Chalupec, Kirkilas: Mazeikiu refinery deal to be finalized next week

  • 2006-12-06
  • By TBT staff
VILNIUS - In defiance of the skeptics, Lithuanian and Polish officials announced on Dec. 4 that the 665 million euro sale of the state's 30.6 percent stake in the Mazeikiu Nafta refinery would be finalized on Dec. 15. In the meantime, a state commission investigating the fire at the refinery closed its probe on Dec. 1, saying it intended to hand the result to the government. No details were available by the time The Baltic Times went to press.

Executives from PKN Orlen, Poland's leading fuel retailer, stated that the company would also complete the deal for buying a 53.7 percent stake in the refinery from Yukos International UK, a subsidiary of the bankrupt Russian oil company, on Dec. 14. That transaction is worth 1.16 billion euros.

"We have agreed in principle on the final details and organizational issues for closing the deal on Dec. 15," Lithuanian Prime Minister Gediminas Kirkilas told reporters on Dec. 4. "We think that the transaction will take place on schedule, as expected."
The announcement was a blow to naysayers, particularly in Russia, who have been claiming that a Russian company would step in and take control of Mazeikiu Nafta, the only refinery in the Baltics.
Since agreeing to purchase the refinery in May, PKN Orlen has been beset by problems. In July, Russia ceased delivering crude via pipeline, citing an accident in Belarus, and in October part of the refinery's diesel complex was destroyed by fire. Damages are estimated at 37.9 million euros.

But Chalupec showed no signs of pessimism in Vilnius. "We are working hard to close the deal," he said of the other half of the acquisition. "Basically, four things remain to be done before we can complete the transaction: two by us and two by Yukos International UK," he explained.
In Poland, Chalupec echoed the importance the deal carries for regional energy security, a theme that was stressed during the NATO summit in Riga and at the opening of the Estlink power cable in Tallinn (see story this page).
"The purchase of the Lithuanian company by a Russian company could have posed a threat to the energy independence of Poland. The company may also be of considerable significance for the independence of Lithuania, Latvia and Estonia," Chalupec was quoted as saying by the PAP news agency.

While in Vilnius, Chalupec also offered a gesture of support for Mazeikiu Nafta CEO Paul Nelson English, whose job appeared to have been on the line last month. "He has been very active in securing alternative oil supplies. We are very satisfied with the actions he has taken," he said.
In terms of money, on Nov. 29 PKN Orlen signed two syndicated loan agreements worth 1.6 billion euros with a total of eight Polish and international banks in order to finance the acquisition.

The Lithuanian government said it expected to receive the funds - $851 million - on Dec. 15. Kirkilas said on Nov. 30 that the money should be transferred to Lithuania's account on that day and that it would be used for different needs.
"We have laws. A large part of the money will have to be used for compensation and other purposes. The government will discuss how to use it, because we must maintain tight fiscal discipline. Large amounts of money can be poured into the market," he said in a radio interview last week.

Under the May agreement, the government will keep a 10 percent stake in Mazeikiu Nafta, the country's largest taxpayer, with a five-year option to sell it to PKN Orlen.
The European Union approved the deal last month.