The OMV Management is interested in acquiring a stake in INA (from the left): Helmut Langanger, Werner Auli, Wolfgang Ruttenstorfer, Gerhard Roiss and David C. Davies The Austrian oil and gas company OMV is still interested in acquiring a stake in INA, despite the fact that the Croatian government is more inclined to trade its ownership share in INA in a share swap with Hungary’s MOL. As Nacional has learned from high-ranking sources close to the OMV management, this company plans to participate in the continued privatization of INA, but only if the Croatian government intends to sell its remaining 19 percent share in a transparent manner, by way of a public tender. OMV believes that this is the only way to guarantee the stable future operations of INA, and the Croatian government could continue to have their influence here. This is the only manner of sale that the Austrians deem to be transparent and, if such a turn of events were to occur, then OMV would be very interested in participating.

Such a position of the OMV management suggests that the Austrians already have a draft offer ready for INA, and that the battle for the leading position on the energy market in central and southeast Europe between the Austrians and Hungarians has definitely spilled over into Croatia. The most benefit from such a situation would go to the INA shareholders, including the state, private shareholders, investment and pension funds, which could earn much more than the price currently being offered by the Hungarians. On Monday, 1 September, the Croatian regulatory agency HANFA approved MOL’s public offering for the takeover of INA shares not owned by the Croatian government. In the offering that is soon to be released, the Hungarians are offering a price of HRK 2800 per share. According to the reactions on the market, this offer was received with disappointment among investors. The Executive Board of the Croatian Veteran’s Fund was also very disappointed, and their decision to sell INA shares could turn out to be key in the final outcome of the battle for INA. Duro Decak, member of the Executive Board called the Hungarian offer a “disgrace”.

TOMISLAV DRAGICEVIC, CEO of INA and Damir Polancec, new chair of the Supervisory Board Not counting the 25% already owned by MOL and the 44% under state ownership, there is currently still 30 percent of INA shares available on the market. Of that, 7 percent is in the hands of the Croatian Veterans Fund, who have already remarked that the government decision have in no way obligated them to do anything. In other words, they will only sell their INA shares to the highest bidder which, according to the Fund, should not be less than HRK 4000. Considering this position, this fall, MOL could at best become the owner of 48 percent of INA.
However, that is only in the case that the government backs away from the share swap with MOL and decides to sell its share in INA via a public tender. This would concern the privatization of 19 percent of the state share in INA, which Croatia is obliged to do as part of alignment with the EU regulations that the state may not own more than a 25% share in privatized companies. It is this 19 percent share in state ownership that will be key for the continued privatization, as the company that acquired this share will have the open possibility of becoming a majority shareholder in INA.

The final phase of privatization of the national oil company turned into a hot topic in April of this year, when Croatian Premier Ivo Sanader and his Hungarian counterpart Ferenc Gyrcsány announced in Budapest that there “was a proposal on a share swap by which MOL would increase its ownership stake in INA, and INA would in return obtain an ownership stake in MOL”. Already in July, the premiers met again in Dubrovnik at the Croatia Summit and announced that a deal had been struck to swap 19 percent of the INA shares for MOL shares. The Croatian-Hungarian negotiations were held in the shadow of the battle between OMV and MOL that has been ongoing for the past year, and also in awaiting the results of OMV’s intention to takeover its Hungarian competitor. A turnaround occurred three weeks ago, when OMV announced that it was backing away from plans to takeover MOL due to, the official explanation, complaints by the European Commission, which assessed that such a merger would inhibit freedom on the energy market. OMV and MOL have long been battling for the leading position in the region, and OMV was attempting to take first place by taking over MOL, in which it already owns a 20 percent share. The Austrians announced that they would sell their MOL shares, and whoever takes them over will also receive a strong influence in the INA operations.

The key issue that has been troubling everyone over the past two months, and which will determine the next step by the Austrians, is what the government plans to do with 19 percent in INA, the share package it plans to sell. According to available information, Sanader’s government has no intention of cashing that capital in, but would rather conduct the share swap with MOL. However, such a transaction, as agreed directly between the Croatian and Hungarian governments, has been met with criticism by many, as this would mean a loss of revenue for Croatia and a loss of control over the largest energy company in the state in the middle of an energy crisis, all in return for a modest share package without any decision-making rights in the Hungarian company. The Croatian government would obtain just a 5 percent share of MOL, while the Hungarians would acquire a 44 percent share of INA.

Despite numerous criticisms, last week Premier Sanader announced that at this time, the share swap is more likely to happen than a sale of the shares. He explained this as an attempt to avoid the inflationary pressures and appreciation of the kuna that are currently in effect. The government claims that the large quantity of kuna that would end up in the hands of the small shareholders and the government, if they sold the shares in a public tender, would only act to increase spending, which in turn would only deepen the inflation crisis in Croatia. Furthermore, Sanader tried to convince the public that the share swap would bring the government a certain amount of influence in MOL’s policies, which could help to increase Croatia’s energy independence.

OMV has 56 petrol stations and holds 10 percent of the market in Croatia On that other hand, those opposed to this manner of privatization have their own arguments. Firstly, considering the interested expressed by OMV, a sale by public tender would thus include at least two bidders, which could bring greater profits for shareholders. Secondly, instead of MOL shares, the state would receive the cash it needs for development of the economy and softening the economic crisis. Thirdly, selling to the highest bidder would give the Zagreb Stock Exchange a big boost and help it out of the liquidity crisis it has been going through for months. And finally, a share swap with MOL would bring the government only a 5 percent share in that company, meaning absolutely no influence. Oil experts warn that Sanader’s argument of increasing Croatia’s energy independence is questionable in the case of a share swap, as neither INA nor MOL have their own oil wells, but depend on the large producers.

Experts who deal with analyses on energy markets claim that the key problem of the share swap is that this would mean a cheapest handover of INA shares to an unknown owner. Namely, OMV is owner of 20 percent of MOL’s shares and following OMV’s recent decision to not go ahead with the takeover of the Hungarian company, these shares will be sold. Currently, about 35 percent of MOL’s shares are easily available on the market. Analysts agree that it is only a matter of time for a Russian oil giant, likely Lukoil, to strike a deal with OMV and to take over MOL, as MOL is heavily dependent on Lukoil’s oil.

According to one analyst who is well acquainted with OMV’s development plans, MOL will have its hands full if it tries to fend off the new owner of OMV’s shares in MOL. “OMV currently has all its options open, it can trade the MOL share package without any limitations. If the share swap takes place, then it will be an unknown as to who will buy those INA shares. According to announcements from Vienna, OMV will soon begin with the sale of its MOL shares, while other shareholders in the Hungarian company are also interested in selling,” stated the analyst. He added that in that case, MOL would be forced to trade with INA in order to maintain its independence, as it has lost a great deal of its financial strength in its attempts to fend off OMV. When asked whether or not OMV will be included in the INA privatization after the announcement of MOL’s bid, the Austrian analyst stated that OMV can give a counteroffer but need not, and can do so at any time in the future.

SANADER and his Hungarian counterpart Ferenc Gyurcsány have struck a deal to swap shares of INA and MOL The same analyst feels that if Sanader’s government decides to sell 19 percent of INA via a public tender, it will also be buying some time. In that case, the entire process could last about six months, and by that time, it will be known who the new owners in MOL will be. The question to be posed to the Croatian government, according to the Austrian analysis, is whether or not the future of INA will be decided in Zagreb, or whether that will fall in someone else’s hands. “If INA is given to MOL, I believe that the regional oil game is just getting started and Croatia will only be an observer,” he said.