Mol Fights Croatia’s Bid to Retake Control of National Oil Group
Hungarian oil and gas group Mol Nyrt. will try to fend off an attempt by Croatia’s government to reassert control over the country’s $7.3 billion refiner in talks due to start today.
Croatia owns 44.84 percent of the Zagreb-based INA Industrija Nafte d.d. and wants to renegotiate a 2009 deal that gave Mol control over INA after a judge ruled it was signed in an “act of corruption” under Prime Minister Ivo Sanader. Mol, with 49.1 percent in INA, said last week it would not cede control even if it may consider some changes to the deal.
Croatian officials complain Mol has resisted investing in INA and is running it as a subsidiary rather than a stand-alone company. Mol threatened to sue the Adriatic nation for 2 billion kuna ($351 million) if the talks are not successful because Zagreb has not made good on its 2009 pledge to take over INA’s money-losing gas unit. INA produced 38 percent of Mol’s hydrocarbon output in the first half of 2013.
“Clearly the negotiations will be tough, since the Croatian authorities have put forward a number of requests, and Mol doesn’t want to lose its control over INA, which has important upstream assets,” Oleg Galbur, analyst at Raiffeisen Centrobank AG, said by e-mail. “In my opinion, both parties realize that a break-up would represent a negative outcome for them,” said Galbur, who has a hold rating on Mol.
Croatia’s government wants to discuss management, cost control, investment, profit sharing, exploitation, refining and other issues in INA, according to an agenda posted on its website. Talks begin at 10 a.m., according to Tomislav Cerovec, spokesman at the Economy Ministry.
Mol first bought into INA in 2003 and increased its stake in the 2009 agreement. Successive governments in the European Union’s newest member have since struggled to reverse the contract arranged by Sanader, who quit office in July of that year and was later convicted of bribery and abuse of power.
“We are seeking a new model to run INA, where control would be proportional to shareholdings,” Ivan Vrdoljak, Economy Minister and head of Croatia’s negotiating team, said in an interview on Sept. 5.
Sanader, who was sentenced to 10 years in prison, is appealing the verdict, and Mol has denied any wrongdoing.
The Supreme Court is expected to rule on the appeal in the coming months. Should the Supreme Court uphold the verdict in Sanader’s case, Croatia may seek to annul the contract which, according to Prime Minister Zoran Milanovic, “the former government signed in a very unusual way.”
“There is a legal procedure against the person who signed that contract, who was prime minister at that time, and who was pronounced guilty in a non-binding verdict,” Milanovic told reporters yesterday in Zagreb. A confirmation of the verdict raises the “possibility of nullifying the contract.”
The prosecutors said they may also pursue further action, including an EU-wide arrest warrant. Mol considers Croatian allegations against Hernadi to be “unfounded,” a Mol spokesperson said on July 11.
Mol supervisory board chairman Gyorgy Mosonyi said last week the company may consider some changes to the shareholding agreement, such as over veto rights. He said Mol won’t give up management control in INA, adding he was confident differences between the two shareholders can be resolved.
The Croatian government says that “Mol doesn’t run INA in INA’s best interest,” Jasminko Umicevic, an analyst at London-based Oil and Gas Consulting International LLP and a former INA manager, said in a Sept. 5 interview.
Failing to reach an agreement with Croatia, Mol may be forced to sell its stake, Peter Szentirmai, a Budapest-based analyst at KBC Groep NV (KBC) unit KBC Securities, said by phone.
“Such a robust change wouldn’t necessarily be positive for Mol, with the final outcome hinging on the price it would get for the INA stake,” said Szentirmai, who has a sell rating on Mol.
Croatia has contacted Russia’s OAO Rosneft as a potential buyer of Mol’s stake and part of the government’s stake as a way of solving the dispute, Bloomberg reported on Sept. 6, citing people familiar with the matter.
The office of Prime Minister Zoran Milanovic on Sept. 9 said the government is not in talks with the Russian company over selling the state stake.
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