Business Polish refinery giant seeks to reshape Czech sector
Confirmation has come of top level talks between the Czech government and representatives of Polish oil refining and petro-chem giant PKN Orlen. The scenario that the Poles would like to plot does not take much fathoming.
Silence is a suspicious substance to most journalists, especially, perhaps, those in radio. A rule of thumb, perhaps, is that when a company or institution is making a lot of noise about something, you should back away and treat it with distrust. When all is quiet and everything is in the shadows, then you should poke around and try and flush something out.
The Czech petro-chemicals sector, designs of Polish refining giant PKN Orlen, and response of the Czech government, belong to the second category at the moment. Fortunately, business daily Hospodářské Noviny is taking the appropriate tack and might have smoked out what could be the Polish plot.
A week or two ago there were stories circulating that oil refining margins in the Czech Republic were so low that PKN Orlen was mulling the closure of some of Česká Rafinérská’s capacity. State-controlled PKN Orlen controls around two-thirds of through its majority stake in the Unipetrol petro-chemicals group. Italy’s state owned petrochemical giant ENI has the remaining 32.4 percent stake in Česká Rafinérská and is rumoured to be ready to sell up if the right price and buyer are forthcoming.
The Ministry of Industry and Trade refused at first to comment on rumours about hurried talks being convened with PKN Orlen, but minister Jan Mládek has now confirmed them to the newspaper and added that ‘certain offers’ were received without giving details.
According to Hospodářské Noviny, PKN Orlen is looking once again to give more sense to its Czech operations by taking control of state-owned oil pipeline company MERO and fuel distribution, fuel storage, and petrol station network owner ČEPRO. Ownership of the pipeline, storage, and distribution assets could make the margins on Česká Rafinérská’s current loss-making Czech refinery look a bit better.
Acquisition of the state assets would look a bit like a reverse takeover. Former Civic Democrat (ODS) industry minister Martin Kuba had been looking to get a state foothold in Česká Rafinérská as a means of pushing Czech national interests in the refinery sector. Kuba frequently criticized the Polish giant for running down its Czech activities, a fact which did not contribute to very friendly relations.
PKN’s purchase of Shell’s 16.3 percent stake in the Czech refiner at the end of last year closed off the option of purchasing a stake in Česká Rafinérská unless it wants to dip deeper into its pockets and buy out ENI’s stake. On their own, the state-owned logistics assets have some strategic sense but don’t fit well into any bigger picture.
PKN Orlen’s ongoing talks also involve Czech Minister of Finance, Andrej Babiš. Babiš and PKN Orlen unfortunately have some shared history dating from around a decade ago when they were joint bidders from Unipetrol but did not happily divide up the spoils. The great government negotiator might not be keen to sell any state assets but he might feel that he could cut them a deal on the prices they are paying to use them in return for some concessions on Česká Rafinérská’s future.