Petrom privatisation stumbles through old legislation

The privatisation of Romania’s largest company, SNP (National Oil Company) Petrom, is now facing its most powerful opponent – the Law. At a time when investors are complaining about the ever-changing legislation, Petrom is tripping on a six-year old document, which ties it to the Romanian State.
“Natural and legal persons, Romanian and foreign, will be allowed to own shares in Petrom, but this must not hurt the State’s position as main shareholder of the company,” states the Emergency Ordinance 49/1997, enacted by the Law 70/1998, regulating the company’s establishment. The law is perfectly valid.
The privatisation of Petrom has now reached the stage of drafting the company’s final report in view of settling the privatisation strategy of the company by the shortlisted consultant – the consortium comprised of investment banks Credit Suisse First Boston and ING Bank.
But why was not the law modified by the state, which says it has been planning to privatise the company for the past two years? No one looked at the papers – this is one explanation. Still, can the Romanian State privatise Petrom now?
Ziarul Financiar has asked this question to the Ministry of Industry and Resources and the SNP Petrom officials, but they did not return calls by press time.
“The law substantiating Emergency Ordinance 49/1997, that is Law 70/1998, does not modify article 9 and it is true that no real privatisation can be done as long as the State is the main shareholder,” Irina Petra, an attorney with CMS Cameron McKenna Cristina BrA„snzan law firm told Ziarul Financiar.
“The State may be allowed to keep a golden share, which would give it certain controlling rights in the Board, and, perhaps, veto rights,” Irina Petra explains. “This problem could be solved if the Government’s new privatisation strategy is joined by the political will. For instance, they could release another Emergency Ordinance, to modify EO 49/1997,” Irina Petra added.
Officials of the Ministry of Industry and Resources, the main shareholder of Petrom, have repeatedly pledged to meet the deadline set by the PSAL II programme for selling the company to a private investor – December 31, 2003.
Another matter refers to the preemption right granted to the SNP Petrom employees, so they can buy shares at their face value, up to 10% in the company’s capital.
Last December, when the consultancy contract for Petrom was signed, the head of the Office for the State’s Participation and Privatisation, Doru Laurian Badulescu, said that the entry of some minority shareholders, such as the European Bank for Reconstruction and Development (EBRD) and PAS (Employees Association) Petrom “will only happen after the strategic investor acquires a stake.”