Polish state energy group seeks to show political independence through media sale

Poland’s state-controlled oil and gas company plans to sell its media subsidiary as its new chief executive strives to show investors that his group’s strategy is no longer subject to political influence.

In his first interview since becoming CEO of Orlen in April, Ireneusz Fąfara told the Financial Times: “I must emphasise that the media company Polska Press is absolutely unnecessary for us [Orlen] . . . We will seek an investor who will be able to buy it from us at a fair price”.

In 2020, Orlen agreed to buy Polska Press, Poland’s largest owner of regional newspapers, from the German company Verlagsgruppe Passau. The takeover followed a pledge by the then rightwing government led by the Law and Justice (PiS) party to “repolonise” the media and cut foreign influence over the sector. 

The acquisition prompted criticism from domestic media rivals as well as beyond Poland. Last year the ethics council of Norway’s sovereign oil fund, which has a 0.4 per cent stake in Orlen, put the group under observation because of the Polska Press takeover and “its implications for freedom of the press” and freedom of expression in Poland.

Fąfara said that he wanted to remove Orlen from Norway’s watchlist and more broadly erase shareholders’ concerns about politicians influencing Orlen’s strategy. “Investors tend to avoid politically involved businesses because they are seen as unpredictable and risky,” he said.

Asked why investors should trust that Prime Minister Donald Tusk — whose pro-EU coalition government replaced PiS in office in December — would allow Orlen to be independent, Fąfara said that he had not met Tusk nor spoken to Tusk’s closest partners since he took over as chief executive.

PiS has an ultranationalist agenda that also promoted state-owned companies as flagships for Poland’s economic growth.

“For now I’m sure that, with the current government in power, there won’t be political decisions impacting our business.” Fąfara said. “I would resign if I got told what to do — absolutely. This is my responsibility towards the investors, these are my ethics.”

Under its previous PiS-appointed CEO Daniel Obajtek, Orlen also acquired domestic rivals to strengthen its position as the national energy champion and the largest listed company in central Europe. Fąfara said he had inherited “something like a chaebol” — referring to the model of family-controlled conglomerates that long dominated South Korea’s economy — which included some subsidiaries that “do not directly support the business” of Orlen.

“I didn’t expect that the company would be so complicated, I was surprised by the poor state of internal regulations and governance, I didn’t anticipate that so many people associated with politics would be working in Orlen,” he said.

Fąfara, 64, is a veteran of the energy sector who previously ran Orlen’s Lithuanian subsidiary until 2017. In contrast Obajtek, 48, is a PiS politician who started out as a village mayor and was elected this month to the European parliament.

Polish prosecutors are targeting Obajtek in connection with different fraud-related investigations linked to his time at Orlen, which he could seek to fend off by claiming legal immunity as an MEP. Obajtek denies wrongdoing and has not so far been charged. This month he was fined for ignoring a summons to appear before a Polish parliamentary committee investigating a visa fraud scandal.

Last year Orlen’s net profit rose to 27.6bn zloty (€6.4bn) from 21.5bn zloty in 2022. However concerns over the group’s strategy have hurt its share price, which fell 40 per cent under Obajtek and is down another 6 per cent since Fąfara was appointed.

“The market is still waiting to see our decisions,” Fąfara said, notably whether Orlen will maintain the capital expenditure plan pledged by his predecessor. Fąfara promised to disclose in August “our approach towards capex spending”.

Fąfara also has other issues to resolve. In April a Polish prosecutor opened a criminal investigation into whether Orlen’s Swiss trading unit had “connections with terrorist organisations”, referring to the Lebanese militant group Hizbollah, after Orlen disclosed that it was auditing the unit following a $400mn loss on its trading activities.

Orlen Trading Switzerland made advanced payments to buy oil from Venezuela and Sudan via “intermediaries Orlen never used before”, but the oil was never delivered, Fąfara said. These small intermediaries were based in Dubai and other parts of the Middle East, but Fąfara said no document was found within Orlen to confirm the Hizbollah link, which was also repeated by Tusk.

“We are in the process of trying to recover this [trading] money, but it is very complicated,” Fąfara 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’s Gdańsk oil refinery to Saudi Aramco. It also sold 417 petrol stations to Hungarian company MOL. 

In February, the Polish state auditor issued a report that claimed Saudi Aramco underpaid by 3.5bn zlotys ($865mn) for the Gdańsk refinery stake. The auditor also said the transaction created a security risk for Poland because it granted Saudi Aramco the power to cut fuel supplies.

Asked whether Saudi Aramco could be forced to divest, Fąfara said that “the process is irreversible as it was a key remedy imposed by the EU”. Instead, he plans to visit Riyadh soon to discuss “potential joint investments and our future co-operation with Aramco”.

He also described Orlen’s merger with Lotos as “irreversible” but acknowledged that he was unconvinced it benefited Poland’s energy market. “From the customers’ point of view, the situation is always more comfortable when there is more competition on the market,” he said.