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Rompetrol saga, chapter about money: Government asks KazMunaiGaz to pay the historical debt and demand settlement of case in court

de Adrian N Ionescu , 20.11.2017

The extension of the memorandum between the Romanian state and KazMunaiGaz, the owner of the Rompetrol Group, will be discussed only after the company’s historical debt will be paid to the state and the case settled in court, according to a press release issued by the Ministry of Energy.

The energy ministry says the Government has informed the Kazakh group of the decision taken after a meeting of Prime Minister Mihai Tudose on Thursday with a delegation of KazMunaiGaz, the owners of Rompetrol Group, and a delegation of Chinese CEFC, the company that will take over the majority stake in KMG International (KMGI).

“In the meeting attended by the ministers of Energy, Economy and Finance, they discussed the future of the memorandum signed in 2013 between the Romanian state and KMG. Following the discussion, the Romanian Government informed KazMunaiGaz that two conditions must be met to discuss a further extension of the provisions of the memorandum concluded four years ago:

  • the payment of the company’s historical debt to the Romanian state and
  • the settlement of the case in court,” the press release states.

Prime Minister Mihai Tudose stressed that the two conditions must be met cumulatively, otherwise the Romanian state will no longer be able to consider the agreement from 2013, according to the quoted source.

On the other hand, Azamat Zhangulov, Senior Vice President of KazMunaiGaz, said on Friday he received the confirmation from the Government representatives that “things will be sped up and we will see quick solutions” on the memorandum.

The memorandum expires on December 31, 2017, after being extended several times and stipulates:

  • the sale by the state of a 26% stake in Rompetrol Rafinare, which KMGI has committed to acquire with USD200 million
  • the establishment of a USD 1 billion joint investment fund in the energy field, the details of which are still unclear.

The terms of Rompetrol Rafinare’s privatization, namely the memorandum on the payment of Rompetrol’s debt to the state, initially transformed into bonds (2003), drew the attention of DIICOT, which opened two criminal cases and decided a seizure of EUR 600 million on Petromidia refinery’s assets, the company’s gas stations.

Azamat Zhangulov said on Friday that the Kazakh side keeps its commitments but a timetable for the implementation of the memorandum is to be issued by the Ministry of Energy in a week or two.

History

1998 – FPS sells to Dinu Patriciu the Rompetrol refinery for USD 50.5 million. Rompetrol commits to take over the petrochemical plant’s debts of USD 340 million to the state and invest another USD 225 million in the refinery’s modernization.

2003 – Nastase government regulates the Romanian state’s subscription of all Rompetrol Rafinare (RRC) bonds resulting from the conversion of a USD760 million claim of Petromidia refinery.

The state, through MFP, subscribed bonds issued by S.C. Rompetrol Rafinare S.A. Constanta totalling ROL 2,177,699,871.86, by cancelling the budgetary obligations representing the VAT, excise duty, contribution to the Special Fund for Public Roads, as well as late the payment interest, interests, penalties and the interest on the account of late payment- due and unpaid by SC Rompetrol Rafinare S.A. Constanta. The maturity of the bond repurchasing had been set at September 30, 2010, when the General Shareholders Assembly of Rompetrol decided to raise the company’s share capital by ROL 1,971 billion.

2007 – Dinu Patriciu sells KazMunaiGaz business for USD 2.7 billion. The Government approved in May 2013 by a draft law the memorandum of understanding between the Romanian state and Rompetrol Group N.V. (TRG), signed in Bucharest on February 15, the same year, according to which TRG was to buy 26.6969% of the shares issued by Rompetrol Rafinare from the Office for State Ownership and Privatization in Industry (OPSPI) for USD 200 million.

USD 175 million was the sale price, and USD 25 million represented the premium agreed by the parties for TRG to acquire the absolute vote majority in RRC (Rompetrol Rafinare-Petromidia – editor’s note).

The Romanian state was to maintain an 18% undivided share for 3 years, “and after the expiration of this period, it will be able to implement a new privatization procedure for selling it,” the Government Press Office said then.

After the expiry of the ban period for selling the 18% stock, OPSPI had the right to have all or part of the remaining shares at its disposal, and TRG continued to have the first option on buying it.

The document also provided for the establishment of a USD 1 billion investment fund with a participation of the Romanian state in the form of a joint stock company to invest in energy projects in Romania. According to the memorandum, The Rompetrol Group (80%) and the Romanian State (20%) will establish a Fund aiming at investments in energy projects in Romania.

The court actions initiated by the Ministry of Public Finance have been rejected and the request to cancel the conversion of the bonds that have not been repurchased into RRC shares under the provisions of OUG 118 approved by Law 89/2005 has been dismissed by Constanta General Court by final and enforceable decision.

At the same time, the request of The Rompetrol Group for Romania to be ordered to pay damages totalling USD 185.385 million was dismissed by the arbitration award issued by the International Arbitration Court of the International Centre for the Settlement of Investment Disputes in Washington.

According to the arbitration award, both claims for material damages of USD 139.385 million and moral damages amounting to USD 46 million have been rejected. The arbitral tribunal concluded that the evidence submitted by the applicant did not support the request for a finding of a harassment campaign organized by the Romanian state, a press release issued by the Ministry of Finance said.

2016 – China Energy Company Limited (CEFC) bought the majority stake in KMG International, the new name of the old Rompetrol Group.

CEFC committed to investing around USD 3 billion over the next five to ten years in Romania and KazMunaiGaz to bring about 125 million tons of crude oil to Petromidia refinery over the next 15 years.

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