A new solution to transferring exploration and production licenses from PGNiG to Orlen in the event of a merger has been proposed. A fresh subsidiary of PGNiG is to be sold to PKN Orlen to remove the need for a general succession, or buyout of individual shares, which would take additional time. Meanwhile, dark clouds are gathering over the merger plan of Orlen, Lotos and PGNiG – writes Wojciech Jakóbik, editor-in-chief of BiznesAlert.pl.
A daughter company to hand over the license
The president of PGNiG has broken the silence surrounding the idea that has been considered for several weeks in the Ministry of State Assets and in the energy and fuel sector, which is to save the exploration and production licenses of Poland’s biggest gas company in the event of its takeover by PKN Orlen. He revealed that the new subsidiary presented in the PGNiG press release as a tool for optimizing the work of the entire capital group, is also to take over the concessions and facilitate the merger with Orlen.
„We will do it on the basis of the existing law. This is an operation that we are planning to complete by the middle of next year. It is divided into three stages. In the first one, we will separate operating assets, our branches to a subsidiary established for this purpose that will be completely owned by us. We will also transfer our licenses there,” Paweł Majewski, president of PGNiG, told journalists. „The point is that the current central office should limit its scope and focus primarily on supervisory, management and planning activities in terms of energy transformation, but also the possibility of concluding various alliances in the future. It is no secret that we are undergoing a merger with PKN Orlen and the Lotos Group. The change I mentioned will of course make it easier,” he added.
The position of the management board on the new subsidiary is easy to find in PGNiG’s current report. „In the opinion of the Management Board of the Company, conducting the Optimization Process will allow for the maximization of the operating and financial efficiency of the PGNiG Group, increasing the company’s potential to enter into strategic alliances and achieving the objectives set out in the Strategy of the PGNiG Group for 2017-2022 with a perspective until 2026 (published in Current Report No. 19/2017 of March 13, 2017), objectives for the corporate hedquaters in the scope of, inter alia, improving efficiency through the process, organizational and tool optimization of the PGNiG business model,” the company’s announcement of October 12 said.
The aforementioned „alliance” is, of course, the merger with Orlen and Lotos. Transferring the new subsidiary with all the concessions to the giant that is being created, would make it possible to avoid the time-consuming process of general succession or the sale of shares, already reported on by BiznesAlert.pl in the past.
Dark clouds over mergers
However, it is still unknown whether this process will be successful. Gas unions that have significant influence in the regional structures of the Law and Justice party (ruling party in Poland – ed.) and some members of the parliamentary opposition are against PKN Orlen taking over PGNiG.
Before the merger comes into fruition, the remedial measures required by the European Commission as part of the merger between Orlen and Lotos must also be adopted. On October 14 at 11 am, the general meeting of Lotos shareholders is to discuss them. The core of the disagreement is the requirement to limit Lotos’s control over the Gdańsk Refinery by creating a joint-venture, and transferring 30 percent of shares to an external partner, which is demanded by the Commission.
The day before the meeting, a scandal broke out around the vice president of this company, Jarosław Wróbel, who was associated with the merger plan from the very beginning. He has refuted the accusations of the Wirtualna Polska portal of mismanagement in Polska Spółka Gazownictwa (PSG). It is no coincidence that this news leaked right before the meeting.
The next challenge is to assess the introduced remedial measures by the European Commission by November 14, 2021. President of PKN Orlen, Daniel Obajtek, argued at last week’s press conference at the Mazeikai Refinery, in which the Deputy Prime Minister and Minister of State Assets Jacek Sasin also participated, that the mergers with Lotos and PGNiG „are not at risk”. „The acquisition of Polskie Górnictwo Naftowe i Gazownictwo by PKN Orlen is unlikely to take place this year. We can expect that this process will be completed by mid-2022, while the acquisition of Grupa Lotos should be completed earlier,” said Deputy Prime Minister Sasin in August.
Great politics
While the originators of the idea to create an Orlen-Lotos-PGNiG giant are handling the incoming obstacles, new ones keep popping up. It is not known how the process will be affected by the election calendar and the dispute within the United Right (governing coalition in Poland – ed.) on this subject. United Poland (member of the governing coalition – ed.) has officially criticized the merger plans, and it is unclear whether Law and Justice will be able to keep the majority in the long term without their votes.