PKN ORLEN submits bid for AB Mazeikiu Nafta
Today PKN ORLEN submitted a bid for the purchase of the 53.7% of Mazeikiu Nafta offered by Yukos International UK B.V. The bid also contains a declaration of a potential purchase, under the same terms, of the shares owned by the Lithuanian government.
The bid is conditional and dependent on meeting several legal conditions, including those concerning the formal and technical status of the logistics assets of Mažeikiu Nafta.
PKN ORLEN has carefully analyzed the conditions for the purchase of a controlling interest in the Lithuanian oil group Mažeikiu Nafta, using the stringent criteria for evaluating the investment as set out in the Group's strategy. This is targeted at achieving a high rate of return on projects. The analysis confirmed that, at the proposed price, the investment meets the assumed requirements.
Apart from the strictly business dimension, the investment also has a strategic significance in the context of building a zone of regional energy security encompassing both Poland, Lithuania and the Baltic states. The purchase of the controlling interest in MN will enhance the importance of the Group as a largest recipient of Russian oil.
Mažeikiu Nafta is an enterprise in good financial standing, located in a dynamic developing market, and characterized by high economic growth. In addition MN is a fully integrated refining plant, providing an opportunity to take advantage of the potential arising from the difference in Brent and Ural oil prices.
In PKN ORLEN's view the refinery in Mažeikiu has a key location in relation to the existing operations of the Plock based company. It provides an opportunity to enhance PKN ORLEN's position in the region and to secure further optimization of its current operations. It is possible to use the experience of PKN ORLEN in achieving synergies ensuing from the merging of operations in neighboring states. Moreover the purchase of Mažeikiu Nafta refinery would allow for an expansion of the production infrastructure and an increase in the processing capacities of the ORLEN Group, from 21 million tons to 31 million tons of crude oil per year.
PKN ORLEN intends to support the Mažeikiu refinery in the deployment of an investment program encompassing the implementation of modern technologies, an increase in the depth of refining, better use of production capacities, and a further shift in production towards products with higher profit margins. The Group also plans environmental capital outlays with a view to meeting the requirements as stipulated by EU regulations and an expansion of the business chain with complementary operations in the area of petrochemical operations.
Both companies can use their experience in sales management to optimize operations in the field of retail and wholesale trade in Poland, Lithuania and the Baltic states.
The planned investment in MN will not limit the Group's other investment plans, including those related to extraction operations, as presented in the updated Group Strategy for the years 2006-2009.
