Nafta walkout delays selection of final bidder for RG
By : Wioletta Buczek
In the pipeline: Rotch Energy and MOL are each bidding for up to 75% of rafineria Gdanska
The selection of a final bidder for the purchase of a majority stake in Poland's second-largest oil refinery, Rafineria Gdanska (RG), initially scheduled for this week, has been postponed following the unexpected resignation of Nafta Polska's management board, said Krzysztof Mering, spokesman for Nafta.
Nafta, the state agency in charge of selling petrochemical-sector assets, said that its entire management board would step down due to disagreements with the Treasury Ministry over the direction and speed of the industry's privatization. The walkout, which happened last week, means that until a new board is assembled, the sell-off of RG will be on hold something that could jeopardize the refinery's privatization this year, market watchers said.
Up to 75% of RG had been slated to be sold off by the end of June to either the U.K.'s Rotch Energy or MOL, the Hungarian oil giant.
Treasury Minister Aldona Kamela-Sowinska said last week that the resignation of Nafta Polska's board would not complicate the sale of RG. Zbigniew Gryglas, the deputy director of the Treasury Ministry's privatization department, also expressed optimism about the progress in negotiations. "The process is quite dynamic and we have seen strong interest in RG," Gryglas said.
In contrast, industry insiders said the privatization would probably drag on, citing a lack of political consensus between the parties involved. If the sale isn't completed by parliamentary elections in September, a newly elected government could change the oil sector's privatization timetable altogether. "The first indication that there could be a problem with RG's privatization due to 'political factors' was when the ministry chose not to select a final bidder and instead decided to continue negotiating with both MOL and Rotch," a source close to the deal said. "And now the current commotion with Nafta Polska creates an even greater chance for the rescheduling of RG's privatization."
Andrzej Szczesniak, president of the Polish Chamber of Liquid Fuels, also predicted the sell-off would not proceed as scheduled. "There is a real threat the transaction will not be finalized as planned," he said. The source also said Poland's dominant refiner, Polski Koncern Naftowy Orlen (PKN Orlen), which had been locked out of the tender, has not given up its plans to take control of RG. "The privatization of RG may not happen in June because PKN Orlen will use political connections and lobbying to annul the tender," the source said.
But Monika Cebula, an analyst with COK Banku Handlowego, said Nafta would do its best to see the deal through. "It may even downgrade its price expectations for RG, because it would not like the deal to fail again," she said.
The Treasury Ministry first tried to privatize RG in 1998, but because there was only one bidder, Finland's Neste, the tender was cancelled.
Even though the ministry has been tight-lipped about the details of the offers submitted by MOL and Rotch Energy, the source said the latter's offer was more attractive. "Rotch has guaranteed a larger investment for RG's development," the source said. "It has also promised to refrain from job cuts for 48 months."
"I think it's more probable that Rotch will become RG's investor, since MOL's first-quarter financial results are far from satisfactory," Cebula said, adding that MOL's shareholders could prevent the company from buying RG. In the first three months of this year, MOL posted a net loss of $40 million. A year ago the oil giant recorded $95.2 million in first-quarter earnings.
"On the other hand, contrary to Rotch, MOL can offer industry know-how," Cebula added. "It has already restructured its fuel stations, and therefore knows how to do it. This hands-on experience may be of great value to RG."
According to market watchers, a strategic allliance between PKN Orlen and MOL would be highly unlikely if MOL were to gain control of RG. "MOL, strengthened by RG, would be a natural competitor for PKN Orlen and I do not see any grounds for an alliance," Cebula said. PKN Orlen, which has been eyeing potential regional partnerships for some time, has conducted several talks with MOL representatives as well as Austrian oil giant OMV. According to PKN Orlen spokesman Ireneusz Wypych, the refinery has set mid-2002 as the deadline for alliance talks with MOL.
