- New government tightens grip on state-controlled companies
- Orlen's `healthy balance sheet' may be exploited: analyst
The government-controlled supervisory board of Poland’s biggest fuel refiner PKN Orlen SA appointed Wojciech Jasinski, a ruling party lawmaker, to run the $7.1 billion company.
Previous Chief Executive Officer Jacek Krawiec was dismissed on Wednesday after seven years at the helm of the refiner, as the new government reshuffles managements at state-run companies. Orlen shares jumped 3.3 percent to 65.87 zloty at 12:54 p.m. in Warsaw, while Poland’s WIG20 index surged 2.2 percent as investors returned to emerging-market stocks after the Federal Reserve stressed on Wednesday that further monetary tightening will be gradual following its first interest-rate increase since 2006.
Jasinski, 67, is a former treasury minister and close aide to Law & Justice leader Jaroslaw Kaczynski. He has no executive experience in bigger companies. Warsaw’s main stock index has dropped 20 percent this year in part because of plans by both this and the previous government to force state-controlled companies to help ailing sectors, such as coal mining, or carry out investments which may not be commercially viable.
“The change in government could create management problems for Orlen and affect its day-to-day operations,” said Kamil Szlaga, an analyst at Trigon Dom Maklerski SA in Warsaw. “Additionally, the company has a very healthy balance sheet and it could be used to finance projects not necessarily linked to its core business.”
Law & Justice, which won October’s ballot on a promise to bolster the state’s role in the economy, has changed top executives at three state-controlled utilities, the biggest insurer and the largest gas company. The government holds a 27.5 percent stake in Orlen.
If Jasinski picks an “exquisite” team to help him run Orlen, he will be a “very good” chief executive, Henryk Kowalczyk, an adviser to Prime Minister Beata Szydlo, said on Monday. He said the new chief executive, who formally quit parliament on Wednesday, has “national interests at heart.”
“The CEO change has been widely expected and the increase in the price today is rather a result of general market sentiment,” Lukasz Prokopiuk, an analyst at BOS brokerage, said by phone Thursday. “What’s also positive is that other management board members, who are highly rated by the market, haven’t been dismissed yet.”
Orlen almost doubled its market value to 27.3 billion zloty ($6.93 billion) under Krawiec, a former banker at Nomura International Plc and CEO at a local computer hardware distributor. The company, which operates refineries or gas stations in Poland, Lithuania, Czech Republic and Germany, ventured into oil and gas production as well as electricity generation during his tenure.
Krawiec managed to halve the company’s net debt from record 12.6 billion zloty to avoid breaching loan covenants after buying a refinery in Lithuania in 2006. The purchase, backed by then Law & Justice government, forced Orlen to post a record net loss last year as it wrote down the value of its Lithuanian operations.
Krawiec kept his post even after recordings of his conversations with then Treasury Minister Wlodzimierz Karpinski were released as part of the leaked tapes scandal in 2014. Karpinski and other recorded ministers left the government.
As margins from processing crude have recovered this year amid a slump in oil prices, the refining business returned to generating profits. Orlen is set to post a record profit of 4.7 billion zloty this year, according to analysts surveyed by Bloomberg. The stock has surged 35 percent this year, making it the best performer the WIG20 this year. Orlen has outperformed regional competitors Mol Nyrt. and OMV AV during Krawiec’s term.
“From all the oil and gas companies trading on the Warsaw bourse, political risk affects Orlen most,” according to Trigon’s Szlaga, who advises his clients to buy the stock.