No settlement over Romanias EUR 516mn claim against Rompetrol refinery.

By bne IntelliNews February 19, 2013
The talks between the Romanian state and the Rompetrol refinery over a EUR 516mn claim against the company are far from settled, economy minister Varujan Vosganian was quoted as saying by Ziarul Financiar daily, thus dismissing the scenarios circulating in media. Over the weekend, the daily announced that a preliminary agreement between the parties was reached, aimed to put an end of the court dispute. The negotiations carried out by the privatisation agency OPSPI with Rompetrol's main shareholder have not been closed and they will have to be approved by the ministry or the government and will possibly involve consultations with the lawmakers, Vosganian stressed. The Rompetrol refinery is owned by Kazakh state company KazMunaiGaz. It owes the Romanian state EUR 516mn -- converted into 45% equity in 2010 under a debt-to-equity swap challenged in court by the government. IntelliNews Comment: The terms of the agreement seem unclear and unfavourable to Romania thus we expect no immediate deal. The state would sell 26% in Rompetrol to KazMunaiGaz for USD 200mn and would be left with an 18.7% stake, under the preliminary agreement announced by the daily over the weekend. But less transparent clauses such as pledged investments or workplace-related clauses are reportedly part of the deal. Neither the sale of the 26% stake nor the investment arrangements seem to favour the Romanian government though. First, the state would be left with a minority stake in a company likely to remain in the red for years [or close to break-even] given the business model of lower margins in refining and downstream. The market value of the remaining 18.7% stake would be very small. Second, KazMunaiGaz' investment plans revealed by Adevarul daily seem at least unclear if not unrealistic. Under the plan, KMG would set up a JV with the Romanian state, with a capital of USD 150mn and a Romanian state participation of 20% [to be covered by KMG as part of the deal though]. The JV would contract bank loans [supported by state guarantees as the daily implies] and other financing sources of up to USD 1bn, with the view of financing [unspecified] investments in the Romanian energy sector. The conflict between the government and Rompetrol occurred in 2010 when Rompetrol paid in cash only EUR 54mn of the EUR 571mn* bond that reached maturity at that time. The rest of the bond was converted into equity equal to a 45% stake. The government argues that the bond cannot be subject to partly cash repayment - but should be either fully paid in cash, or fully converted into equity. In the latter case, the state would have gained back a majority control over the refinery. * the value in terms of euro of the USD 603mn bond ( denominated in US dollars)

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