In our opinion, not only did we not lose PLN 5 or 7 billion, but we also gained PLN 9 billion with this transaction – said Janusz Szewczak, member of the board of directors of Orlen, about the merger with Lotos.
Szewczak was critical of the Supreme Court conference devoted to the merger of Orlen and Lotos. He pointed out that NIK President Marian Banaś did not participate. – It was probably a wise decision, because President Banaś has already politicized the Supreme Court so much that there is a big problem when it comes to its credibility – he said.
As he explained, the NIK report on Orlen’s merger with Lotos “contains very serious methodological errors and uses data that has nothing to do with the actual situation.” – In our opinion, the report’s findings are worthless, with some political contention. They were intended to prove a predetermined claim that Lotos’ assets were sold at too low a price, Szewczak said.
Report of the Supreme Court of Audit. “Wrong methodology” and “extreme simplification”
According to Orlen, the Supreme Court of Audit used an incorrect formula and methodology when calculating the value of Grupa Lotos: “the product of the margin refinement model times the processing capacity times five.” – This formula is an extreme simplification. It is mainly based on historical data and does not take into account costs, future changes and their impact on results regarding the future of the company – said the vice president of the concern.
He added that all NIK calculations are based on Russian oil, and that since 2022 and the Russian attack on Ukraine, “everything has changed.” – But even by applying such a drastic simplification of this model margin, NIK could not avoid gross errors in the assumed assumptions. It is a mistake to view the model margin as an indicator of refinery profitability. Making such assumptions demonstrates a complete lack of understanding of the specific nature of the refining industry, Szewczak argued.
Model refinement margin. Did the inspectors count incorrectly?
He pointed out that “even on the Grupa Lotos website there is information that the model refining margin is a” hypothetical indicator and its values are not identical to the actual values of the refining margin obtained in the seasonally adjusted and optimized operation of the Grupa Lotos refinery .”
He went on to say that “the real margin takes into account, among other things, the cost of wages and other raw materials – apart from oil and gas, and also utilities.” In accordance with the methodology used by Lotos to calculate the model refining margin, all crude oil processed in Gdańsk was assumed to be Russian. Meanwhile, Russian oil use was around 65% at the beginning of 2022. and it was not a temporary phenomenon, Szewczak argued.
According to him, NIK used “manipulations that allowed to increase the value of Lotos in the report.” – Lower costs mean a higher margin and therefore, according to the Supreme Court’s methodology, a higher value of Lotos. In our view, this is a calculation that has nothing to do with Grupa Lotos’ refining margin, and the entire valuation structure was based on this, he said. According to Orlen’s vice president, this proves the “incompetence and ignorance of the industry” of the report’s authors.
Merger of Orlen with Lotos. “Without the merger, half of the Polish company would go bankrupt”
Szewczak also emphasized that the claim that the country’s fuel security has been reduced as a result of the merger is incorrect. NIK contradicts itself because it states at the beginning of the report that “the continuous supply of crude oil and fuels was assured during the audited period.” – Furthermore, the Supreme Court of Audit positively assesses the diversification of oil supplies. However, he did not want to point out that this diversification was possible thanks to the merger of Orlen with Lotos, he argued.
He added that it was thanks to this merger that “strategic agreements between Orlen and Saudi Aramco” were concluded. – This contract gave us 45 percent. demand from the entire Orlen Group, including Lotos. The strategic partnership with Aramco, which offers us oil with parameters similar to those in Russia, has allowed us to safely leave Russian oil behind at a very critical moment, he explained.
– If there had been no merger, if it had not been possible to negotiate the supply of 20 million tons of crude oil, half of Poles would have had to leave their cars in the garage, and half of Poland company have gone bankrupt,” Szewczak said, emphasizing that Orlen managed to convince the Saudis, who “like to act on their own,” to do business together. – They found us a reliable partner – he added.
Szewczak: We didn’t lose 5 or 7 billion PLN. We won 9 billion PLN
– I have one more comment that may surprise you. We will give a very detailed calculation of what I am going to say. In our opinion, not only have we not lost PLN 5 or 7 billion (…). In our opinion, we gained PLN 9 billion from this transaction and we can prove it, Szewczak said.
Source: Do Rzeczy
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.