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ROMPETROL’S TURNAROUND OF THE PETROMIDIA REFINERY A Case Study by hzp22842

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									ROMPETROL’S TURNAROUND OF
 THE PETROMIDIA REFINERY
A Case Study in Sour Crude Processing in the
                 Black Sea




                             CERA—East Meets West
                              Istanbul, June 29, 2005




                     1
                   Table of contents
 The Rompetrol Group Profile

 Rompetrol History

 Privatization Attempts

 The Turnaround of Rompetrol Rafinare

 Structure of Romanian Oil Industry

 Difference between Rompetrol Rafinare and others

 Investigation into privatization procedures




                             2
                                           The Rompetrol Group Profile

   Largest Romanian group of private companies (2004 gross
    revenues of $1.61 billion), representing almost 7% of state
    budget revenues and 3% of GDP
   32% share of Romanian refined products market
   Domiciled in the Netherlands with worldwide operations and
    assets (though mostly in Romania)
   Owned by management
   Financed principally by international banks; audited to IAS
    standards
   Mostly active in refining and marketing in the Balkans
   One of the country’s largest exporters and taxpayers ($635
    million in tax payments in 2004)
   Core asset is 4.8 mta. (nameplate) capacity Petromidia refinery
    north of Constanta
   Listed on BSE since April 2004; market capitalization over $500
    million; 20% weight in local index




                                       3
                        Rompetrol – History



1974 - Established as the international
       operator of the Romanian oil industry
1993 - Privatized by Management and Employee Buy
    Out (―MEBO‖) and turnover subsequently
    reduced to below $6 million by 1998
1998 - Control purchased by Dinu Patriciu and local
    investor group
1998 to 2000 - Series of synergistic acquisitions;
    private equity investment
2001 to 2003 – Restructuring of management,
    technology, finances and operations of
    associated companies; strategic investment by
    OMV (25.1%)
2004 to 2006 – Becoming a large integrated regional
    low-cost producer of refined products;
    disinvestment of OMV and access to capital
    market



             4
                                          Petromidia Privatization Attempts


 Complexul Petrochimic Midia Navodari (the first name of Rompetrol Rafinare S A) was one of
the large oil refining plants which were built after 1975

In 1991, the entity was changed into a stock company which took over all of the assets of the
former unit

The Romanian Government attempted three privatizations of Petromidia

           The first attempt was carried out in 1997 when the State Ownership Fund (SOF)
          had discussions with Daewoo, Glencore and Petromidia USA

            The second effort was made over July 1998 - January 1999 and resulted in a
          sale/purchase agreement for 65.323% in Petromidia’s share capital to Turkish
          investor Akmaya. Due to the disagreements between the Romanian authorities and
          Akmaya regarding the additional incentives the Government re-slated the sale of a
          controlling interest in Petromidia

           In a third effort, SOF concluded an agreement with the Rompetrol Group N.V. on 31
          October 2000. Actual transfer of the stake was subsequently performed on 26
          January 2001




                                               5
    Rompetrol Rafinare




6
                        The turnaround of Rompetrol Rafinare



Old Petromidia                       New Petromidia
State owned                         Privately owned
Listed on RASDAQ $6mil              Listed on BSE with $500+ mil
market cap                           market cap
Financed by traders                 Financed by western banks
Sweet crude slate                   Sour crude slate
Low capacity utilization            High capacity utilization
(<1mta)                              (>3mta)
Highly indebted and with            Reasonable leverage (e.g.,
historical tax arrears               40%)
Overstaffed (3600)                  Automation brings a smaller
                                     staff (1200)
 Unprofitable                          Profitable


                                7
                                                                  The turnaround of Rompetrol Rafinare


          Crude Supply - considerations


                Brent vs. Urals 2001-2005                                                              Brent (Dtd)                    Urals (Med)


          $60

          $55

          $50

          $45

          $40
USD/bbl




          $35

          $30

          $25

          $20

          $15

          $10
            Jan-01   Apr-01   Jul-01   Oct-01   Jan-02   Apr-02   Jul-02   Oct-02   Jan-03   Apr-03   Jul-03   Oct-03   Jan-04   Apr-04   Jul-04   Oct-04   Jan-05   Apr-05




