KMG renegotiates terms of sale of Romanian refinery to CEFC

By bne IntelliNews September 13, 2016

Kazakhstan's state-owned KazMunaiGaz (KMG) is renegotiating some of the terms for the sale of Romanian refinery Petromidia to China Energy Company Limited (CEFC), following recent asset seizure and investigations launched by Romanian prosecutors.

CEFC and the Kazakh company signed an agreement in April which envisages that the Chinese company, which is involved in the financial, energy and investment industries, will purchase 51% of the KMG International (KMGI), the owner of the Romanian refinery. However, the transaction is now at risk after Romanian prosecutors seized the assets of the refinery and started investigations into alleged losses suffered by the state budget during the privatisation process of Petromida and the debt conversion into bonds of the oil company.

“[The transaction] has been affected because we were taken by surprise. It was somehow affected the next day after it was signed,” KMGI senior vice president Azamat Zhangulov told Economica.net. “The asset seizure was an unpleasant surprise for us. Now we have to renegotiate with our partners some of the terms which are related to some aspects of the probe. There has been progress in this respect,” he added.

Zhangulov suggested there have been changes regarding the price of the transaction, although the Chinese buyer has never said “we will pay that less because of the Romanian state.”

“The availability of the proposal was limited in time. You cannot have the same price offer for things that change in time,” he said.

In May, the Directorate for Investigating Organised Crime and Terrorism (DIICOT) seized around $680mn worth of assets owned by four people involved in the privatisation of Petromidia in 2000, as well as assets of three companies. DIICOT said at that time it was taking action to recover alleged losses incurred by the state budget. Former Prime Minister Victor Ponta is reportedly part of an investigation related to the settlement of a $600mn debt of KMG, Euractiv reported in July.

Romanian prosecutors have recently intensified their efforts to solve the outstanding issues related to the privatisation of Romania's biggest refinery, before it changes its owner again.

In a July statement, KMGI said that together with KMG it had submitted a notice of investment dispute to the Romanian authorities, a first step towards eventual international arbitration. KMGI said in August it could cut its losses and pull out of Romania if it loses the dispute with the country over Petromidia.

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