Sunday, 17 March 2019

Croatia's INA Oil Company Expands Retail to Montenegro

ZAGREB, March 17, 2019 - Croatia's energy group INA, whose biggest shareholders are Hungary's MOL with just below 50 percent and the Croatian government with an almost 45 percent stake, has expanded its retail network in Montenegro by acquiring five new locations from petrol station chain Pavgord.

The locations include the capital Podgorica and the Adriatic city of Kotor.

INA will now operate 11 petrol stations in Montenegro, increasing its market share to 15 percent from just one percent in 2017.

The company says its medium-term goal is to become a major player in the Montenegro market.

The INA oil and gas company generated a net profit of 1.18 billion kuna in 2018, down 3.7% from 2017, its financial statement showed.

Total revenue increased by 19.5% to 23.35 billion kuna, while expenditure reached 21.83 billion kuna, up 21.5% on the year.

EBITDA rose by 3.0% to 3.49 billion kuna and net sales revenue increased by 20% to 22.35 billion kuna. Capital expenditure amounted to 1.82 billion kuna, an increase of 30% on the year.

More news about INA can be found in the Business section.

Friday, 22 February 2019

INA Reports 3.7% Lower Net Profit in 2018

ZAGREB, February 22, 2019 - The INA oil and gas company generated a net profit of 1.18 billion kuna in 2018, down 3.7% from 2017, its financial statement showed on Thursday.

Total revenue increased by 19.5% to 23.35 billion kuna, while expenditure reached 21.83 billion kuna, up 21.5% on the year.

EBITDA rose by 3.0% to 3.49 billion kuna and net sales revenue increased by 20% to 22.35 billion kuna. Capital expenditure amounted to 1.82 billion kuna, an increase of 30% on the year.

The positive business results were driven by growth in all segments, particularly due to higher hydrocarbon prices and higher sales.

Sandor Fasimon, president of the management board, said that the INA Group had once again achieved a very strong result.

INA utilised the market conditions and increased both its sales and EBITDA, with revenues growing by a further 20% on the strong 2017 result to over 22 billion kuna. Upstream, as the main cash generator of the company, benefited from the increased Brent price, Fasimon said.

He warned that the natural decline of the production remains a challenge due to the maturity of company's upstream assets, adding, however, that multiple projects aimed at addressing this were underway.

He said that downstream operations remain burdened with the negative cash generation of refining operations, but that the increase in capital expenditure showed INA's commitment to maintaining a vertically integrated business model. The group's capital expenditure increased by 30%, mostly in refining.

As for retail operations, Fasimon said that the expansion of the network in Montenegro was evidence of INA’s future focus on regional markets.

More news on INA can be found in the Business section.

Wednesday, 20 February 2019

Government Accused of Selling INA to Hungary

ZAGREB, February 20, 2019 - Social Democratic Party (SDP) members of parliament on Tuesday defended for more than four hours about 300 amendments they submitted to the INA Privatisation Act, dissatisfied with the fact that it is being discussed under fast-track procedure, telling MPs of the ruling HDZ party that the government was turning over INA to the Hungarian energy group MOL and betraying national interests.

"This law regulates the privatisation of Croatia's biggest company and requires a serious and comprehensive debate. But the government has changed its approach, organising a public consultation... during the Christmas holidays, and it did not even last for the full 30 days, after which the amendments were submitted to be discussed under fast-track procedure," said Social Democrat Peđa Grbin.

He said that the government's claim that the purpose of the bill was to align the law with EU rules was not true.

"The fact that the European Commission considers a law as not being in line with EU law does not mean that that is true. The EC is not the one to make decisions on whether laws are in line with EU law, that is what the EU Court of Justice does," said Grbin, criticising the government for not even trying to prove that the existing law was not in line with EU law.

"A normal country and a normal government should define the energy development strategy. Judging by the information at hand, we cannot see any ambitious energy strategy plan," SDP MP Sinisa Hajdaš Dončić said, expressing concern about the country's energy sovereignty.

Another SDP MP, Željko Jovanović, said that the HDZ's election slogan "Credibility" was totally missed, recalling that two governments had fallen over INA (both were HDZ-led governments, one led by Ivo Sanader and the other by Tihomir Orešković, a PM chosen by former HDZ leader Tomislav Karamarko), adding that he hoped the HDZ would lose the next election over INA again.

