Poland's PKN Orlen decides not to sell its Lithuanian unit

"Orlen's supervisory board approved the management board's recommendation to discontinue Orlen Lietuva's sale process and to increase the company's value," Orlen President Jacek Krawiec said at a news conference in Warsaw on Wednesday.

The decision was based on an analysis by Nomura, the news portal bankier.pl quoted him as saying.

Earlier this year, the head of the Polish oil concern said that PKN Orlen was more in favor of an idea not to sell Orlen Lietuva and the final decision would be taken by the end of June. Last Decembe,r Poland’s Treasury Ministry, which controls PKN Orlen, said that the concern was not obliged to sell the Lithuanian company.

PKN Orlen, which is the sole owner of Orlen Lietuva, in 2010 hired the investment bank Nomura to work out possible scenarios for the Lithuanian company's future. As said at that time, the options included the sale of the Lithuanian company.

PKN Orlen was dissatisfied with performance of its Lithuanian company. However, last year the concern reduced the debt burden of Orlen Lietuva and the Lithuanian company improved its performance figures.

In 2006, Orlen purchased 53.7 percent of shares in the Lithuanian crude refinery (then Mažeikių Nafta) from Yukos International for 1.492 billion US dollars and another 30.66 percent from the Lithuanian government for 851.829 million dollars.

The Polish oil group later bought out minority shareholders of Mažeikių Nafta for about 160 million dollars. In April 2009, it acquired the remaining 10 percent of shares from the government for more than 285 million dollars, thus raising its holding in the Lithuanian crude refinery to 100 percent. The performance of Orlen Lietuva has not been too successful since then as Russia has suspended the supply of cheaper crude through Druzhba pipeline.

The Veidas weekly said this week that the sale of Orlen Lietuva was one of the most inefficient deals of last decade. Back in 2006 PKN Orlen paid some 6.8 billion litas (EUR 1.97 b) for Mažeikių Nafta. The current market value of Orlen Lietuva, as estimated by Vytautas Plunksnis, chairman of the board of the Lithuanian Investors’ Association, makes up some 3.9 billion litas.