PKN Orlen becomes owner of Lithuania’s Mazeikiu Nafta

Dec 15, 2006 01:00 AM

The Polish group PKN Orlen took firm control of Lithuania's Mazeikiu Nafta oil complex after completing transactions worth $ 2.344 bn that give it a stake of nearly 84 % in the Baltic facility, officials said.
Orlen acquired a 53.7-% stake in Mazeikiu -- which operates the only oil refinery in the Baltic states, an offshore terminal and pipeline -- from the bankrupt Russian oil group Yukos for $ 1.492 bn (EUR 1.133 bn), in the biggest block trade in the history of the Vilnius stock market.

The Polish company finalized another deal, this time with the Lithuanian government, giving it a further 30.66 % in Mazeikiu for $ 852 mm. Lithuanian Prime Minister Gediminas Kirkilas called the transaction, which took 18 months to complete, "the deal of the century."
"There were sceptics and those who put forward conspiracy theories, but we succeeded in proving it is possible to take important decisions for Lithuania when there is political agreement, even if there is a minority government," Kirkilas said after the sale of the government's stake was closed. "This will enhance regional energy security," Kirkilas told later.

Yukos has described the sale process as "a most extraordinary 18-month marathon" which the Kremlin had repeatedly tried to derail, and Orlen's chief executive Igor Chalupec agreed that the road to acquiring Mazeikiu Nafta had not been easy.
"The negotiations were long and difficult," Chalupec told. "The first phase is behind us now but there is more to come. We have to show that we can work together."

Reports in the Lithuanian press said that Polish and Lithuanian workers had come to blows in the canteen at Mazeikiu's refinery. Chalupec has dismissed the stories and said no Orlen workers were involved in the canteen brawl. Officials at Mazeikiu said the foreign worker who had picked the fight was Spanish.
Orlen is the third foreign investor in Mazeikiu since 1999, when the Lithuanian government sold a controlling stake in the oil complex to Williams International of the United States. Williams never turned a profit with the oil complex, and in 2002, Yukos bought out the US company's stake.

Under the Russian group's ownership, Mazeikiu became profitable, but Yukos announced a tender to sell its stake in Mazeikiu last year, as a politically charged row with the Kremlin over unpaid taxes heated up.
Yukos founder Mikhail Khodorkovsky, once Russia's richest man, is serving an eight-year prison sentence in a Siberian camp after being convicted in May 2005 for embezzlement and other financial crimes. The company he used to run, which was once Russia's biggest oil group, is being dismembered by the Russian courts and was declared bankrupt in March by a Moscow court.

The temporary administrator appointed by Moscow to oversee the beleaguered oil company's business asked that Yukos' attempts to sell its stake in Mazeikiu be blocked until the dispute with the Kremlin had been resolved. But a US court lifted a restraining order barring Yukos from selling its stake in Mazeikiu Nafta, leaving the road clear for PKN Orlen to sign an agreement in May to buy Yukos' majority stake.
Since the deal between Yukos and Orlen was signed, the Lithuanian oil complex has been dogged by problems, ranging from a halt in supplies of crude by pipeline from Russia, a shutdown of its offshore oil terminal for repairs, and a fire that ripped through its key asset, the refinery, in October.

Russia was said to be unhappy with the sale of Mazeikiu to the Polish concern because Russian companies had also bid for the Baltic oil complex. The series of setbacks forced Mazeikiu to scale back its profitability forecast for this year by 20 %.
Chalupec said Orlen would strive to "ensure secure, reliable supplies of crude to Mazeikiu," and stressed that the company would work not only with Russia, but also with other suppliers.

Source: Itar Tass
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