"If this government had a plan, the PM would not have just said, off the top of his head, on Christmas 2016, that 'INA will be restored to Croatian ownership'," SDP MP Sasa Đujić said, claiming that the government was betraying national interests.

Objecting that the amendments envisage two Croatian government representatives overseeing INA's operations while currently Croatia has three seats on the INA management board, MP Domagoj Hajduković wondered if the proposed amendments were a result of arrangements between Hungarian Prime Minister Viktor Orban and PM Plenković.

"The Croatian government's representatives will continue to sit on INA's management board as will two independent members," State Secretary for Energy Ivo Milatić said, rejecting the SDP's amendments.

In an ironic remark to a recent statement by President Kolinda Grabar-Kitarović, SDP MP Predrag Matić said that "the President has discovered that corruption in Croatia dates back to the times of the Habsburg monarchy, while the HDZ is making it possible for us to return there.

"In the 1990s we sold our banks to Austrians, we will now sell INA to Hungarians, and chances are we will again be living in the Habsburg monarchy," he said.

SDP MPs said they would insist on a vote on their amendments. "You don't have to accept the amendments. It is clear to everyone that they were submitted to point to a problem. Accept our proposed conclusion and let us have a second reading on the bill," said Grbin.

The INA Privatisation Act, which went into force in 2002, defines the company's privatisation. The current bill of amendments changes Article 10 under which Croatia has the exclusive right of control over changes in the company's ownership structure as well as the right to veto certain decisions of the company's management and the right of pre-emptive buying of the entire company or parts thereof at an estimated market price in case the process of its liquidation is launched.

Under the bill, a party acquiring INA shares and wishing to own an interest of more than 50% should inform the relevant minister about this and submit to the minister a long-term business management plan.

Based on the minister's opinion, the government makes a decision on its consent for the acquisition of shares within a 30-day period.

The government can withhold or withdraw its consent if it decides that it constitutes a serious threat to public security and puts the country at serious risk of losing secure, reliable and regular energy supply.

More news on the INA-MOL issues can be found in the Business section.

Monday, 18 February 2019

Sanader’s INA-MOL Corruption Trial Resumes

ZAGREB, February 18, 2019 - A Zagreb County Court panel on Monday dismissed a motion for their recusal filed by the defence of former prime minister Ivo Sanader in the INA-MOL corruption trial, in which the other defendant is Zsolt Hernadi, CEO of the Hungarian energy company MOL, who is beyond the reach of the Croatian authorities.

Panel president Maja Štampar Stipić also dismissed a motion to postpone today's hearing, filed by Sanader's new court-appointed attorney Nikola Drobac. Instead of three months he had requested to familiarise himself with the case, he was given one month.

The panel found that with their motions, the defence was trying to stall the trial.

Judge Stampar Stipic adjourned the previous hearing on February 8 because Sanader's counsel had not shown up and chose a lawyer for him, which Sanader called a gross violation of his constitutional rights and fundamental freedoms. Today he again claimed that the court's choosing a lawyer for him violated his minimum rights to a defence.

In the INA-MOL case, Sanader was already convicted to 10 years in prison for taking a bribe from Hernadi, but the Supreme Court reduced the sentence to 8.5 years. The ruling was eventually quashed by the Constitutional Court.

The USKOK anti-corruption office accused Sanader of giving controlling rights in Croatian energy company INA to MOL for EUR 10 million and of arranging with Hernadi the divesting of INA's unprofitable gas business.

Former INA supervisory board chair Davor Štern testified in court on Monday that the energy company's management was "only formal" and that its Hungarian peer MOL made all the decisions without seeing to INA's interests.

"INA's management was only formal because all decisions were made by the board of executive directors, and one could also hear that closing down the Sisak refinery was widely discussed already in the 2009 contract amendments. MOL had 44% ownership and practically made every decision, without seeing to INA's interests," said Stern.

More news on the INA-MOL case can be found in the Business section.

Wednesday, 13 February 2019

Do Proposed Amendments to INA Law Favour MOL?

ZAGREB, February 13 2019 - The chairman of the ruling Croatian Democratic Union's (HDZ) parliamentary group, Branko Bačić, on Wednesday dismissed the opposition's claims that the proposed amendments to the INA Privatisation Act favoured the Hungarian energy group MOL to facilitate INA's privatisation, stressing that the purpose of the proposed amendments was to further protect national interests in the Croatian oil and gas company.

