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1 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.

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Presentation on theme: "1 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."— Presentation transcript:

1 1 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

2 2 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

3 3 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

4 4 Rompetrol – History Established as the international operator of the Romanian oil industry Privatized by Management and Employee Buy Out (“MEBO”) and turnover subsequently reduced to below $6 million by Control purchased by Dinu Patriciu and local investor group 1998 to 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

5 5  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 January 1999 and resulted in a sale/purchase agreement for % 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 Actual transfer of the stake was subsequently performed on 26 January 2001 Petromidia Privatization Attempts

6 6 Rompetrol Rafinare

7 7 The turnaround of Rompetrol Rafinare Old Petromidia  State owned  Listed on RASDAQ $6mil market cap  Financed by traders  Sweet crude slate  Low capacity utilization (<1mta)  Highly indebted and with historical tax arrears  Overstaffed (3600) New Petromidia  Privately owned  Listed on BSE with $500+ mil market cap  Financed by western banks  Sour crude slate  High capacity utilization (>3mta)  Reasonable leverage (e.g., 40%)  Automation brings a smaller staff (1200) UnprofitableProfitable

8 8 The turnaround of Rompetrol Rafinare Crude Supply - considerations

9 9 The turnaround of Rompetrol Rafinare

10 10 The turnaround of Rompetrol Rafinare

11 11 The turnaround of Rompetrol Rafinare

12 12 Evolution of MTBE % in unleaded gasoline The turnaround of Rompetrol Rafinare

13 13 The turnaround of Rompetrol Rafinare

14 14 Structure of Romanian Oil Industry—Survival of 4 out of 5 Name of Refinery Capacity (mta)Governance Nameplate2003 actual OwnerAuditsListingBanking Petrobrazi3.52.8Petrom (OMV 51%) Ernst & Young BSE ING, ABN Amro, RZB, Citibank, BCR Arpechim3.52.7Petrom (OMV 51%) Ernst & Young BSE ING, ABN Amro, RZB, Citibank, BCR Petromidia4.83.3TRG 79% Float 21% Deloitte & Touche BSEHVB, RZB, Citibank, BCR Petrotel3.80Lukoil 100%KPMG NYSE Global Rafo3.52.4Balkan Petroleum 97% unknown noneFinanced by oil traders Total Entire Nation

15 15  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 Investigations into privatization procedures

16 16 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


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