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MOL-INA – The Madness Must End

Hungary Today 2014.11.26.

Opinion piece by CEE Perspectives on the saga of the Hungarian and Croatian oil companies. 

In the latest twist of a long and torturous saga, MOL appears to be ready to pull out all retained earnings from INA, most likely in preparation for selling its nearly 50% stake in the flagship Croatian company.

The acrimony between the Croatian and Hungarian sides is complete madness. It is not too late to step back from the edge of the abyss, but both sides need to swallow their pride, put things into perspective and start working on a solution which will help the CEE region demonstrate that it can sustain a viable and regionally significant local player in the oil industry.

MOL acquired its stake in INA in two major steps: 25% of the company was purchased in 2003 for USD 505m, and then a further 22% was bought in 2008 for EUR 873m. With these transactions and a series of subsequent massive capex infusions, MOL became by far largest foreign investor in Croatia. Until the end of last year, MOL had sunk almost 3 billion euros into INA. The bleeding was stopped, INA was thoroughly revamped and upgraded. The Croatian stock market was a clear reflection of the improvements: from the beginning of 2009 until the beginning of 2013, INA’s share price surged by about 300%.

Then came the spanner in the works: in 2009 MOL acquired INA’s management rights, in spite of the fact that it owns less than half the shares. The Croatian authorities have investigated the matter, and Ivo Sanader, then prime minister (who is alleged to have been bribed by MOL in order to facilitate the transfer of control), is now in jail, serving a long sentence. MOL chairman, Zsolt Hernadi, has also been charged with graft by Zagreb (a charge he vehemently denies).

Grievances now abound on both sides. The Croats say that MOL is planning to close at least one, if not both, of INA’s local refineries (Rijeka, Sisak), for no good reason. MOL on the other hand have accused the Croatian government of not making good on their original contractual commitments and of continually hindering their efforts to modernise and streamline INA.

The special dividend currently proposed (around EUR 260m) is a drop in the ocean and clearly not intended as „cashing in”. What is far more likely is that its purpose is to prepare INA to be handed over to new owners. A Swiss consultancy firm is said to be running due diligence already.

This insanity must stop.

The Hungarian side should admit (at least privately) that in all likelyhood a bribe was indeed paid for the management rights. Period.

And the Croatian side should admit (at least privately) that MOL did indeed save INA from bankruptcy. They also need to realise that whoever replaces MOL will likely be much less sensitive to Croatian national interests than the Hungarians. Period.

The real question, however, is this: going forward, in the context of much larger oil companies, ever bent on further consolidation of the industry, and a global oversupply of oil, which is projected to last for many years to come, is INA a viable business on its own?  Or does it stand a better chance of survival as part of MOL?

It can not, must not be allowed that a wedge is driven between Hungary and Croatia in such a cruical strategic area. These two countries ought to be role models for CEE cooperation, not the opposite.

via cee-perspectives.tumblr.com e-mail: balazsfur@gmail.com photo: nol.hu


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