Croatian INA Fails to Agree on Closing Sisak Refinery

INA Industrija Nafte d.d., Croatia’s largest energy company controlled by Hungarian Mol Nyrt., failed to reach a decision on whether to close its Sisak refinery in a dispute with the second largest shareholder, the Croat government.

Split by a three-year feud over how to run INA, the management board, in which Mol appointees have a majority, met to decide the fate of the unprofitable refiner. As hundreds of Sisak’s workers gathered at the Zagreb headquarters to protest the possible closing, the meeting lost a quorum when three Croat board members walked out, newspaper Jutarnji List reported on its website, without citing anyone.

“The decision was delayed until some future time,” INA spokeswoman Tamara Karagity said by phone in Zagreb, without elaborating. She declined to comment on the Jutarnji report.

Shutting down Sisak, which the Croatian government wants to remain open, may further polarize a clash between INA’s main owners that has snowballed since Mol took control of the Zagreb-based company in 2009. The tussle over INA has led to tit-for-tat legal challenges and soured ties between newest European Union member Croatia and its neighbor Hungary, whose prime minister, Viktor Orban, has defended Mol’s actions.

Court Cases

Croatia has tried to wrest back management oversight since 2011, a year before a court sentenced former prime minister Ivo Sanader for corruption over his role in the sale. A Zagreb court has also raised an international arrest warrant for related charges against Mol Chairman Zsolt Hernadi, who maintains his innocence and is expected to be tried in absentia.

A similar suit against him in Hungary was dismissed. Both sides are also pursuing arbitration in international courts following months of fruitless negotiations.

INA shares closed at 3,950 kuna on the Zagreb stock exchange, the lowest since Sept. 22. Mol stock closed at 12,225 forint in Budapest, the highest in last three days.

Croatia owns 44.84 percent of INA; Mol holds 49.1 percent. Croatia accuses Mol of mismanaging the company, while Mol says the government has not met the terms of the sale contract because it hasn’t taken over INA’s unprofitable gas unit.

The Sisak refinery, 50 kilometers (31 miles) south of the capital Zagreb, can process 44,000 barrels of oil a day and employs about 700 people. Along with INA’s larger refinery in Rijeka, on the country’s Adriatic coast, Sisak contributed to INA’s 1.5 billion-kuna ($211 million) 2013 loss amid weakened demand for oil derivatives in the region, Saravanja said on state TV.

‘Unacceptable, Absurd’

Economy Minister Ivan Vrdoljak, who heads Croatia’s negotiating team in talks with Mol, told state TV the closing of Sisak would be “unacceptable and absurd” as the country expects to award new oil- and gas-exploration concessions.

Croatia began tenders earlier this year for hydrocarbon exploration onshore and in the Adriatic sea in a search for revenue to combat the effects of a recession that is seen stretching into a sixth year.

INA is considering taking part in an offshore exploration tender that closes in Croatia on Nov. 3, Zoltan Aldott, head of the company’s management board, said in an interview in July.

“I believe that any decision on the closing of the refinery would be a pure economic one,” Oleg Galbur, oil-and-gas analyst at Raiffeisenbank Centrobank SA, said by phone from Vienna. “Both refineries are not the best in profitability, and these are challenging times for European refiners.”

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