THE SHARE CAPITAL INCREASE WITH THE PLOTS OF LAND CONTRIBUTED BY THE STATE  The government and Petrom have been ignoring the Court of Accounts for seven years, and it is giving them another respite

In its 2014 audit, the Court of Auditors has found that the state had still not implemented the obligations which the Court had set for it back in 2009, concerning the share capital increase of "OMV Petrom" by the amount of the plots of land for which the company has obtained a deed of ownership.

In 2014, the Romanian authorities gave Petrom an ultimatum concerning the share capital increase, and the management of the company has committed to make the due diligence, but the share capital increase has nevertheless been left hanging.

In August 2015, "BURSA" wrote that what was at stake was the price which OMV would have to pay to keep its 51% share in the capital of Petrom, because the contribution in kind will be booked on the account of the Romanian state.

The law requires companies to increase their capital by the amount of the plots of land that become their property, but there are two laws that regulate the evaluation method and they result in different valuations.

Some sources said in August, that OMV was willing to subscribe 12.7 million Euros in the increase of the capital of "Petrom", according to the market value of the plots of land, calculated at the time of the share capital increase, whereas the state's numbers put the amount Petrom would have to subscribe at 50 million Euros.

Even though the problem has not been resolved, it would seem that in the new government, everyone is keeping silent about it, at least for the moment.

The Court of Auditors itself doesn't seem too eager to sort things out. After is enumerates, on two pages, which of the obligations it had set 2009 have been violated, the Court of Accounts itself merely settles for a new postponement: "Given the presented state of things, an extension of the deadlines for the implementation of the measures taken".

The 2014 report of the Court states: "In the case of the verification of the fulfillment of the obligations set by the Court of Accounts through the decision issued in 2009, pertaining to the elimination of the irregularities uncovered following the «Audit on whether the parties have fulfilled their contractual obligations stipulated in the privatization contract of SC Petrom SA», conducted at the Office of the State's Interests and Industrial Privatization, it has been found that the implementation of the required measures has not been finalized (...) namely: the initiation of the actions for the Buyer (ed. note: OMV) to increase the share capital of the company with the updated amount, according to the legal provisions in effect, equivalent to the plots of land for which SC PETROM SA has obtained deeds of ownership, as well as the transfer of the pertaining block of shares to the portfolio of the institution which has attributions in the field of privatization, which manages the stocks on behalf of the state".

The Court has also found that steps have been taken to the obligation set through the Decision made in 2009, measures which have not been completed, but this is in the context where: "- SC OMV Petrom SA did not receive the certificate to prove the right of ownership for every plot of land transferred to the company by the Romanian government for the purposes of management and use; - the share capital of SC OMV Petrom SA has not been increased with the updated amount, according to the legal provisions in effect, of the plots of land with a total surface of 1386 hectares, for which the company has obtained 1873 deeds of ownership, and it has not transferred the afferent block of shares to the portfolio of the public institution with privatization roles which manages the shares on behalf of the state, even though the deadline for following this action, as stipulated in the privatization agreement, was three years from the Date of the Signing (December 14th, 2007)".

According to the quoted report, the Department for Energy -The General Division for Privatization and Management of the Energy Interests of the State has drawn up, in 2014, the MEMORANDUM called "The status of the increase of the share capital by the amount of the ownership deeds obtained by SC OMV PETROM SA", approved by the Romanian government in April 2014.

Through the MEMORANDUM, the Department for Energy is proposing: "Given the aforementioned facts, we submit for analysis and decision the approval for resuming correspondence and talks with OMV Aktiengesellschaft concerning the possibility of modifying the contractual provisions and, if this agreement is secured, the initiation of a law to change the provisions of the Law no. 555/2004 concerning some measures for the privatization of National Oil Company "Petrom" - SA Bucharest, as well as the mentioning in the General Shareholder Meeting of the aforementioned problems, because by this time the decisions of the Romanian Court of Auditors concerning the plots of land transferred to OMV Petrom by the Romanian state for management and/or use have not been implemented".

Nevertheless, the Court of Accounts has found that no progress has been made on these actions.

The issue is also of interest for the Proprietatea Fund, which has announced last year that it is reviewing strategic options for a potential decreased of its stake in OMV Petrom below 15%.