State consolidating energy sector

With prospects increasingly slim for a foreign takeover of Rafineria Gdańska (RG), the nation's second-largest oil refiner, analysts expect a drawn-out domestic consolidation in the fuel sector to precede regional partnerships. But the possible extent and timing of such cooperation remains unclear, as analysts look to the Treasury Ministry's expected March release of its strategy for the sector. Hungary's MOL has already expressed interest in a merged Polski Koncern Naftowy Orlen (PKN Orlen)-RG group, as regional oil refiners now look for alliances as protection against takeover bids from cash-laden Western and Russian oil concerns. "Over the long term, there isn't really an alternative to some sort of cooperation with these regional companies," said Bidzina Bejuashvili, fuel analyst with Raiffeinsen Bank in London. "Such a merger would take some time and the privatization of PKN Orlen would surely be postponed."

Nafta Polska, the state agency handling fuel-sector sell-offs, last week said its three-member board needed more time to issue a final opinion on the purchase of 75% of RG by private investors led by the U.K.'s Rotch Energy, which submitted a bid last fall. A bid from MOL also remains on the table. Krzysztof Mering, Nafta Polska spokesman, said a decision should be ready this week. Nafta's delay came days after Wojciech Żurawik, RG's president, announced his resignation. Industry watchers say Żurawik is a staunch opponent of merging RG with PKN Orlen, Poland's leading oil refiner - a proposition that has picked up momentum since the Democratic Left Alliance (SLD) took power last fall. Żurawik, one of the few remaining Solidarity Election Action (AWS) government appointees still running a state-owned company, insisted his reasons for leaving are personal. "It could be a sign that the decision has already been made," said Rafał Jankowski, fuel analyst with CDM Pekao Securities.

While producing synergies, analysts played down monopolistic threats that a merged PKN Orlen-RG outfit might pose to the domestic market, particularly given the wave of state-backed maneuvers at PKN Orlen. While the state owns just 28% of the company, Treasury Minister Wiesław Kaczmarek has essentially wrested control of its management and supervisory boards. Foreign competitors' increasing market share on the retail side - aided in 2001 by a full lifting of import tariffs on fuels - should keep prices in line, analysts said. Players such as Netherlands-based Shell, the U.K.'s BP and Belgium's Aral today each have 3-5% of the market throughout the region and are driving competition, according to the U.K.'s Fitch Ratings agency. "Foreign competitors in the retail sector would be there to take advantage (of price hikes)," Jankowski said. All players involved, including Austria's OMV, which is bidding along with MOL for a 17.6% stake in PKN Orlen, were tight-lipped following last week's delay by Nafta Polska.