Polish state-owned oil and gas company, PKN Orlen, has started proceedings to takeover PGNiG Group in a huge consolidation move by the Polish state.
The State Treasury, represented by the minister of state assets, and PKN Orlen announced on Tuesday a Letter of Intent (LoI) was signed regarding the acquisition of PGNiG, Kallanish Energy reports.
The announcement comes after the European Commission issued a conditional approval for PKN’s takeover of Grupa Lotos, another Polish state-run oil company. These proposed transactions follow PKN’s acquisition of Energa Group last year.
The goal is to create “a powerful global multi-energy group in Poland,” said Poland’s deputy Prime Minister and minister of state assets, Jacek Sasin. “The consolidation of state-owned companies is our response to the increasingly demanding environment.”
Polish Prime Minister Mateusz Morawiecki said the takeover is “a breakthrough process that will increase the efficiency of both PGNiG and PKN Orlen,” generating “synergies on costs.”
The new state energy giant is set to play a crucial role in Poland’s energy transformation, which the government describes as a “big challenge.” The consolidated enterprise led by PKN would generate annual revenues of PLN 20 billion.
PKN roughly estimates that 40% of the new company’s operating profit would come from the core business of refining and petrochemicals; 20% from upstream; 15% from retail of fuel, energy, and gas, plus distribution; and 10% from power generation.
However, some analysts believe the strategy is strictly political with little benefits for both companies. Investors had expected PKN to buy PGNiG if the Lotos deal fell through, not in addition to that acquisition.
PGNiG, a key natural gas player in Poland and in Central Europe, hasn’t commented on the matter.
Under the terms of the LoI, “the transaction model and schedule will be developed by a team consisting of representatives of the parties to the agreement.” The transaction is also subject to regulatory approval from competition authorities, including the European Commission.
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