"There is not a single provision in this bill that reduces the influence and importance of government representatives and members of INA's bodies. On the contrary, their influence and importance is strengthened. This position has been brought into accord with the EU's acquis communautaire, which means that after the adoption of the bill there will be no reason any more for the European Commission to ask Croatia to change its actions in INA's bodies," Bačić said in response to questions from the press after a meeting of the HDZ group.

Bačić said that the proposed bill of amendments would ensure full protection of Croatia's interests in INA with regard to oil supply and its relationship with the strategic partner. He noted that the proposed amendments did not give MOL any new position that could lead to changes in the relationship between the government and the strategic partner.

Asked why this bill was being considered under fast-track procedure, Bačić said that the bill had been talked about in public for years, that countless debates had been held in parliament and government meetings, and that all issues in that regard had been discussed.

Asked if the HDZ had the support of all coalition partners for amending the INA Privatisation Act, Bačić replied in the affirmative.

More news on the INA-MOL situation can be found in the Business section.

Wednesday, 6 February 2019

Croatia Waiting for ICSID Ruling in Case Brought by Hungary's MOL

ZAGREB, February 6, 2019 - Arbitration proceedings which the Hungarian energy group MOL has launched against Croatia before the International Centre for Settlement of Investment Disputes (ICSID) in Washington are still ongoing and a ruling is pending, and Croatia has contested the jurisdiction of the arbitration tribunal in Washington in all arbitration proceedings initiated against it based on investment protection agreements with EU member states or the Energy Charter Treaty, the government said in response to a query from Hina on Wednesday.

MOL launched arbitration proceedings before the ICSID in late 2013, arguing that Croatia had failed to honour its commitments from the main agreement on gas business and its annexes. The Hungarian company is demanding about US$1 billion in damages.

At the four hearings that were held, Croatia presented its arguments denying that with its discriminatory, arbitrary and non-transparent actions it had caused damage to MOL's investment in the Croatian oil and gas company INA, and expressed expectations that its arguments would be taken into account, the government said.

The government stressed that MOL did not suffer any damage and that it was in fact the Croatian state that was adversely affected by agreements that were the result of corruption. "The hearings before the arbitration tribunal were completed in July 2018 and now we are awaiting a ruling. This process can take a year or more, given its complexity. At this stage of the process, we cannot divulge any more details," the government said.

The government recalled that Croatia had adopted the EU declaration on the legal consequences of the judgement of the Court of Justice in the Achmea case and on investment protection in the European Union, under which courts outside the EU cannot have jurisdiction over investment disputes between member states. "Consequently, in all arbitration proceedings that have been launched against Croatia based on investment protection agreements with EU member states or the Energy Charter Treaty objections were raised to the jurisdiction of the arbitration tribunal in Washington," the government said.

Last month, all EU member states undertook to terminate bilateral investment protection agreements signed between them, and 22 of them committed to ensure that the Energy Charter Treaty could not be used as a basis for arbitration following the Court of Justice judgment of March 2018. The judgment concerned a lawsuit brought by the Dutch insurance company Achmea against Slovakia.

The European Commission said at the time that "the dispute settlement mechanisms provided in these treaties as well as their intra-EU application of the Energy Charter Treaty are incompatible with EU law and discriminate between EU investors."

The Commission welcomed the fact that "the majority of member states committed to undertake action to ensure that the Energy Charter Treaty cannot be used as a basis for arbitration between investors and EU member states."

However, Hungary is not among the majority of member states that took on these commitments. Its permanent representative to the EU signed a separate statement saying that the Hungarian government will terminate all bilateral investment protection agreements with other member states either through a multilateral agreement or bilaterally. Hungary maintains that the Achmea judgment concerns only bilateral investment protection agreements and not the arbitration clause in the Energy Charter Treaty.

In addition to MOL's action, Croatia is faced with another seven ongoing arbitration cases that have been brought against it before the UCSID, including lawsuits brought by four banks over the conversion of loans denominated in Swiss francs into euros.

More news on the INA-MOL case can be found in the Business section.

