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August 3, 2020updated 04 Sep 2020 2:36pm

Poland’s biggest oil refiner wants to take over next state-owned gas producer and become Polish national champion

By Market Line

PKN Orlen SA, Poland’s biggest oil refiner, signed a letter of intent with the Polish Government to acquire a controlling stake in the country’s biggest gas company.

The proposed acquisition price is $7.8bn and it is a part of the government’s push to create Polish national champions in the mold of South Korea or Japan, which will be able to compete abroad.

The new state energy giant is set to play a crucial role in Poland’s energy transformation, which the government describes as a big challenge. The consolidated enterprise led by PKN would generate annual revenues of $5.2bn.

However, some analysts believe the strategy is strictly political, with little benefits for both companies. The ruling Law and Justice (PiS) party has been seeking to increase state control over the economy, halting privatisations and merging some state- controlled companies, with PKN leading the consolidation drive.

PGNiG has not commented on the matter.

Next step to become the multi-fuel energy behemoth in Poland

Orlen aims to become the biggest energy conglomerate in the country, spanning oil, gas, as well as power production. The company already owns one of the two refineries existing in Poland, as well as refineries in Lithuania and Czech Republic. It operates in the wholesale and retail markets for refined oil products in Poland, Austria, Czech Republic, Estonia, Germany, Latvia, Lithuania and Slovakia. It also has activities in the upstream exploration, development and production of crude oil and natural gas operates in the petrochemicals market.

The announcement of the proposed acquisition of PGNiG also came on the day Orlen received the European Union’s conditional antitrust approval for its merger with Grupa Lotos SA, which owns the only other Polish refinery.

It is the country’s second largest refiner and operates in the wholesale and retail markets for refined oil products, mostly in Poland but also in Czech Republic, Estonia, Latvia, Lithuania and Slovakia. Additionally, it is also active in the upstream exploration, development and production of crude oil and natural gas and in the petrochemicals market.

In April 2020, Orlen also closed the acquisition of 80% interest in the state-owned utility group ENERGA SA for $700m. The acquisition was the largest transaction of its kind on the Polish fuels and energy market and added valuable renewable sources of ENERGA to Orlen’ conventional energy potential. ENERGA generates more than 30% of its power from renewable sources, a share higher than any other Polish state utility.

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