday.
"The companies which will start operating first will have an advantage over the rest. I want PKN to be the frontrunner," said Wróbel in a statement to the press, reiterating his readiness to speedily use money left over from his Lotos Group bid war chest.
With constant attention to globalization, Orlen has also formed a partnership agreement with Basell, the Dutch chemical company with a presence in around 160 countries around the world, and the world leader in the production of polypropylene. Looking east, Orlen has started to discuss joint exploration projects with the Polish Oil and Gas Company (PGNiG) in Ukraine and Kazakhstan, and has agreed to purchase crude oil from Ukraine via the Odessa-Brody pipeline, with the prospect of extending it on to Orlen's "Eagle's Nest" in Płock and on the thirsty European Union.
In spite of being haunted by criticism of his ethics, Wróbel has lead a company that is creating Poland's world brand, and which is also an industrial empire of great value to the economy. James Angelus comments that one of Orlen's top achievements this year has indeed been to keep Wróbel with them this long, because his possible improprieties have been a price worth paying for the leadership that they have had over the last twelve months. PKN Orlen "...has managed to keep Zbigniew Wróbel as president, the visionary who is largely responsible for Orlen's successes this year, despite the two scandals he is allegedly involved in and the persistent rumors of his ousting," says Angelus.
According to Pawel Poręba of the PKN Orlen press office, "Mr Wróbel always says that people with vision have to be stronger than other people. That's the cost of being a visionary in these hard times."
For a month to date, the auditing firms Deloitte & Touche and Ernst &Young have been examining all transactions for the purchase of land for new petrol stations as well as the business of re-branding the company which was undertaken by Rekon Sevices Centers, 10 percent of which Wróbel owns indirectly. If incriminating, the result of the enquiry, as well as other documents evidencing management misconduct over the past year, will be too powerful to allow Orlen to keep Wróbel once again.
The result will have a major effect on Orlen's share price, the proposed sell off of a 28 percent tranche owned by the treasury and the company's future itself. As in every good epic, the most ambitious adventurer will finally fall when he scrambles too fast to reach his goal.
