Orlen attacks the Supreme Audit Office’s report on the merger with Lotos: The findings of the Chamber’s auditors are manipulation

Luc Williams

As Szewczak stated on Monday, Supreme Audit Office report to the extent applicable merger of Orlen with Grupa Lotos “in our opinion contains serious errors and uses data that have nothing to do with the actual situation.” According to him The Supreme Audit Office’s report is based on “unknown materials”Because The Chamber did not control Orlen.

According to the Supreme Audit Office, the concern, in connection with implementation of remedial measures in connection with the merger with Lotos, sold assets to private entities that were at least PLN 5 billion below their value estimated by the Chamber. As indicated by the Supreme Audit Office, sale of shares in the Gdańsk Refinery to Aramco occurred below the valuation value by approximately PLN 3.5 billion.

Profit instead of loss

The report is unreliable and very harmful: for the market, capitalization, shareholders and state security. It puts the entire country at risk of losing credibility,” Szewczak said, adding that “the findings are worthless” and prepared for the political thesis that Lotos’ assets were sold for too low a price.

“In our opinion, not only did we not lose PLN 5 or 7 billion, but we gained PLN 9 billion on this transaction” – said Szewczak, announcing the publication of data proving this.

Wrong assumptions, wrong calculations

As he emphasized, When calculating the value of Lotos, the Supreme Audit Office used an incorrect methodology, using the formula of the model refining margin times processing capacity times five. “This formula is an extreme simplification. It is based on historical data and does not take into account future costs, changes and impact on future results,” Szewczak pointed out. He added that the use of a multiplier of five shows “incompetence and ignorance” of the industry, because, as a rule, these multipliers are lower.

Szewczak noted that all NIK calculations are additionally based on assuming that the refinery uses Russian oiland by the beginning of 2022 this indicator was only 65%. “The model refining margin is a hypothetical indicator and is not the same as the real market margin” – said a member of the Orlen management board.

In his opinion, NIK omitted facts such as: implementation of supply diversification. “This type of manipulation allowed us to increase the value of Lotos because Russian oil has historically been cheaper, so it offered a higher marginwhich in the Supreme Audit Office’s methodology gives a higher value for Lotos,” Szewczak said. “In our opinion, it has nothing to do with the value of the group,” he emphasized.

Undervaluation and veto power

From published on Monday report of the Supreme Audit Office shows that PKN Orlen, in connection with the implementation of remedial measures during the merger with Lotos, sold assets to private entities that were at least PLN 5 billion below their value estimated by the Supreme Audit Office. The Chamber indicated that sale of shares in the Gdańsk Refinery to Aramco was below the valuation value by approximately PLN 3.5 billion. At the same time, Aramco gained a very strong position in Rafineria Gdańska sp. z o. o., incl the right to veto key strategic decisions in the field of company management – noted the Chamber. In her opinion, it exists risk of paralyzing the operations of the Gdańsk Refinery in the event of lack of shareholder consent regarding the strategic directions of the company’s development.

In information about the results of the audit “Implementation of activities to improve fuel security in the oil sector”, NIK stated that, taking into account the recommendations indicated by the Council of Ministers goal to improve the energy security of Poland and the regionthe merger process of PKN Orlen and Grupa Lotos, taking into account remedial measures agreed between PKN Orlen and the European Commissioncaused significant risks.

Fair price for MOL

According to the Supreme Audit Office asset sale price as part of remedial measures when taking over Lotos was “abnormally low”, except for transactions with MOL. The Hungarian company took over 417 gas stations previously owned by Lotos.

In June 2022, Orlen received consent from the European Commission for the merger with Grupa Lotos. Earlier – in accordance with the requirements of the European Commission – the company presented remedial measures planned in connection with the takeover of Lotos. It was decided that Hungarian MOL will take over 417 gas stations of the Lotos Group network in Poland, whereas Orlen will buy 144 gas stations in Hungary and 41 gas stations in Slovakia from MOL. The fuel and asphalt logistics area within the Lotos Terminale company will be purchased by Unimot. Lotos Biopaliwa will be purchased by Rossi Biofuel.

Lotos for oil supplies

At the same time, Orlen decided to Saudi Aramco sales 30 percent shares of the Lotos Group refinery in Gdańsk and agreed a long-term supply contract from PLN 200,000. up to 337 thousand barrels of oil per day, with the target volume of supplies of Saudi raw material should amount to 20 million tons per year. The company estimated that these supplies could meet up to 45 percent. total demand of the entire Orlen Group – after the takeover of Lotos – both in Poland, Lithuania and the Czech Republic.

The Orlen Group is a multi-energy concern, which has, among others, refineries in Poland, the Czech Republic and Lithuania. He also manages the petrochemical segment and the hydrocarbon mining segment. At the same time, it is developing the segment of renewable energy sources and plans to develop safe nuclear energy – by 2030 it intends to launch at least one small SMR nuclear reactor.

Last year, the Orlen Group’s strategy until 2030 was updated, taking into account its priority goals, especially after the merger with the Energa Group, Lotos Group and PGNiG. According to this document, the company is to invest over PLN 320 billion by the end of the decade.

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