Wednesday, 30 January 2019

“Amendments to INA Privatisation Law Protect Croatia's Interests”

ZAGREB, January 30, 2019 - Energy and Environment Protection Minister Tomislav Ćorić said on Wednesday that a bill of amendments to the law on the privatisation of the INA oil company, which the government recently sent to parliament, safeguarded Croatia's interests to the maximum amount.

On 23 January, the government tabled the bill which aligns the INA law with European Union legislation and protects Croatia's energy interests as well as the state's interests in INA, as stated by the government on that occasion.

However, the opposition has criticised the Andrej Plenković cabinet about the detrimental effects of the latest proposal, and in his response to the press Minister Ćorić today dismissed the criticism.

Ćorić said that during a parliamentary debate on the proposed bill, he would explain how the bill protected Croatian state interests.

As for a report by the weekly newspaper Nacional that the Office of for the Suppression of Organised Crime and Corruption was analysing some segments of the bill, the minister said on Tuesday that the ministry was open to all who wanted to get information about the bill, and that he had not heard before that USKOK was interested in the matter.

Today, Ćorić told the press that it was in the government's interest to have a strong and efficient INA, and that by entering the EU Croatia took over certain responsibilities, one of them being the adjustment of the domestic legislation with the EU acquis.

The INA Privatisation Act went into force in April 2002, stipulating that the state retained certain special rights in the company - the exclusive right to control changes in ownership, the right to veto certain management decisions, and the right to pre-emption of all or part of the company's property at market value in case of liquidation. Since those provisions are not in line with the EU acquis, the European Commission launched an EU law violation procedure and decided to file a suit at the EU Court of Justice in July 2017.

That's why the Environment Protection and Energy Ministry proposed amendments to the INA Privatisation Act, stipulating the obligation of a stock buyer to submit a long-term management and business plan, withdrawing the government's consent for stock acquisition and the right to buy shares and pay compensation in the event of a serious threat to safe, reliable and regular energy supply and to the protection of the energy supply infrastructure.

The amendments also propose that, as long as the state has one or more shares in INA, the government can appoint two representatives who will attend management meetings without the right to vote. Also proposed are penalties and protection in case management adopts a decision seriously bringing into question the safety of energy supply and its infrastructure.

As for the opposition's criticism about the previous procedure of INA's privatisation, Ćorić said today that one of the lawmakers "has clearly stated that HDZ-led (Croatian Democratic Union) governments have not sold any share of INA to Hungary's MOL." He recalled that under the 2002 law on privatisation, the first package of 25% of the stock was sold to MOL in 2003. At the time, the SDP-led government was in power.

More news on the INA-MOL situation can be found in the Business section.

Tuesday, 15 January 2019

INA Restructuring and LNG Terminal Remain a Priority

ZAGREB, January 15, 2019 - Environment and Energy Minister Tomislav Coric said on Tuesday that the government wanted a successful and profitable INA, adding that this required restructuring of this oil company's refineries. He also spoke about the LNG terminal.

"The aim of the government is to ensure a successful, profitable and vertically integrated INA. A successful and efficient INA has no alternative," Ćorić told a press conference dedicated to energy issues.

He, however, added that this wish does not correspond with the present state of INA's oil refineries, as the one at Rijeka operates at 70 to 80 percent capacity and the one at Sisak at 30 percent.

Ćorić said that the planned transformation of the Sisak plant would ensure the largest possible employment and that it was tied to investment in the Rijeka refinery and other business segments. He noted that the conversion of the Sisak refinery into an industrial centre has been decided by INA's management and supervisory boards and it "has no alternative, regardless of the size of the government stake in INA."

Asked if he had any message for the workers at Sisak, he said that their future would not be uncertain and that under the business plan 40 to 50 percent of them would be retained at the Sisak complex.

Ćorić said that the government had not abandoned its idea to buy back the Hungarian energy group MOL's stake in INA, noting that this was a very complex process.

Asked if the proposed legislative changes could make it possible for MOL to acquire a majority stake in INA, Ćorić said that if MOL or any other company had such an intention it would first have to present its long-term plan for INA to the government to see that this would not have an adverse effect on the country's energy stability.

The proposed amendments to the INA Privatisation Act are under public consultation until January 22. Their purpose is to align this law with EU legislation.

When explicitly asked if there was a deal with the Hungarians to leave INA to them, Ćorić replied in the negative.

