Transcript EU ACCESSION AND MARKET LIBERALIZATION

ROMPETROL’S TURNAROUND OF
THE PETROMIDIA REFINERY
A Case Study in Sour Crude Processing in the
Black Sea
CERA—East Meets West
Istanbul, June 29, 2005
1
Table of contents
 The Rompetrol Group Profile
 Rompetrol History
 Privatization Attempts
 The Turnaround of Rompetrol Rafinare
 Structure of Romanian Oil Industry
 Difference between Rompetrol Rafinare and others
 Investigation into privatization procedures
2
The Rompetrol Group Profile









Largest Romanian group of private companies (2004 gross
revenues of $1.61 billion), representing almost 7% of state
budget revenues and 3% of GDP
32% share of Romanian refined products market
Domiciled in the Netherlands with worldwide operations and
assets (though mostly in Romania)
Owned by management
Financed principally by international banks; audited to IAS
standards
Mostly active in refining and marketing in the Balkans
One of the country’s largest exporters and taxpayers ($635
million in tax payments in 2004)
Core asset is 4.8 mta. (nameplate) capacity Petromidia refinery
north of Constanta
Listed on BSE since April 2004; market capitalization over $500
million; 20% weight in local index
3
Rompetrol – History
1974 - Established as the international
operator of the Romanian oil industry
1993 - Privatized by Management and Employee Buy
Out (“MEBO”) and turnover subsequently
reduced to below $6 million by 1998
1998 - Control purchased by Dinu Patriciu and local
investor group
1998 to 2000 - Series of synergistic acquisitions;
private equity investment
2001 to 2003 – Restructuring of management,
technology, finances and operations of
associated companies; strategic investment by
OMV (25.1%)
2004 to 2006 – Becoming a large integrated regional
low-cost producer of refined products;
disinvestment of OMV and access to capital
market
4
Petromidia Privatization Attempts
 Complexul Petrochimic Midia Navodari (the first name of Rompetrol Rafinare S A) was one of
the large oil refining plants which were built after 1975
In 1991, the entity was changed into a stock company which took over all of the assets of the
former unit
The Romanian Government attempted three privatizations of Petromidia
The first attempt was carried out in 1997 when the State Ownership Fund (SOF)
had discussions with Daewoo, Glencore and Petromidia USA
The second effort was made over July 1998 - January 1999 and resulted in a
sale/purchase agreement for 65.323% in Petromidia’s share capital to Turkish
investor Akmaya. Due to the disagreements between the Romanian authorities and
Akmaya regarding the additional incentives the Government re-slated the sale of a
controlling interest in Petromidia
In a third effort, SOF concluded an agreement with the Rompetrol Group N.V. on 31
October 2000. Actual transfer of the stake was subsequently performed on 26
January 2001
5
Rompetrol Rafinare
6
The turnaround of Rompetrol Rafinare
Old Petromidia
New Petromidia
State owned
Listed on RASDAQ $6mil
market cap
Financed by traders
Sweet crude slate
Low capacity utilization
(<1mta)
Highly indebted and with
historical tax arrears
Overstaffed (3600)
Privately owned
Listed on BSE with $500+ mil
market cap
Financed by western banks
Sour crude slate
High capacity utilization
(>3mta)
Reasonable leverage (e.g.,
40%)
Automation brings a smaller
staff (1200)
Unprofitable
Profitable
7
The turnaround of Rompetrol Rafinare
Crude Supply - considerations
Brent (Dtd)
Brent vs. Urals 2001-2005
Urals (Med)
$60
$55
$50
USD/bbl
$45
$40
$35
$30
$25
$20
$15
$10
Jan-01
Apr-01
Jul-01
Oct-01
Jan-02
Apr-02
Jul-02
Oct-02
Jan-03
8
Apr-03
Jul-03
Oct-03
Jan-04
Apr-04
Jul-04
Oct-04
Jan-05
Apr-05
The turnaround of Rompetrol Rafinare
Refinery Run
Used Capacity
Unused Capacity
Max.Capacity
Million mt / year
5.00
4.00
3.00
2.00
1.00
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
9
The turnaround of Rompetrol Rafinare
Feedstock - Product Quality
Sweet Crude
Sour Crude
Non-Euro Products
Euro Standard Products
Million mt / year
5.00
4.00
3.00
2.00
1.00
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
10
The turnaround of Rompetrol Rafinare
Refinery Staff
4,000
3,000
2,500
2,000
1,500
1,000
500
11
Jul-06
Jan-06
Jul-05
Jan-05
Jul-04
Jan-04
Jul-03
Jan-03
Jul-02
Jan-02
Jul-01
-
Jan-01
No.of employees
3,500
The turnaround of Rompetrol Rafinare
Evolution of MTBE % in unleaded gasoline
% MTBE
14
13.148
12
10
8.488
8
6.884
7.297
6
4
2
0
2001
2002
2003
12
2004
The turnaround of Rompetrol Rafinare
Gross revenues
EBITDA
Net profit
2,000
1,774
1,444
1,500
1,138
1,077
1,000
500
701
407
287
16
0
-10 -23
-75 -35
-74
86 11
122 71
-350
-500
2000
2001
2002 rest
13
2003
2004
2005
Structure of Romanian Oil Industry—Survival of 4 out of 5
Capacity (mta)
Name of
Refinery
Nameplate
2003
actual
Governance
Owner
Audits
Listing
Banking
Petrobrazi
3.5
2.8
Petrom
(OMV 51%)
Ernst
&
Young
BSE
ING, ABN
Amro, RZB,
Citibank,
BCR
Arpechim
3.5
2.7
Petrom
(OMV 51%)
Ernst
&
Young
BSE
ING, ABN
Amro, RZB,
Citibank,
BCR
Petromidia
4.8
3.3
TRG 79%
Float 21%
Deloitte
&
Touche
BSE
HVB, RZB,
Citibank,
BCR
Petrotel
3.8
0
Rafo
3.5
2.4
Total
19.10
11.20
Entire Nation
23.00
13.29
Lukoil
100%
Balkan
Petroleum
97%
14
NYSE
KPMG
Global
none
unknown
Financed
by oil
traders
Investigations into privatization procedures
 Interest groups are still active in Romania and
receive strong political backing
 PNA investigation started and ended last year—
charges were rejected and sent for investigation to
the General Prosecutor’s Office
 The General Prosecutor’s Office has launched an
investigation into the privatization of Petromidia
 Although we suspect the initiation of the
investigation was politically motivated, Rompetrol will
cooperate fully with the prosecutors all through the
process, which we hope will be:
 Professional
 Expeditious
 Apolitical
 Conclusions expected to vindicate the Rompetrol
Group and also to disarm special interest groups
15
What we are doing in response
 To prove our innocence we have been cooperating with prosecutors
and provided documents and answers that show no wrongdoing
 Rompetrol retained the services of a team of local and international
attorneys including international law firm Salans
 Rompetrol shareholders brought forth to the public attention the lack
of due process in conducting the investigation
 Local and international media and civil society have rallied in support
of principles such as presumption of innocence, fair and quick due
process free of political or economic interference
 Rompetrol shareholders are considering international legal action to
defend investments made in the company
 Rompetrol welcomes a swift and independent investigation conducted
with the observance of due process and respect for the justice process
16