New Croatian regulation to hit INA revenue hard

Deals

MOL today stated that a decision by the Croatian economy ministry on mandatory gas sales would require its Croatian unit INA to transfer HRK 250 million to HRK 350 million (HUF 10.2 billion to HUF 14 billion) a year of its own revenue to state-owned power company HEP.

The ministry decision requires INA to sell that part of its natural gas production for household use to HEP. The price INA gets for gas through its unit Prirodni plin will fall to HRK 1.7058 per cubic meter from HRK 2.2, according to MOL said. At the same time, the regulated sales price of HEP towards distributors to household customers will be HRK 2.4032 HRK per cubic meter.

In a statement released yesterday, INA said the economy ministry resolutions would have a “material negative impact” on its business performance in 2014 and the coming years as well as on funds available for investment projects.

MOL holds a stake of just over 49% in INA; the state of Croatia owns about 45%. A perceived lack of investment in the company by MOL and the state’s failure to take over INA’s loss-making gas business, as stipulated in a shareholders agreement, have been sources of tension between the two stakeholders.

An earlier report in Croatian media stated that while MOL reportedly views INA losses in the fourth quarter due to the uneven exchange as simple company debt, the Croatian government maintains that the current operation in place at INA is part of an illegal deal between former Croatian prime minister Ivo Sanader and MOL management.

Said deal-making has been at the heart of multimillion euro-sized problems since then: In 2012, a Croatian court sentenced Sanader to ten years in prison on corruption charges involving the alleged payment of a bribe of at least €5 million to give MOL management rights in INA. Last October, Croatian authorities issued an arrest warrant for MOL chairman Zsolt Hernádi in relation to the Sanader case.

MOL currently holds a stake of a bit over 49% in INA, while the Croatian government’s share is just under 45%.

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