Speaking of Croatia's plan to build an LNG terminal on the northern Adriatic island of Krk, Ćorić recalled that the state-owned power company HEP had booked 520 million cubic metres of the terminal's capacity, while the booking of 1.5 billion cubic metres was required to make the terminal profitable, and that two letters of intent had come from Hungary inquiring about the possibility of entering the ownership structure of the future terminal.

Despite the modest interest in the booking, Ćorić said that "as long as this government is in office, the LNG will be without an alternative the dominant energy project."

He announced further talks with the Hungarians, saying that this was a strategic project, not only for Croatia, which could become increasingly dependent on gas imports, but also for Europe, especially for countries such as Hungary and Ukraine.

Asked about the possibility of renewing oil and gas exploration and exploitation in the Adriatic, Ćorić said that there were indeed indications of considerable quantities of gas existing in the Adriatic, that he was "neither in favour nor against" and that a consensual decision should be taken on this issue.

More news on the LNG terminal project can be found in the Business section.

Thursday, 3 January 2019

Minister Hopeful about Future for Sisak Oil Refinery Workers

ZAGREB, January 3, 2019 - Environment and Energy Minister Tomislav Ćorić said on Thursday, while commenting on the business transformation of the INA oil company, that the government was insisting that as many Sisak oil refinery workers as possible should be retained.

He dismissed claims that he and State Assets Minister Goran Maric disagreed on the issue of the Sisak refinery.

"What Minister Marić said in 2016 and what we have been saying all long is that INA should be a vertically integrated company. We believe that modernisation of INA's refining business has no alternative and an investment of between 3.5 and 4 billion kuna that will be made in that regard is necessary," Ćorić told the press outside the government headquarters.

"There are no differences of opinion between us. It was necessary to insist on maintaining employment in Sisak-Moslavina County. Marić's statement should be viewed in a wider context. The question of the refining business in 2016 and in 2018 is not the same," he added.

Marić said in 2016 that he would not allow the closure of the Sisak oil refinery because of its importance for the local economy. "I would sooner leave politics than allow its closure," he said then.

Under its business plan for 2019, INA will concentrate its oil refining business at the Rijeka refinery, while the Sisak refinery will be converted into an industrial centre focusing on other activities.

Ćorić said that the Sisak plant was currently operating at about 30 percent of its capacity, while the Rijeka refinery was operating at 70 percent. "Croatia needs INA as a strong energy company. It needs an efficient and successful INA that will be competitive and profitable," he added.

Asked what would happen with workers at Sisak as part of INA's business transformation, Ćorić recalled the conclusions of the business plan adopted at the end of last year, under which between 40 and 50 percent of workers at Sisak would remain in the plants that would continue operating.

As for the rest of the workers, a comprehensive redundancy programme has been prepared by the management and they will also have an option of working in other business areas of INA, the minister said.

More news on the INA oil company can be found in our Business section.

Wednesday, 2 January 2019

State Assets Minister “Forgets” His Election Promise

ZAGREB, January 2, 2019 - State Assets Minister Goran Marić said on Wednesday that neither the government nor he could do anything about the closing of the refinery in Sisak because that was the decision of the INA oil company's management, adding that he was still advocating for not closing the plant.

"The state assets minister and the government can't make business decisions for any company," he told reporters when asked if the government had done enough to prevent the closure of the Sisak refinery.

Asked if he would keep his promise from the 2016 election campaign that he would leave politics if the refinery was closed, Marić said he was still advocating for not closing the plant.

He said he was politically advocating that contractual obligations be met, that management consider whether the closure was justified, but added that business decisions in any company were made by management and the supervisory board. "As a minister, I can't exert pressure on anyone," he stressed.

Asked if INA was a state asset in any way, he said it was not and that the government only had shares in it, reiterating that business decisions concerning INA were made by the management and the supervisory board.

Marić said he would continue to insist on the adoption of decisions in Croatia's interests, and that not closing the Sisak refinery was in Croatia's interest.

Asked if the government and Prime Minister Andrej Plenković were pushing hard enough for what he was pushing for, he said that as an economist he mostly supported production and that during the election campaign they pushed for salvaging the Petrokemija fertiliser manufacturer and against closing the Sisak refinery.

He said Petrokemija was salvaged and that "the State Assets Ministry had a crucial role in its recapitalisation, but it certainly can't have decisive influence on the closure of the refinery."

More news on the Sisak refinery can be found in our Business section.

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