Romania selects partner for investment fund with KMGI despite ongoing corruption probe

Romania selects partner for investment fund with KMGI despite ongoing corruption probe
By Carmen Simion in Bucharest July 15, 2016

Romania has selected SAPE, the agency that manages state holdings in energy companies, to set up an investment fund with KazMunaiGas International (KMGI), as stipulated in a memorandum of understanding signed between the Romanian government and the oil company in 2013, Energy Minister Victor Grigorescu said on July 14, local media reported.

The investment fund is part of the settlement reached between the Romanian state and KMGI on a controversial conversion of bonds into equity at Romperol Rafinare refinery. The memorandum of understanding was signed in 2013 and also stipulated that KMGI should buy 26.7% of Rompetrol for $200mn. Investments in the fund were supposed to reach $1bn, and Romania was offered a 20% participation.

The memorandum of understanding is now being investigated by the National Anticorruption Directorate (DNA), Euractiv has previously reported. Former Prime Minister Victor Ponta, is reportedly part of the investigation. The issue of the debt, which was converted into bonds in 2003, is also being investigated by Romanian prosecutors.

Grigorescu’s announcement comes shortly after KMGI vice president Azamat Zhangulov said in an interview with EUToday.net that Romania is not fulfilling its obligations stipulated in the memorandum. He also said the prosecutors’ investigations are affecting the company’s business and threatened the company could leave the country, according to Hotnews.ro.

Earlier this year, KMGI signed agreement to sell the majority stake in the refinery to China Energy Company Limited (CEFC). The sale process is likely to be affected by the ongoing investigations.

Grigorescu said Romania selected SAPE to represent the country in the future establishment of the investment fund as it is “structured for this type of activity.”

“SAPE owns minority holdings in other companies, received dividends, has this characteristic of managing assets. We consider it is economically efficient to use available vehicles rather than to build new structures, new bureaucracies, another company,” Grigorescu told Hotnews.

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