“It would be preferable for the two shareholders of Rompetrol–KazMunayGas and the Romanian state–to find a mutually acceptable solution rather than litigate. The agreement cannot also be mutually advantageous because Petromidia (the refinery of the Rompetrol Group) has very high losses and debts,” Vulpescu said.
Vulpescu was tasked by the Romanian authorities to handle two of the most “painful” problems facing the state – the privatization of chemical plant Oltchim Ramnicu-Valcea (OLT.RO) and now recouping the historic debt from Rompetrol Rafinare.
Moreover, Romanian investment fund Fondul Proprietatea (FP.RO) also proposed him as member of the Supervisory Board of Hidroelectrica, the most valuable state-run company, currently in insolvency procedures.
Vulpescu ran OPSPI during the time when the institution was in charge of the privatization of chemical plant Oltchim, but he could not change the outcome of the process, which ended in failure after Dan Diaconescu, the winner of the auction for the sale of the majority stake in Oltchim did not prove he had the money pledged in the auction, around EUR50 million. The privatization drew little interest from investors because of the company’s significant losses of over EUR700 million.
Now Remus Vulpescu gets another “mission impossible”, to try to recoup what can be recouped from the EUR516 million debt that the Kazakh company owes to the state.
The story of the debt starts in 2003, when Rompetrol Rafinare, then held by local tycoon Dinu Patriciu, was allowed a seven-year respite on the payment of the historic debts of Petromidia. The debts of $285 million plus the interest rates and penalties collected, which brought the overall amount to $603 million (EUR571 million), were turned into seven-year bonds. The bonds were convertible and the government let the issuer decide whether to pay the money on maturity or convert the bonds into shares.
On maturity, KazMunayGas paid only EUR54 million of the debt the company had inherited from Dinu Patriciu, the former owner of Rompetrol Rafinare. For the remaining EUR516 million, the state got shares in Rompetrol, although it did not want any, and currently holds 44.7%.
The stake is currently worth around EUR144 million on the stock exchange, which means the state has lost around EUR372 million from this deal.
The shares of Rompetrol Rafinare are very little traded so analysts are skeptical that the state will be able to recoup this amount, especially since Petromidia refinery has in the past few years reported increasingly high losses and has debts of around EUR1 billion even after the EUR516 million in debts owed to the state were turned into shares.
“The state has no chance of recouping the debt if it was turned into shares in the company and I don’t think anyone would be interested in buying the stake in Rompetrol considering the company’s losses and the fact that the majority shareholder has no interest in obtaining a significant profit or in paying dividends. The state made a bad deal and is trapped in the company. All it can do is negotiate with the majority shareholder to sell the stake,” believes Andrei Radulescu, analyst at Broker Cluj.
The Finance Ministry brought a court case against Rompetrol saying the group had no right to redeem only some of the bonds and convert the rest into shares. In June 2011, the Constanta court of law ruled that the general meeting of shareholders whereby Rompetrol Rafinare bonds were turned into shares was legal. The ruling is definitive, but not irrevocable, the state appealed the decision and the court case is ongoing.
Since the takeover of the Rompetrol group by the Kazakh company, Rompetrol Rafinare has posted increasingly weak results, and the value of the company, in which the state became a shareholder, was strongly affected by the losses reported in the past few years.
In the first half of this year, Petromidia reported a loss of RON428.9 million (EUR94 million), compared to a net profit of EUR39.5 million in the similar period of last year, but which was only possible thanks to a favorable exchange rate trend.
Rompetrol Rafinare is controlled by the Rompetrol Group, held by Kazakhastan’s KazMunayGas. The Rompetrol Group, registered in the Netherlands, controls 43.74% of the capital of Rompetrol Rafinare, but together with other affiliated entities holds over 50% of the capital, while the Economy Ministry holds 44.69% of the shares.
(English version by Daniela Stoican)