Get your free copy of Editor’s Digest
FT editor Roula Khalaf picks her favourite stories in this weekly newsletter.
Poland’s state-run oil and gas company plans to sell its media subsidiary as its new chief executive tries to show investors that the group’s strategy is no longer politically influenced.
“I must emphasize that we don’t need Polska Press as a media company at all,” Ireneus Fafara told the Financial Times in his first interview since taking over as CEO of Orlen in April.[Orlen]… We’re going to find an investor who can buy it at the right price.”
In 2020, Orlen agreed to buy Poland’s largest regional newspaper owner, Polska Press, from German company Verlagsgruppe Passau. The acquisition came after the then right-wing government led by the Law and Justice party (PiS) pledged to “re-Polish” the media and reduce foreign influence on the media industry.
The acquisition drew criticism from media rivals in Poland and abroad: Last year, the ethics committee of Norway’s sovereign oil fund, which owns 0.4 percent of Orlen, placed the group under scrutiny for its acquisition of Polska Press and its “impact on press freedom and freedom of expression in Poland.”
Fafara said he wanted to remove Orlen from Norway’s watch list to allay shareholder concerns more broadly about politicians influencing Orlen’s strategy. “Investors tend to avoid politically-charged businesses as they are seen as unpredictable and risky,” he said.
Asked why investors believe Prime Minister Donald Tusk – who replaced PiS with a pro-EU coalition government in December – would allow Orlen to become independent, Fafara said he had not met Tusk or spoken to his closest aides since Tusk became chief executive.
PiS has an ultranationalist agenda and has promoted state-owned enterprises as drivers of economic growth in Poland.
“For now, I am confident that as long as the current administration is in power, political decisions will not affect our business,” Fafara said. “If I am told to do so, of course I will resign. This is my responsibility to investors and my ethics.”
Under PiS-appointed CEO Daniel Obajtek, Orlen also acquired domestic rivals, strengthening its position as the domestic energy leader and central Europe’s largest listed company. Mr. Fafara said he inherited “something like a chaebol” – a reference to the family-run conglomerate model that has long dominated the South Korean economy, including several subsidiaries that “do not directly support” Orlen’s operations.
“I didn’t realize the company was so complicated and was surprised by the poor internal rules and governance. I didn’t expect there to be so many politically connected people working at Orlen,” he said.
Mr. Fafara, 64, is an energy industry veteran who ran Orlen’s Lithuanian subsidiary until 2017. By contrast, Mr. Obajtek, 48, is a PiS politician who started out as a village mayor and was elected to the European Parliament this month.
Polish prosecutors are targeting Obajtek in connection with various fraud-related investigations that took place during Orlen’s tenure, and he has sought to evade investigations by claiming legal immunity as a member of the European Parliament. Obajtek has denied wrongdoing and has not been charged so far. This month he was fined for ignoring a subpoena to a Polish parliamentary committee investigating the visa fraud scandal.
Orlen’s net profit rose last year to 27.6 billion zlotys (6.4 billion euros) from 21.5 billion zlotys in 2022. But concerns about the group’s strategy have seen its shares fall, dropping 40 percent under Obajtek and a further 6 percent since Fafara took over.
“The market is still waiting for our decision,” Mr. Fafara said, focusing particularly on whether Mr. Orlen would stick to the capital spending plans promised by his predecessor. Mr. Fafara promised to publish “our approach to capital spending” in August.
Fafara has other issues to sort out. In April, Polish prosecutors opened a criminal investigation into whether Orlen’s Swiss trading unit is a “terrorist organisation” (linked to the Lebanese militant group Hezbollah). Orlen said it was auditing the unit after it suffered losses of $400 million in its trading activities.
Fafara said Orlen Trading Switzerland paid advances to buy oil from Venezuela and Sudan through “intermediaries that Orlen had not used before,” but the oil was never delivered. These smaller intermediaries were based in Dubai and other parts of the Middle East, but Fafara said he found no documentation of any links to Hezbollah within Orlen, an allegation reiterated by Tusk.
“We are trying to recover this. [trading] “It’s about money, and it’s very complicated,” Fafara said.
In 2022, Orlen completed its most significant transaction by acquiring domestic rival Lotos. To overcome EU antitrust concerns, Orlen sold a stake in Lotos’ Gdansk refinery to Saudi Aramco. It also sold 417 gas stations to Hungary’s MOL.
Poland’s regulator released a report in February saying Saudi Aramco had undervalued its stake in the Gdansk refinery by 3.5 billion zlotys ($865 million). It also said the deal posed security risks to Poland because it gave Saudi Aramco the power to cut fuel supplies.
Asked whether Saudi Aramco might be forced into a divestment, Fafara said, “This is an irreversible procedure as this is a significant bailout imposed by the EU.” Instead, he plans to visit Riyadh soon to discuss “possible joint investments and future cooperation with Aramco.”
He also said the Orlen-Lotos merger was “irreversible,” but admitted he was not convinced it would benefit Poland’s energy market. “From the customer’s point of view, the situation is always more comfortable when there is more competition in the market,” he said.
