July 6, 2016 - 10:30 AM EDT
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Former Romanian PM Victor Ponta reportedly part of Rompetrol investigation

Former Romanian Prime Minister Victor Ponta is reportedly part of an investigation related to the settlement of a $600mn debt of KazMunaiGaz (KMG), the owner of Rompetrol Rafinare, which operates the country’s largest refinery Petromidia, Euractiv reported on July 6.

Romanian prosecutors have recently intensified their efforts to solve outstanding issues related to the privatisation and debt settlement of the company. Three other former ministers have already been indicted for setting up an organised criminal group, abuse of power and complicity in embezzlement in a an investigation related to Rompetrol carried out by Romania’s Directorate for Investigating Organised Crime and Terrorism (DIICOT) .

The Romanian prosecutors have already seized the assets of Rompetrol Rafinare, alongside those of KMG International (KMGI) and Oilfield Explorations Business Solutions (formerly Rompetrol). That came shortly after the KMGI reached an agreement to sell the majority stake in the refinery to China Energy Company Limited (CEFC) in a $680mn deal.

The privatisation, debt conversion and sale of Romania’s only Black Sea refinery have been the subject of lengthy debates and speculation due to the lack of transparency and questionable decisions of successive governments.

According to government sources quoted by Euractiv, Romania’s anti corruption body, the Nation Anticorruption Directorate (DNA), has seized documents related to the signing of a memorandum of understanding between the state and KMG, which settled the debt issue.

Rompetrol, the former state company dealing with oil and gas exploration, was owned by local investor Dinu Patriciu when it took over the majority stake in Petromidia, in 2000 and registered it as Rompetrol Rafinare.

The company was privatised to Patriciu under unclear circumstances after the original winner of the process, a Turkish investor, was unable to pay. Patriciu reportedly also failed to pay the purchase price, but Petromidia's debts to the state, dating from before the privatisation, allegedly plus the purchase price, amounting to around $660mn, were converted into convertible bonds under an emergency ordinance in 2003. Rompetrol was supposed to buy back the bonds by the end of September 2010, but it didn’t, and Romania then sued the company.

The month before the deadline, Rompetrol Rafinare bought back bonds amounting to just $70mn. In September the same year, the shareholders decided to convert the bonds it had not bought into equity, thus giving the Romanian state a 44.7% stake in the company. KazMunaiGaz, which had previously bought back the $70mn worth of bonds, remained the majority shareholder.

Romania challenged the decision, but in February 2013 the government decided to sign a memorandum of understanding with Rompetrol Group. The Romanian government accepted a $200mn cash payment for a 26.7% stake in the refinery. This was much lower than value of the bonds Rompetrol had not bought back. In addition, Romania was offered a 20% participation in an investment fund. The investments were supposed to reach $1bn, but it seems there were no clear deadlines for this.

The memorandum was adopted by the parliament, but former President Traian Basescu challenged the bill at the Constitutional Court, which invalidated it. The bill was later endorsed by the government led by Victor Ponta.

Meanwhile, there has not been made much progress regarding the investment fund agreed in the memorandum signed in 2013.Unofficial sources quoted by economica.net said earlier in June that Romania’s government will appoint by the end of the year its partner in the investment fund .

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Source: Equities.com News (July 6, 2016 - 10:30 AM EDT)

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