By MARTA WALDOCH and MACIEJ MARTEWICZ
Grupa Lotos SA, Polands second-biggest refiner, plans
to raise about 1 billion zloty ($318 million) from a share
sale this year to fund expansion
The Gdansk, Poland-based company plans to sell as many as 55
million new shares to current shareholders, it said in a
regulatory statement. That accounts for 42% of its current
129.9 million outstanding shares.
We plan to spend all proceeds from the share sale on
future investments, deputy CEO Mariusz Machajewski said
in an e-mailed statement.
Lotos is seeking to boost upstream investments locally and
beyond the countrys border by developing existing sites
and purchasing licenses to increase oil production to about
1.2 million tons by 2016 from 0.5 million tons now. It wants
to buy a Norwegian offshore oil field, it said in February,
and is also planning by the end of this year to decide on
building a 12 billion-zloty petrochemical
plant with Grupa
The share sale was expected, but is to happen earlier
than planned, said Wojciech Kozlowski, a Warsaw-based
analyst at Espirito Santo Investment Bank. Lotos has
many investments plans, but the lack of detailed presentation
of the share sale goals is negative.
Lotos owners will vote on the rights offering plan on Sept.
8. Still, the sale will depend on the Polish government
buying new shares. The government holds 53.2% of Lotos, and
according to the company, the majority owner will use the
Companies Restructuring Fund to pay for the shares. Any share
issue that would cut its stake to below 50% would require an
amendment to the state policy
for the oil industry.
The fund, which is financed by proceeds from state-controlled
asset sales, had 2.49 billion zloty in assets at the end of
2013, according to a report by Supreme Audit Chamber.
The State Treasury isnt surprised by the
companys decision to sell shares, ministry spokeswoman
Agnieszka Jablonska-Twarog said. A final decision will be
announced on the shareholders meeting, she said.
Lotos set the record day in the rights issue for Nov. 18 and
plans to complete the offering by the end of this year, it
said. One Lotos share will grant owners one rights issue.
If new shares are issued, it would be Lotos first
capital increase since April 2005 when the company also
raised 1 billion zloty, data compiled by Bloomberg show.
Machajewski said in March that the company wont be able
to provide substancial financing for the Azoty project
without capital increase.
Lotoss net debt stood at 6 billion zloty at the end of
the first quarter and its financial leverage, or net debt to
equity, was at 66%. The company took out a $1.75 billion
12-year loan in 2008 to finance the expansion
of its Gdansk refinery
by 50%. The ratio
compared with 33% at its bigger competitor, PKN Orlen SA.
The rights issue is not particularly surprising, as we
have always highlighted that Lotoss balance sheet was
weak and unable to support further large-scale
investments, Wood & Co.s analysts Bram Buring
and Robert Rethy said in a research note. We would not
expect all shareholders to be willing to provide additional
funds to the company, although the government and several
large core domestic shareholders may ensure a fairly large
take up of the rights.
Ewa Radkowska-Swieton, the chief investment officer at ING
Groep NVs Polish pension fund unit, the second-largest
investor in Lotos with 6.2%, declined to comment on the
Lotos, which has been on the lookout for exploration assets
in Norway, is seeking to reclaim losses it made on the North
Sea Yme oil field. Earlier this week, it said it wrote down
an additional 545 million zloty on the Yme project
, which will cut its
first-half net income by about 191 million zloty.