Is the sale of the shares in Rompetrol stuck at the level of Ministry of Finance?

The sale to KazMunayGaz (KMG) of about 25% of the shares owned by the Romanian government in Rompetrol Rafinare in exchange for 200 million dollars may be stuck in the Ministry of Finance, sources close to the situation say. The Ministry would like the government to sell the rights which are under dispute in the case of Rompetrol, rather than some of the shares it owns.

The deal between the Romanian state and KMG, the shareholder of Rompetrol Rafinare, was heavily criticized by economic analysts, as it was considered a bad deal for Romania.

The Government is now trying to fix up the mess, by selling half of the stake it owns in Rompetrol Rafinare, and calculates that at the same time it will also lose about 440 million dollars of the total debt and hoping that it would get the amount back in time, thanks to its stake in the investment fund which KMG will create.

The draft law concerning the trade between KazMunayGaz and the Romanian government, which was announced in February 2013, needs to get all the necessary clearances before going before the Parliament for approval, and the ministry of Finance has not yet approved it, the quoted sources say.

In the draft law agreed upon by the OPSPI and KazMunayGaz, the conclusion of the deal is subject to the Romanian state dropping the lawsuits against Rompetrol and the creation of an investment fund, in which the government would become a shareholder together with KazMunayGaz, for projects which the Rompetrol group will conduct in Romania and in the region. The Kazakh company will pay 30 million dollars in the accounts of the state, in order to participate in this fund. As a shareholder, the Romanian state will receive all the benefits resulting from the operations of the future fund.

On Friday, in Constanţa, PM Victor Ponta has reached an agreement with Rompetrol on the receivable owed by the company, and one of the significant investments could be made in the refinery of Năvodari: "An agreement has been reached, which meant 200 million dollars for some of the shares, and the dropping of the lawsuit. But what is more important than the 200 million dollars in the obligation of KazMunayGaz to create an investment fund of 1 billion Euros in Romania. The first important investment which I think will only take place in the current refinery and further down from the Năvodari terminal, of Midia. One billion dollars that gets invested in Romania is a very good thing and I will do the same thing for all other companies looking to invest in Romania".

In 2003, the government, through the Ministry of Public Finance, subscribed in bonds issued by Rompetrol Rafinare Constanţa with a total value of 2,177,699,871.86 lei (about 600 million dollars), by canceling some debts the company had towards the state budget. The maturity for the buyback of the bonds was set for September 30th, 2010. Shortly before the bonds coming to maturity, Rompetrol Rafinare paid 70 million dollars to the Romanian government, and then the General Shareholder Meeting of Rompetrol Rafinare decided to increase the share capital of the company by 1.971 billion lei. As a result, the government once again became the shareholder of Rompetrol Rafinare.

At the time, the Ministry of Finance rejected the solution of KazMunayGaz for extinguishing the debt of Rompetrol, as it claimed that it would either have to receive the payment in full, or just receive stocks with a value equal to the amount of the debt. As a result, the government sued Rompetrol and losts the lawsuits in the first circuit.

Following the loss of the lawsuits, at the end of last year, the government decided the transfer of the shares it received from Rompetrol Rafinare (44% of the share capital) from the Ministry of Finance to the OPSPI, therefore implicitly acknowledging, according to several lawyers, that the debt had been fairly extinguished, through the combined solution (the payment of one amount and the receipt of a the shares). The lawsuits filed by the government against Rompetrol were suspended in order to find an amicable solution.

The Kazakh state is not willing to pay the face value of the historic debt of "Rompetrol", Remus Vulpescu, the representative of the Romanian government on the Board Of Directors of Rompetrol Rafinare told BURSA, at the end of February. In his opinion, the escalation of the lawsuit between the Romanian state and KazMunayGaz could lead to a conflict which would be bad for every party involved.

At the time, Remus Vulpescu told us that a compromise solution which would be acceptable to both parties would allow the beginning of new investments and the Romanian state to collect further revenues to the state budget whose annual amounts would be greater than the initial historic claim, at least in the future, after a few years of deadlock which was harmful to both countries.

In his opinion, if correctly handled, the potential for cooperation between Romania and Kazakhstan, could bring an additional 400-500 million Euros (500-600 million US Dollars), a year, as a result of the impact of the new investments.