PKN ORLEN’S second sale of mandatory stocks in 2010, for over PLN 900M
As previously announced, PKN ORLEN carried out another sale of mandatory crude oil stocks in 2010, thus transferring the statutory obligation to maintain the stocks onto a third party and releasing approximately PLN 910m in the process.
On December 23rd 2010, PKN ORLEN sold over 490 thousand tonnes of REBCO crude oil, accounting for approximately 14% of the Company's mandatory stocks of crude oil and petroleum products. Concurrently, PKN ORLEN contracted the counterparty to maintain these stocks on its behalf as required under the relevant laws. Such practice is consistent with the 2007 Act on mandatory reserves of crude oil, petroleum products and natural gas. PKN ORLEN has pioneered execution of this type of transactions on the Polish fuel market.
- By using the legal mechanisms available under the Polish and European laws, we carried out the crude oil sale involving the transfer of obligations to maintain crude oil stocks to a third-party contractor. Thus we are able to achieve one of our key objectives, that is to bolster the balance sheet and reduce our debt. Following the transaction, we released funds of approximately PLN 910m that had been tied up in the strategic reserves - explained Jacek Krawiec, PKN ORLEN's President and CEO.
As was the case in March 2010, when the first sale was executed, the contractor was selected following a competitive tender, in which the bids were submitted by eight leading banks. The winning institution was Royal Bank of Scotland N.V. The bank will perform its contractual obligations through RBS Polish Financial Advisory Services Sp. z o.o., its subsidiary, which owns Maury sp. z o.o., an SPV specializing in crude oil trading. The contract remains in force until the end of January 2012.
Under the contract for stock accumulation and maintenance, Maury Sp. z.o.o. is obliged to maintain adequate mandatory stocks of crude on behalf of PKN ORLEN, while PKN ORLEN is to secure storage of these stocks at the current location. During the term of the contract, Maury sp. z o.o. may not use the stocks for its own purposes, neither is it allowed to sell or encumber the stocks (e.g. to use them as a security for other transactions). PKN ORLEN may repurchase the stocks at any time during the term of the contract.
The crude stocks will continue to be stored in one of the caverns managed by IKS Solino, a subsidiary of PKN ORLEN which satisfies 100% of the Group's crude oil storage needs and operates Poland’s only underground storage facility for liquid hydrocarbons.
