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Energy 1 March, 2018 10:00 am   

The Orlen-Lotos merger heralds expansion. An NPP too?


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The Polish government and PKN Orlen have signed a letter of intent regarding the takeover of the Lotos Group shares, and thus control over it, which the government representatives have been discussing in recent months – writes Wojciech Jakóbik, editor-in-chief of BiznesAlert.pl

The energy minister Krzysztof Tchórzewski and the president of PKN Orlen Daniel Obajtek signed the letter, which indicates the acceleration of works on the merger with Lotos, which most probably results from the change of the head of the Płock concern, Wojciech Jasiński. The fact that the Ministry of Energy has disagreements with the previous manager of the company has been repeatedly published in BiznesAlert.pl.

In the announcement, we read that by signing a letter of intent, Orlen and the State Treasury undertook to take bona fide talks in good faith aimed at executing a transaction understood as the acquisition by PKN Orlen, directly or indirectly, of a minimum of 53% in the share capital of the Lotos Group. The transaction provides for acquisition by Grupa LOTOS of shares of Grupa Lotos from its shareholders, including in particular from the State Treasury, while complying with the requirements of the Act of 29 July 2005 on public offerings and conditions for introducing financial instruments to organized trading and public companies .

The letter is a signal that the state’s treasury wants to build an international champion. The consolidation is to serve the construction of giants to the largest companies in the industry and more effective rivalry in the first division with players such as French Total or Hungarian MOL.
From BiznesAlert.pl information, it appears that the Gdańsk Refinery is to maintain autonomy guaranteeing the maintenance of inflows to regional budgets from CIT, PIT and property taxes. There are also no plans for consolidation of petrol station brands, so we will continue to be able to refuel at red and yellow stations with Orlen and Lotos brands.

The originators of the merger argue that consolidation will improve the negotiating position when buying oil. However, this also depends on the management staff, that’s why we urgently need to observe personnel changes in both companies. The interviewees at PKN Orlen assure that the company will maintain the dividend policy, which is to guarantee an increase in the company’s value for shareholders. They also claim that Orlen and Lotos will react more effectively to possible problems with the continuity of raw materials supplies.

It is not known whether the merger will be the preparation for the entry of PKN Orlen into a new special purpose vehicle for the implementation of the Polish Nuclear Power Program.
Unofficially, you can hear it as one of the reasons for the merger. Funds for the treasury from the merger of Orlen and Lotos may reach over PLN 5 billion. It is difficult to estimate the cost of a nuclear project, but in the media there were PLN 40-60 billion in the range. If the construction lasted a decade, the merger could finance the first year of the project.