Bank questions likelihood of PKN Orlen sale of Orlen Lietuva

16 August 2010 16:50  [Source: ICIS news]

PRAGUE (ICIS)--Poland’s PKN Orlen would struggle to recover its $2.3bn (€1.8bn) investment in troubled Lithuanian refining unit Orlen Lietuva should it go ahead and sell the subsidiary, equity house KBC Securities said on Monday.

In a statement released on 15 August, chemical and petrochemical group Orlen said it had hired Nomura Holdings to advise on a possible sale of the subsidiary, which until last year was known as Mazeikiu Nafta.

KBC Securities noted that only Russian companies offering very low prices were likely to be interested in acquiring Orlen Lietuva.

Orlen instructed Nomura to collect initial offers from potential buyers of all or a proportion of the shares in the subsidiary.

Late last year, Orlen indefinitely postponed plans to turn the refiner’s main site into an oil and petrochemicals complex after it recognised that difficulties in obtaining pipeline oil for the subsidiary from Russia had affected Orlen Lietuva’s profitability.

Orlen has lately been trying to obtain sea terminal and railroad concessions from the Lithuanian government that would lower the cost of seaborne deliveries of oil. Lithuanian ministers have, however, so far not awarded any concessions.

The company noted that logistics remained the core issue impacting “the unsatisfactory profitability of the Orlen Lietuva project”.

In Orlen’s statement on the matter, CEO Jacek Krawiec said “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”.

($1 = €0.78)

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By: Will Conroy
+44 20 8652 3214

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