Oil price slump forces MOL to step back in INA fight

By bne IntelliNews February 3, 2015

bne IntelliNews -


Hungarian energy group MOL said on February 3 that it has suspended plans to seek payment of an extraordinary dividend from Croatian gas and oil firm INA, because of the slump in oil prices. 

The Hungarian company, which holds a 49.1% stake and management rights in INA, announced in a statement that "… due to the falling oil price and its potential negative effect on the INA Industrija nafte d.d., MOL as a responsible shareholder has suspended its request to convoke an extraordinary general meeting of the shareholders of INA with the agenda of extraordinary payout of dividends".

In November last year, MOL announced it was proposing that shareholders vote for the payment of dividends worth HRK2bn (€260.6mn) from retained earnings.

However, with oil prices having slumped, MOL is now having to view INA more realistically, suggests Tamas Pletser at Erste. Noting the Croatian company has depended on the upstream segment to keep its head above water in recent years, he says the Hungarian has had to step back. "MOL definitely doesn't want to kill this investment," he tells bne Intellinews.

MOL had earlier said its decision to seek a special dividend was a result of the stance of the Croatian economy ministry to withdraw INA's exploration licenses in Sava and North-Western Croatia exploration areas. The Hungarian company complained at the time that it saw Croatia's move as a lack of support for an investor-friendly environment in the country.

Pletser suggests MOL would have been been able to gather the support needed to push through the motion, but investors appeared to welcome the news that it will not. The company's shares were around 0.8% higher in afternoon trading in Budapest.

Fuel to the fire

Croatia, which owns a 44.85% stake in INA, has been in dispute with MOL over the company's management rights, which resulted in both sides filing arbitration suits against each other. Croatia also alleges that the sale of part of the state stake to MOL was corrupt and Croat prosecutors have brought bribery charges against MOL's CEO Zsolt Hernadi, and convicted former Croatian prime minister Ivo Sanader. MOL denies any wrongdoing.

In the meantime, the Hungarian company's group chief executive claimed in January that MOL is in talks with potential buyers for its stake in INA. In an interview with Austrian newspaper Wirtschaftsblatt, Jozsef Molnar said MOL's main aim is to reach an agreement with the Croatian government and remain a strategic investor in the Croatian company. However, MOL will sell its stake in INA if hostilities persist, he claimed.

Croatian media reported in December last year that Polish state-controlled oil refiner PKN Orlen was interested in acquiring MOL's stake. Quoting unnamed sources, Jutarnji List claimed the Polish company had held several meetings with MOL, but that talks stalled, with PKN ready to offer no more than half of the €3bn the Hungarian company demanded.

Moreover, MOL seems to have started looking at other markets and other investment opportunities. Last year, together with Hungary's MVM, it submitted a joint bid for Enel's 66% stake in Slovak power utility Slovenske Elektrarne (SE). On February 2, it announced that it has completed the acquisition of 42 service stations in Romania from Italy's ENI. MOL also agreed in May last year to acquire ENI's downstream subsidiaries in the Czech Republic and Slovakia, granting it a further 208 service stations, but this is still pending regulators' approval.

Yet as the step back from the dividend claim illustrates, the Hungarian company is clearly unwilling to walk away from INA, which offers perhaps the only significant potential in upstream assets in its portfolio. That's despite the risks that the slump in oil prices introduces.

Meanwhile, adding financial pressure into an already poisonous mix will do little to help Zagreb and MOL settle their differences. Nor would it help the valuation should either party finally decide enough is enough and look to sell. 

"If INA were to run out of funds, the question of who should put in more money would come up," points out Pletser. "The low oil price is clearly negative for the company and the [fight between Zagreb and MOL], although financially things are not drastic right now."

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