CEFC’s Romanian refinery deal finally collapses

CEFC’s Romanian refinery deal finally collapses
The deal, agreed back in 2016, would have given CEFC control over Romania's Petromidia refinery.
By Carmen Simion in Bucharest July 3, 2018

KMG International (KMGI), the operator of Romania’s Rompetrol Rafinare, said on July 3 that China Energy Company Limited’s (CEFC’s) acquisition of 51% of the company will not be completed.

KMGI is 100% owned by Kazakhstan's state-owned KazMunayGas (KMG). In 2016, KMG reached an agreement on selling a 51% stake in KMGI to CEFC. However the deal was delayed first because of a corruption probe concerning KMGI’s main refinery, and more recently by financial problems at CEFC. The chairman of CEFC, Ye Jianming, is being investigated in China for alleged economic crimes. 

“The long-stop date by which the parties were to obtain all of the condition precedent has expired on 30th of June 2018 and the parties will not extend the period thereof,” KMGI said in a statement filed with the Bucharest Stock Exchange.

In addition to the Romanian deal, CEFC has been on an acquisition spree across Eastern Europe in recent years, which came abruptly to an end with the revelations of its financial troubles. Since then, CEFC has pulled out of the deal to acquire a 14.16% stake in Russia's largest oil company Rosneft, while its Czech division is being taken over by Chinese state conglomerate CITIC

Until now, the future of the deal with KMGI has been in question, with the Kazakh company telling Reuters back in March that the deal was still going ahead, but had been postponed until the end of June.

According to an unnamed Chinese source quoted by Reuters on July 3, CEFC had been expected to pay about $50mn as a deposit to keep the deal alive, but the Chinese company was not able to make the payment before the deadline.

In April, g4media reported that a US investor backed by Overseas Private Investment Corporation (OPIC) might replace CEFC and take over 51% of KMGI. Bursa daily has also reported that unnamed investors, including some “American investors”, were possibly interested in replacing CEFC in the deal with KMG.

Asked by Reuters on July 3 whether a third party had been offered the stake, an unnamed Kazakh senior official told the news agency that “there is a long progress, but there is interest in it.”

The planned deal with CEFC had previously been put 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 of the Petromidia refinery and the conversion of the refinery's debt into bonds.

With 6,000 employees, KMGI carries out operations throughout Europe and Central Asia, being active primarily in trading, refining and petrochemicals, retail and marketing and other services in the oil industry such as well services, drilling, EPCM. Rompetrol is the main brand of KMG International, used for the refining, petrochemicals and retail activities in Romania, Moldova, Bulgaria, Georgia and also for well services in the upstream area.