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PKN Orlen, KazMunayGaz place second bid for Mazeikiu Nafta

Feb 01, 2006
Staff and wire reports

VILNIUS - Economy Minister Kestutis Dauksys said on Jan. 30 that he had no official information as to what companies had bid for Yukos' 53.7 percent stake in Mazeikiu Nafta, but that he believed there were no more than two bidders.

"I think there are two known contenders, but I have no official information as yet," said Dauksys, who heads the government's negotiating team in talks with Yukos.

On Jan. 27 Poland's PKN Orlen and Kazakhstan's KazMunayGaz confirmed that they had submitted final bids for the stake in the Baltics' only refinery.

According to unconfirmed information, the Poles bid around $1.5 billion for the asset, while KazMunayGaz reportedly announced last week that it would offer some $1.2 billion, according to the Baltic News Service.

At the same time, both companies said that they were ready to buy a stake from the government, which owns 40.66 percent. The government wants to sell 20 percent of the refinery to the strategic investor in order to sweeten the deal and acquire a one-time cash windfall.

Two potential buyers, Russia's TNK-BP and Lukoil, did not announce whether they had bid for the stake. Sources say the two companies might not bid.

Still, TNK-BP said that it had submitted "a very sound bid" for the shares and had not pulled out of the race. "We have submitted an offer. We do not comment on the price," Platts, an energy news service, quoted a TNK-BP spokeswoman as saying.

Previous reports indicated that TNK-BP bid around $600 million for Yukos' stake in Mazeikiu Nafta, while Lukoil, together with partner ConocoPhillips, offered some $980 million.

Meanwhile, Yukos officials said they expected to complete talks on the sale in two - four months.

"We expect that the ongoing process will be brought to a successful conclusion, which will be beneficial to Lithuania, Yukos and its creditors," Yukos' president and chairman Steven Theede said after meeting with Prime Minister Algirdas Brazauskas on Jan. 26.

"The legal and technical procedures of this process would allow the government to buy the stake in Mazeikiu Nafta if it wished to do so," Theede added.

Theede, who heads Yukos' negotiating team, said that the two sides were negotiating the cancellation of several conditions that are unfavorable to the Lithuanian side. The government, which wants to ensure that the refinery's next investor can guarantee stable supplies of crude to the refinery, something that it has hitherto been unable to do, is seeking to cancel two Yukos-held options to buy more shares in Mazeikiu Nafta and of its 2002 agreements with the Russian company.

"We are discussing how this process should proceed. We are interested both in pricing and concluding a deal that would be acceptable to the government," Theede said.

If Yukos decides to sell the shares directly to the government, which holds the preemptive right to acquire the stake, the latter will itself negotiate with potential investors.

Parliament has authorized the government to buy out Yukos' stake in the refinery for up to 3 billion litas (870 million euros) with the aim to turn around and sell it, along with an additional 20 percent stake, to an investor of its choice. Yukos, however, might ask for as much as 1 billion euros.

If Yukos opts to go on with the sale, it will likely choose between Kazakhstan's state oil and gas company KazMunayGaz and Poland's PKN Orlen, who bid the most for the shares. Lithuanian officials, however, have in the past said they would prefer negotiating with TNK-BP, a British-Russian joint venture that has the Kremlin's blessings.

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