Ministry talks to Statoil about strategic stake in Rafineria Gdanska
In addition to planning to privatize part of Rafineria Gdanska through an initial public offering (IPO) this fall, the Treasury Ministry is holding talks with Norwegian firm Statoil about taking a strategic stake in the Polish oil refiner and retailer, the Business Journal has learned.
"We're still interested (in Gdanska)," said Jacek Kolodziejczyk, director of sales and logistics at Statoil. Kolodziejczyk said that Statoil was currently in talks with the Treasury Ministry for a strategic stake, although he would not say what percentage of Gdanska may be acquired.
That sale is expected to go forward, even though news reports last week said that the Treasury Ministry expects to privatize part of the company through a public flotation.
Statoil, Poland's largest foreign retailer, has long been interested in Gdanska. With the Treasury Ministry eager to get the company off its hands this year, analysts said Statoil is well placed to acquire the firm. They also said Statoil is out ahead of other potential bidders such as Russia's Lukoil and Germany's Aral.
"They're really determined," said Chris Buckley, an analyst at Merrill Lynch. "If you look at the people who've committed massively to the market, Statoil must be one of the ones you'd think about. It's certainly credible."
Moreover, Kolodziejczyk said that Statoil is a good fit for Gdanska, because the Norwegian firm is heavily concentrated in the Gdansk area. Statoil now has more than 100 gas stations in Poland, and aims to bring the number up to 120 by the end of 2000 as part of a $350 million investment program, Kolodziejczyk said.
Nafta Polska, the holding company for all state-owned fuel assets, is anxious to see Gdanska privatized before the end of the year as well as the liberalization of Poland's oil market, Buckley said.
"It's a priority, and it was their initial priority before privatizing (Poland's largest oil company) Polski Koncern Naftowy (PKN)," he said. PKN was publicly floated at the end of 1999.
PKN dominates the market with 30-40% of retailing and 50-70% of the refining business. But Gdanska is a far smaller operation, with around 3% and 20% retailing and refining market shares respectively. In 1998, it had revenue of zl. 3.7 billion ($1.06 billion) and sold 3.5 million tons of processed crude oil. That is in contrast to Petrochemia Plock, PKN's refinery wing, which pulled in revenue of zl. 14.5 billion ($4.14 billion) on 11.2 million tons of processed crude.
Statoil originally bid for a strategic stake in Gdanska at the end of 1998, but the Treasury Ministry found its price too low, Kolodziejczyk said. "The difference was so big the treasury couldn't accept it," he said. He refused to say how much the company bid last time.
"The best choice would be one strategic investor," he said. But "this is a story about value; the ministry is just interested in getting the best price possible."
While Statoil is not expected to bid more this time, analysts said the company is seen as the most compatible investor for Gdanska.
Moreover, the Treasury Ministry's plans to press on with Gdanska's IPO in which the company will float an estimated 45% of its shares on the public market is still mired in uncertainty. PKN's second public offering is set for the second half of the year, and analysts said that issue could hurt interest in Gdanska's flotation. They said investors will find PKN's offering to be the more attractive of the two, and with both companies going to market around the same time, Gdanska's issue could well be overshadowed.
"(Gdanska) could be quite a risky IPO," Buckley said. "A strategic purchase might be an all-round preferred."
In addition, the Competition and Consumer Protection Office (UOKiK) said last week that it disagreed with the Gdanska IPO because it could present PKN with the opportunity to take over its competitor. That would further enhance PKN's dominant position on the market.
Statoil has a 25% market share in Scandinavia's retail gas sales. Furthermore, it also supplies fuel to Germany, Austria, the Netherlands and Spain, said Aziz Unan, an analyst at Erste Securities. Within Central and Eastern Europe Statoil has expanded in recent years across the Baltic region, with stations not only in Poland but also in Lithuania, Latvia and Estonia. While those operations are served via Scandinavian and Lithuanian refineries, acquiring Gdanska would boost the company's operations in the area, Kolodziejczyk said.
Kolodziejczyk would not say if Statoil is considering converting Gdanska into a storage facility, which many analysts have previously said is the impetus for foreign, and especially Scandinavian, interest in the firm. Currently, state-owned firm Naftobazy rents most of Poland's storage space and charges foreign firms high rates. Furthermore, foreign attempts to build storage facilities have failed, with Swedish firm Preem Polska still waiting for a decision from the government.
But Gdanska's location on the Baltic coast makes it an ideal storage point from which to distribute foreign refined fuel around Poland. Analysts argue that acquiring Gdanska whose refining capacity is similar to that of operations currently being shut down in Western Europe and switching its core business to storage and distribution would end the headache.
Kolodziejczyk refused to expand on that but did say that Statoil is less interested in Gdanska's refining operations. The company is more interested in the firm's retail activities, he said.
