Hostilities between MOL and Croatia over control of INA resume

By bne IntelliNews May 14, 2014


The Hungarian state energy firm MOL hit back on May 13 at claims from Zagreb that it has overseen the destruction of Croatian oil and gas company INA. The resumption of hostilities suggests a deal to end the long war over control of INA is some way off, despite the shrinking list of alternatives.

MOL issued a statement rejecting the claim made the previous day by Croatian Economy Minister Ivan Vrdoljak that since MOL took management control of INA in 2009, it has lost billions as targets have been missed and production dwindled. Pulling no punches, the Hungarian company accused Zagreb of looking to the past, and questioned the accuracy and independence of the report quoted by Vrdoljak.

The Croat official on May 12 quoted a study by A.T. Kearney and Oil & Gas Consulting, which was commissioned by Zagreb, that found that after taking over INA, MOL defrauded Croatia of $6.2bn by failing to abide by agreements. However, MOL countered by claiming instead that it has invested a total of €1.4bn directly into the Croatian economy. It added that the Croatian minister had harmed the reputation of INA.

"After finally having accepted MOL Group's appeal for the acceleration of the negotiations, MOL Group was encouraged that the Ministry of Economy would at last come up with proposals regarding the future development of INA. Unfortunately, the Ministry once again raised issues of the past, which will be anyway clarified by on-going arbitration processes, whereas no reasonable forward-looking ideas have been presented. Therefore the Minister's recent media approach can only be understood as an attempt to deflect attention from his recent regulations, which caused over HRK 1 billion damage to INA," the vice president of MOL Corporate Communications, Dominic Koefner, said in a statement. 

The sniping comes as the pair enter yet another round of negotiations over control of INA. The long-standing battle has been going on for years. Zagreb claims that MOL gained management control illegally in 2009. Last year, former Croat prime minister Ivo Sanader was jailed for taking a bribe from MOL in return for handing over control in 2009 as it raised its stake to just below 49.1%. Croatia also insists the Hungarian company is failing to live up to its investment commitments. For its part, MOL claims Croatia - which holds 44.8% of INA - has breached its contractual agreements and is hampering its investments.

A May 8 statement from MOL said negotiations to sort out the fight had resumed. MOL Group CEO Jozsef Molnar claimed: "Today, our meeting was once again held in a constructive atmosphere. We agreed to meet at the end of May to accelerate the negotiations. We are ready to continue the negotiations but not at any costs." The talks are the first in close to four months. The pair failed to make headway in three previous rounds of negotiation.

With no apparent progress being made, late last year the pair looked prepared to sell a majority stake in INA as the only way out of the mess. However, the only viable suitors are understood to be Russian state companies, and given Moscow's role in the Ukraine crisis that has made such a sale highly unlikely. 

That appears to have put the issue back to square one. Without the option of finding a new partner, Croatia has little choice but to resume its bid to win back control of INA, and it has made several moves designed to antagonize the situation - including stripping INA of its role in domestic gas distribution and forcing it to sell gas to its successor at regulated prices. The ongoing spat does little for the investment story of the struggling economy.

MOL, meanwhile, is desperate to keep hold of control. INA is one of the group's few units offering strong potential, with the company controlling promising exploration rights, as well as a strategic posting on the Adriatic coast for European efforts to diversify energy supplies away from energy dependence on Russia.

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