Reg. ORLEN Lietuva
The Management Board of PKN ORLEN has appointed a consultant to help work out a recommendation concerning the future of the company’s investment in Lithuania. So far PKN ORLEN was analyzing the situation of the Mazeikiai refinery internally. It will be the consultant’s task to verify the plausibility of various scenarios – from maintaining the current ownership status and adding to the Lithuanian company’s value, to scenarios in which some or all shares in the Lithuanian refinery are sold.
- At the moment none of the scenarios are given any preference – the final decision will be based solely on business grounds. We have run our own analyses concerning the reasons behind low profitability of the facility in Mazeikiai and the potential solutions to the problem. At this stage we need the support of a consultant who will evaluate the market in a transparent process and will precisely define the scenario that will be most advantageous both for ORLEN and its shareholders - says Jacek Krawiec, PKN ORLEN President & CEO.
- The consultant may seek offers from potential investors: what shareholding packages they are interested in, what is required in exchange, what money we are talking about - adds Krawiec.
The current corporate strategy assumes that the company will be becoming involved in crude oil search and extraction projects (the so-called upstream projects) and in electricity production, which will transform ORLEN into a modern, multi-power brand. It is our strategic objective to move ORLEN quickly along the path of its development and to close the value gap to our regional competitors – ORLEN's President sums up.
Logistics remains the core issue impacting the unsatisfactory profitability of the Mazeikiai project. Attempts to solve the problem made over the years have failed to bear any fruit so far. In addition, legislative solutions passed in Lithuania recently and allowing 30% of the obligatory inventory level to be held outside the country favor mainly importers and weaken the position of ORLEN's Lithuanian refinery.
- The Mazeikiai refinery was a profitable company only when the sector was blooming, i.e. before it was purchased by ORLEN. Moreover, its previous owner – Yukos – withheld all large investment projects to improve the refinery’s results. Today, we are dealing with low profit margins and with the immense cost of logistics in Lithuania, for which we are not to blame. Therefore, we let the market know, for the first time, that no options can be ruled out: from continuing with the project – which has failed to yield any returns so far – through selling some of the shares, to backing out of the project completely. The price will play a very important role in making the decision to sell - stresses Jacek Krawiec.
The consultant was appointed in line with ORLEN's in-house procedures and the financial conditions are more favorable than those that bound the company with consultants hired for the acquisition project in 2006. The project will be carried out by an international team of consultants from the Nomura Bank, specializing in the refining sector. Due to the weight of the project and its strategic significance, the largest investment banks were also taken into consideration during the appointment process. The consultant is set to commence the project in the week to come, and its first stage consisting in outlining the potential strategic scenarios is expected to be completed in Q4 this year.
