Polish state auditor claims oil group sold assets for less than they were worth

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Polish state-controlled oil company Orlen sold assets for $1.24bn less than they were worth in order to complete a merger with a smaller domestic rival, according to the country’s audit office.

The report by state auditors is expected to bolster claims made by Prime Minister Donald Tusk that the previous government of the Law and Justice (PiS) party misused Orlen for political purposes to develop a national energy champion.

The auditors focused on Orlen’s takeover of oil company Lotos, which required the combined group to sell some assets in 2022 following an EU antitrust ruling that found the merger risked stifling competition in the Polish energy market.

The main buyers of the assets were state-controlled oil group Saudi Aramco and Mol, the Hungarian oil company. 

Saudi Aramco underpaid by about 3.5bn zlotys ($865mn) to acquire a 30 per cent stake in Lotos’ Gdansk oil refinery, according to the Polish audit office. It also said the transaction created a security risk for the country because it granted Saudi Aramco the power to cut fuel supplies.

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The auditors added the refinery sale should have been valued at 4.6bn zlotys, rather than 1.15bn zlotys.

They did not detail all of the other assets that they claimed were undervalued in disposals, but suggested the total underpayment to Orlen came to 5bn zlotys.

The auditors said more investigations were needed to determine what Orlen had been paid during the asset sales.

But Orlen said the audit office’s report contained “gross methodological errors” that disqualified all its conclusions, including the claim that Saudi Aramco posed a security threat to the country.

It said the auditors assumed that Saudi Aramco could export all the refinery’s production, when in fact “any large-scale fuel exports cannot be carried out without co-operation with the state”.

Responding to claims that assets had been undervalued in transactions, Orlen said the audit “does not take into account the life of assets and their attractiveness for potential investors”.

Since Tusk became prime minister in December, Polish prosecutors have launched several investigations into Orlen’s previous transactions and decisions. Orlen has denied wrongdoing.

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Prosecutors are investigating the merger involving Lotos, as well as whether Orlen kept petrol prices artificially low before parliamentary elections in October, in an attempt to convince voters to give PiS another term in government. Tusk’s coalition won the elections.

Daniel Obajtek, Orlen’s chief executive, was ousted last week by Tusk’s government. It is yet to name his replacement.

Obajtek took charge of Poland’s largest energy company in 2018, having previously been the PiS mayor of Pcim, a town of 10,000 inhabitants.

He has strenuously denied wrongdoing at Orlen and insisted shortly before his removal that the deal with Saudi Aramco was done “at market value”, and that he was “not afraid of these [investigations] because the entire process was carried out properly”.

The Orlen share price fell almost 40 per cent under Obajtek’s management, as he expanded the company through several takeovers.

In 2021 Orlen completed the controversial purchase of Poland’s largest owner of regional newspapers, following a PiS government pledge to “repolonise” the media and reduce the influence of foreign groups.

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Source: https://www.ft.com/content/a0aff94e-bb8c-4c50-be50-faf698c625c4