                                                                                         8
                                    The turnaround of Rompetrol Rafinare


                                       Refinery Run

                              Used Capacity   Unused Capacity   Max.Capacity

                    5.00

                    4.00
Million mt / year




                    3.00

                    2.00

                    1.00

                     -
                           1999 2000 2001 2002 2003 2004 2005 2006 2007 2008




                                              9
                                      The turnaround of Rompetrol Rafinare


                               Feedstock - Product Quality
                             Sweet Crude              Sour Crude
                             Non-Euro Products        Euro Standard Products

                    5.00

                    4.00
Million mt / year




                    3.00

                    2.00

                    1.00

                     -
                           1999 2000 2001 2002 2003 2004 2005 2006 2007 2008




                                                 10
                                                     The turnaround of Rompetrol Rafinare


                                                       Refinery Staff
                  4,000
                  3,500
No.of employees




                  3,000
                  2,500
                  2,000
                  1,500
                  1,000
                   500
                    -
                          Jan-01



                                            Jan-02



                                                               Jan-03



                                                                                      Jan-04



                                                                                                        Jan-05



                                                                                                                          Jan-06
                                   Jul-01



                                                      Jul-02



                                                                             Jul-03



                                                                                               Jul-04



                                                                                                                 Jul-05



                                                                                                                                   Jul-06
                                                                        11
                                 The turnaround of Rompetrol Rafinare

Evolution of MTBE % in unleaded gasoline

% MTBE
14
                13.148

12


10

                         8.488
 8
                                                               6.884
                                             7.297
 6


 4


 2


 0
         2001                    2002                2003   2004




                                        12
                            The turnaround of Rompetrol Rafinare



                   Gross revenues          EBITDA         Net profit

2,000                                                                          1,774

                                                               1,444
1,500
                                  1,077        1,138

1,000                 701

        407
 500                                                     287
                                                                       86 11       122 71
                                                    16
   0
         -10 -23        -75 -35      -74    -350

 -500
        2000          2001        2002 rest        2003         2004            2005




                                      13
Structure of Romanian Oil Industry—Survival of 4 out of 5
   Name of               Capacity (mta)                         Governance
   Refinery
                 Nameplate           2003          Owner    Audits     Listing   Banking
                                     actual
 Petrobrazi      3.5             2.8             Petrom      Ernst       BSE      ING, ABN
                                               (OMV 51%)       &                 Amro, RZB,
                                                             Young                Citibank,
                                                                                    BCR

 Arpechim        3.5             2.7             Petrom      Ernst       BSE      ING, ABN
                                               (OMV 51%)       &                 Amro, RZB,
                                                             Young                Citibank,
                                                                                    BCR

 Petromidia      4.8             3.3           TRG 79%      Deloitte     BSE     HVB, RZB,
                                               Float 21%       &                  Citibank,
                                                            Touche                  BCR
 Petrotel        3.8             0                 Lukoil               NYSE
                                                   100%      KPMG                 Global

 Rafo            3.5             2.4            Balkan                   none    Financed
                                               Petroleum    unknown                by oil
                                                  97%                             traders
 Total           19.10           11.20


 Entire Nation   23.00           13.29




                                              14
                         Investigations into privatization procedures


 Interest groups are still active in Romania and
receive strong political backing
 PNA investigation started and ended last year—
charges were rejected and sent for investigation to
the General Prosecutor’s Office
 The General Prosecutor’s Office has launched an
investigation into the privatization of Petromidia
 Although we suspect the initiation of the
investigation was politically motivated, Rompetrol will
cooperate fully with the prosecutors all through the
process, which we hope will be:
          Professional
          Expeditious
          Apolitical
 Conclusions expected to vindicate the Rompetrol
Group and also to disarm special interest groups




                                         15
                                   What we are doing in response


 To prove our innocence we have been cooperating with prosecutors
  and provided documents and answers that show no wrongdoing
 Rompetrol retained the services of a team of local and international
  attorneys including international law firm Salans
 Rompetrol shareholders brought forth to the public attention the lack
  of due process in conducting the investigation
 Local and international media and civil society have rallied in support
  of principles such as presumption of innocence, fair and quick due
  process free of political or economic interference
 Rompetrol shareholders are considering international legal action to
  defend investments made in the company
 Rompetrol welcomes a swift and independent investigation conducted
  with the observance of due process and respect for the justice process




                                  16

								
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