On A State-Guaranteed 330 Mio EUR Loan, RAFO Could Secure Financing For Investments In Autumn

• Management contemplates sale of the 43 fuel stations

Ştefania Ciocîrlan

RAFO - Onesti (BSE:RAF) could receive the funds necessary for modernizing the refinery in early October at the latest, as the Government has given positive feedback to the request for a State guarantee for a 330 million EUR loan required for this purpose, Rafinorul Onesti Union leader Ion Marian told BURSA.

"If we do not get stuck again, and I am sure that we will do well, we may obtain a credit line in late September or early October this year," Marian further told BURSA, adding that the company"s initial hopes for financing had been shattered in October 2008, when the financial crisis had started. "We have had a several favourable discussions with the banks regarding a loan, but no bank was willing to give us the money we needed after October 2008," said the leader of the Rafinorul Onesti Union.

• State may come to the rescue

RAFO"s financing problem seemed solved after the management took the matter to the Prime Minister in late March 2009. On 23 March, a delegation from RAFO comprising Iakov Goldovskiy, the representative of the majority shareholder, Miroslav Dermendjiev, the CEO of RAFO, Andrei Yurkevvich, the CFO of RAFO and Ion Marian, the leader of the trade union of RAFO, were received by Prime Minister Emil Boc to discuss the possible issuance of State guarantees for a loan required for the investment plan scheduled to be completed until early 2010. RAFO"s main argument was that they had no overdue debts to the State or any supplier, according to a press release issued by the company at the end of that meeting. The Prime Minister decided that RAFO"s request should be reviewed by an inter-ministerial committee and that the refinery could receive, in principle, a governmental guarantee to open a credit line. If the financing is secured, RAFO"s staff could reach 4,200 employees.

The refinery was closed in February 2008 pending preparations for the modernization programme. "For the time being, all industrial processes have been stopped and the refinery is empty of any oil by-products. We are currently partially working on its modernization," Marian told BURSA, adding that, with the necessary financing in place, RAFO could hire 3,000 people in addition to the existing 1,200 employees. "As soon as the money is available, we will start the retooling process at full speed and probably reach over 4,200 employees," he added.

The modernization and retooling programme is intended to improve oil processing efficiency and upgrade installations to EURO5 grade, as per the European Union requirements. Additionally, RAFO wants to replace gasoline production with benzene and paraxylene production. The shift in production plans is motivated by the constant decrease in gasoline consumption in Europe and a number of technical reasons, as RAFO was initially designed as a supplier of raw materials to the petrochemical industry. When the modernization programme is completed, RAFO could also decide to sell all of their fuel stations. "The 43 fuel stations owned by RAFO have been recently appraised. After the refinery is restarted, a decision will be made whether to sell them or not," Marian said.

RAFO has a market value of 2.01 billion RON, calculated based on the price of 2 RON/share logged in early July. Calder International BV holds 35.98%, followed by Petrochemical Holding with 31.87%. Balkan Petroleum Ltd. has 20.98%. RAFO commenced judicial reorganization on 8 December 2004.