GAS GIANT: PKN Orlen, a massive Polish gas and oil company, said it did not have the funds to complete the purchase.
VILNIUS - The put-option deal between Lithuania's government and Poland's oil giant PKN Orlen on the buyout of the remaining 9.98 percent stake in Mazeikiu Nafta oil refinery wasn't completed by the deadline after the oil company claimed it didn't have the money available, Kauno Diena reported.
The Lithuanian government has not yet received the first installment of the approximately 730 million litas (211.6 million euros) due to them in the sale.
Advisor to the prime minister Mykolas Majauskas told The Baltic Times that negotiations were continuing after the agreement wasn't met on March 20.
"The negotiations are underway. It was not completed on Friday [March 20] as expected, but discussions are continuing and we are waiting for information from PKN Orlen. The government is doing everything it can to help PKN Orlen close the deal. I would not like to speculate about when it would be finished because this is a very sensitive subject," he said, adding that a deal is expected soon.
Economy Minister Dainius Kreivys is conducting talks with the company.
"We are waiting for information from PKN Orlen about the fulfillment of their obligations. The government spares no efforts so as to ensure that PKN Orlen meets its obligations as per the option agreement. And that is all we could say today," Kreivys said on March 20.
Earlier, Prime Minister Andrius Kubilius said the agreement between the companies would need to be tweaked to make it workable in the economic crisis.
The two parties are said to be working on amendments to the option agreement allowing PKN Orlen to make the payments in installments, but still no later than the end of the second quarter of the year, according to unofficial Baltic News Service sources.
PKN Orlen president Jacek Krawiec submitted payment proposals to the government while in Vilnius on March 20.
The Cabinet gave the go-ahead for Kreivys to continue talks with PKN Orlen to enable the company to pay for the shares in installments.
Under the terms of the put option agreement signed in 2006, the government has the right to sell its remaining stake in Mazeikiu Nafta and PKN Orlen is obliged to buy it out within 10 days of the request.
The right of demand of the Lithuanian government is irrevocable unless ceded by the government itself, which the investor agreed to in writing.
PKN Orlen was supposed to pay $284.45 million (727 million litas) for 9.98 percent of Mazeikiu Nafta on March 20.
Lithuania's government sent a formal offer to buy out the rest of Mazeikiu Nafta to PKN Orlen. The offer was sent on March 10, and the deal, as set forth in the agreement, should have been closed at the Ministry of Economy in Vilnius at noon on March 20.
Under the agreement, if the government sells its remaining stake in Mazeikiu Nafta (70,750,000 shares) by mid-December 2009, the price of the shares will be $4.02 per share, or $284.45 million in total.
The Polish company currently owns 90.02 percent of Mazeikiu Nafta.