Rafineria Gdanska sale held over

"It is difficult to say that Rotch caused the delay. It was caused by all the … formalities which must be met before the contract can be signed."
By : Greg Goodale

   Negotiations between the U.K.'s Rotch Energy and Nafta Polska on the sale of Rafineria Gdanska (RG) will continue for another month while Rotch draws up financing guarantees for the government.

   "We are talking about a very sizeable expansion project here and we have to demonstrate that the banks are committed," said David Wood, RG project manager for Rotch Energy.

   Nafta Polska, the state agency in charge of selling state-owned assets in the petrochemical sector, entered exclusive talks with Rotch on June 11. The agency was to decide on the deal by July 13, but last week said that talks would continue until Aug. 20.

   Meanwhile, there has been speculation among analysts that the government and Rotch have deliberately delayed signing the deal. Nafta Polska spokesman Krzysztof Mering said no side was to blame for the delays. "It is difficult to say that Rotch caused the delay," Mering said. "It was caused by all the … formalities which must be met before the contract can be signed."

   According to Wood, the first negotiations involved working on the purchase agreement, which stipulates that Rotch must maintain the RG brand, must invest in bringing the company's products up to the European Union's 2005 quality standards and cannot sell the refinery for 10 years. The target for the next stage is to provide the government with full financing guarantees.

   "By the end of August we have to produce time sheets, giving additional proof that the banks are able to lend money to the project, and before we close we need the banks to be prepared to write a check," Wood said. He added that the government was pressing Rotch because of budgetary pressures in the run up to the September elections. "Because of the urgency of the election coming up and the need for the government to show some success in privatization, they wanted to ensure that we act very quickly," Wood said.

   The negotiations involve a 75% stake in Rafineria Gdanska, Poland's second largest oil refinery, which has a 22% share of the Polish market and posted a net profit of zl. 173 million ($42.2 million) last year. Mering would not disclose the price of the shares, but said: "The board decided that Rotch offered the best proposal both in terms of finance and proposed investment in Rafineria Gdanska."