The expert committee of Romania’s senate has issued a negative recommendation on the bill endorsed by the government in 2013 on the settlement of Rompetrol Rafinare’s $660mn debt to the state, Bursa daily reported on August 31.
Romania’s lower house of parliament has already voted to scrap the bill, but senators have the final word on this. If - as is likely - senators also vote to scrap the bill this would further complicate the country’s negotiations with KazMunaiGas, the main owner of the refinery, which have already been put at risk by prosecutors’ investigations into the initial conversion of the debt to bonds in 2003.
The decision would also put at risk a deal between the refinery’s owner KazMunaiGas International (KMGI) and China’s CEFC. KazMunaiGas reached an agreement with China’s CEFC earlier this year to sell a 51% participation in KMGI, the investment vehicle that controls Rompetrol Rafinare.
Although the conversion took place before KMGI became the refinery’s owner, Romanian prosecutors seized the assets of the refinery and companies connected to it including KMGI on May 9. The Directorate for Investigating Organised Crime and Terrorism (DIICOT) said at the time that it was taking action to recover alleged losses incurred by the state budget amounting to €680mn – the refinery’s debt converted to bonds immediately after its privatisation in 2003.
The cabinet of former Prime Minister Victor Ponta endorsed in 2014 an ordinance to settle the $660mn debt remaining from the €680mn initial debt after part of it was paid in cash, after a failed attempt to have the bill endorsed by the parliament in 2013. However, the settlement endorsed by the government in 2014 has not yet been enforced. Furthermore, Ponta is reportedly being investigated by prosecutors for his involvement in the settlement.
Under the bill drafted in 2013 and endorsed in 2014, the government accepted in exchange for the $660mn a $200mn cash payment plus a bonus of 20% conditional upon participation in a $150mn investment fund to settle the dispute. The $200mn is the price paid by KMG for a 26.7% of Rompetrol Rafinare - part of the 44.7% stake that the Romanian state received from the conversion of the $660mn to shares. Romania will thus also remain with a 18% share, in addition to the $200mn and the 20% participation in the $150mn investment fund.
Romanian lawmakers have never supported the government’s decision on the debt settlement, but the government has not prepared for what will happen if its solution to the debt is rejected by the parliament. As recently as this summer, after the joint committee of the parliament’s chamber issued a negative recommendation on the bill, Minister of Energy Victor Grigorescu still seemed to be confident about the smooth settlement of the debt.
Grigorescu even announced on July 14 that Romania had selected SAPE, the agency that manages state holdings in energy companies, to set up the investment fund with KMGI, as stipulated in the memorandum of understanding signed between the Romanian government and the oil company in 2013.