The sale of part of Lotos’ assets was carried out in accordance with the market valuation of these assets, Orlen said in a statement published on Monday evening. The Płock company referred to the report of the Supreme Audit Office, according to which Saudi Aramco paid PLN 7 billion 200 million less for the Lotos part than it was worth.
In July 2023 Supreme Chamber of Control prepared a report regarding, among others, merger of Orlen with Lotos after inspection by the Ministry of State Assets. Journalists “Black and White” on TVN24 Łukasz Frątczak and Dariusz Kubik found the still unpublished document. According to the Supreme Audit Office, Saudi Aramco paid PLN 7.2 billion less for the Lotos part than it was worth..
A broader discussion of the entire report obtained by TVN24 reporters, including the translation Jacek Sasin Already on Tuesday, January 23 in “Black and White” on TVN24 at 8:30 p.m. and also on TVN24 GO.
On Monday evening, Orlen’s press office published a statement regarding the “alleged findings of the Supreme Audit Office regarding the merger with Grupa Lotos.”
Orlen on the valuation and sale of Lotos assets
According to the Płock-based company, “the merger of Orlen with Grupa Lotos was of key importance for strengthening the country’s raw material and fuel security.” “Thanks to this transaction, the Gdańsk Refinery is also provided with funds for investments necessary to adapt its business to the requirements of the EU climate policy,” we read in the statement.
According to Orlen’s assurances, “the sale of part of Lotos’ assets, resulting from the implementation of remedial measures indicated by the European Commission, was carried out in accordance with the market valuation of these assets, in full compliance with legal provisions and under the supervision of state authorities.” “Taking this into account, the allegations of the Supreme Audit Office regarding the Orlen-Lotos merger are unjustified,” it added.
Orlen’s press office reported that “the valuation and sale of Lotos’ assets took place on market terms.” “The valuations were prepared by independent external advisors. The entire process was carried out in compliance with the law, and the transaction was approved by the European Commission. The valuations were also accepted by statutory auditors and shareholders of Lotos and Orlen,” we read.
In the opinion of the Płock concern, “in this context, it is inappropriate to use the book value of Grupa Lotos as a reference point, which has nothing to do with the market value of the company.” “At the time when Orlen was finalizing the merger with Grupa Lotos, approximately 150 companies on the Stock Exchange were valued below their book value,” it was noted.
Who was interested in purchasing Lotos’ assets?
The information provided shows that inquiries regarding the sale of Grupa Lotos’ assets “were directed to several dozen selected companies, of which only a few responded.” “Reliable strategic investors or even infrastructure funds from Europe or North America were not interested in purchasing the refinery or logistics assets,” it was noted.
According to Orlen, “this is a direct result of the accelerating energy transformation.”
“The fuel market is systematically shrinking, and more refineries are being closed down in Europe. This only proves the validity of the merger of Grupa Lotos with Orlen in order to create a strong entity capable of implementing the costly strategy of transforming its assets towards emission neutrality,” it said.
Impact on the Gdańsk Refinery
The company’s press office said in a statement that “from the beginning of the merger of Orlen with Lotos, the European Commission expected the sale of the entire refinery in Gdańsk.” “However, Orlen negotiated the retention of majority shares in the separated company, of which it is the operator and which it can effectively manage today,” it added.
The Płock company also assured that as a result of the merger with Lotos, the State Treasury “has not lost its influence on the operations of Polish refineries.” “Moreover, as a result of the takeover of Grupa Lotos, and later also PGNiG, the State Treasury increased its share in Orlen – before the merger with Grupa Lotos it was 27.52 percent, and after all the acquisitions it was almost 50 percent.” – it was written.
It was added that “70 percent of shares in the company operating the refinery in Gdańsk remained in the hands of Orlen, which has a decisive influence on corporate decisions in the company.” As we read in the statement, representatives of the Polish concern “constitute the majority of members of the management board and supervisory board of this company.” It was also assured that “the shareholders’ agreement was developed based on the best market standards and protects Poland’s interests.”
According to Orlen, the countermeasures accompanying the merger with Lotos did not pose a risk to Poland’s fuel security. “(…) an important effect of the merger is the increased ability to negotiate favorable contracts, strategic partnerships with reliable suppliers and an increase in expenditure on investments strengthening the security of supplies of raw materials and products,” it was assured.
Agreement with Saudi Aramco
It was emphasized that the basis for the merger of Orlen with Grupa Lotos is the agreement with Saudi Aramco, which “effectively secures the interest and ensures Poland’s fuel security.” It was also indicated that the contract was examined by the office of Competition and Consumer Protection.
In the statement, Orlen also commented on allegations that the joint venture agreement has veto rights. “Each, without exception, joint venture agreement lists matters that can only be decided jointly – it is mainly for this purpose that such agreements are concluded. No investor will decide to acquire a minority stake in any business if he had to make all decisions without exception on his own larger partner, because this would not protect the minority partner from draining its value,” we read.
It was also assured that the contract with Saudi Aramco agreed that the rights of a minority shareholder “may not lead to paralysis of the business or harm the entity’s profits.”
Orlen emphasized that due to its strategic nature, the entire merger process with Grupa Lotos was carried out under constant supervision of the corporate bodies of all companies, and due to the importance of the transaction in the context of Poland’s energy security, also in consultation with all relevant state authorities.
As assured, state authorities “were provided with access to all necessary information.” “This also concerned the Minister of State Assets (Jacek Sasin – ed.)” – it was added.
Main photo source: Novikov Aleksey/Shutterstock