Poland drops proposed merger of oil and gas giants

By bne IntelliNews February 25, 2016

Poland has halted analysis of a potential merger of its state-controlled oil and gas companies, a government official told parliamentarians on February 25.

The idea of a merger, hinted at by the Treasury Minister Dawid Jackiewicz on January 11, was a potential worry for investors who have eyed with concern the ruling Law and Justice (PiS) party's efforts to take a firmer grip of large Polish listed companies since coming to office in November. Warsaw said it was studying a potential tie up of oil companies PKN Orlen and Lotos with gas utility PGNiG as a means of defence against potential hostile takeover bids - presumably from Russia.

However, Jackiewicz’s deputy in the treasury ministry, Henryk Baranowski says work on the merger is no longer underway. "The treasury ministry is not conducting any analytical works concerning the area of crude oil and gas," Baranowski said, according to PAP.

Poland's listed state companies have long been vulnerable to political decision making rather than a purely commercial outlook. PKN has struggled to maintain the largely loss-making Mazeikiai refinery in Lithuania that it was pushed into buying in 2006 from the rump of the bankrupt Russian oil firm Yukos, to the fury of Moscow. Executives at PGNiG – and even ministers – have fallen in recent years over the company's failures to secure greater independence from Russian gas supplies.

The three companies have also been pushed in recent years to explore Poland's shale gas deposits, which were seen as having the potential to allow the country to halt gas imports from Russia. The nationalist PiS is a ardent critic of Moscow.

Russia, meanwhile, has often sought to gain a foothold within Polish companies, particularly those with a strategic role in gas. Motivated by Russian attempts to take control of chemicals giant Azoty, the previous Civic Platform government passed a law in August that aims to protect “strategic” companies from unwanted advances.

Early trading on the Warsaw Stock Exchange on February 25, saw PKN Orlen shares gain over 1.22% to PLN63.34, while PGNiG’s stock was up 1.02% to PLN4.97. Lotos traded 0.67% down to PLN25.35.

Poland maintains operational control of PKN despite holding just 27.5% in the company. Warsaw also holds a 53% stake in fellow refiner Lotos, and 72% in PGNiG. 

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