Our Firm has been supporting PKN ORLEN at the final stage of the implementation of remedies laid down by the European Commission in its decision granting conditional approval for ORLEN’s concentration with Grupa LOTOS. On 30 November 2022, the key agreements with Aramco Overseas Company and MOL Hungarian Oil and Gas Public Limited Company were signed, and so the implementation of these specific remedies is now complete. Meanwhile, the divestment process in the area of fuel logistics is still underway. Legal aspects of these complex and multidimensional transactions have been handled by our expert legal team led by Prof. Maciej Mataczyński.
‘We are at the final stage of this merger – the biggest concentration in the Polish energy market,’ says Prof. Maciej Mataczyński, Managing Partner at SMM Legal, actively engaged in the project from the very beginning. ‘Contrary to what one may think, this is a highly demanding, crucial phase for the entire merger which has already been completed,’ explains Prof. Mataczyński.
Path towards the divestment phase
In its conditional approval of concentration between the two companies issued on 14 July 2020, the European Commission obliged PKN ORLEN to sell certain assets to third parties (buyers) and enter into specific agreements with them.
The reason for this measure was to ensure competition protection in the markets affected by the concentration.
In January 2022, PKN ORLEN presented the proposed buyers to the European Commission, specifying how the remedies would be implemented. At the same time, conditional share purchase agreements (SPAs) were signed and terms and conditions of remaining agreements (trade contracts) were agreed between the parties.
Once the Commission approved both the buyers and the contractual provisions, the merger between both companies went through.
‘Over the last months our teams worked at warp speed for our client to draft and negotiate highly complex trade and operational agreements, mostly referring to the operations of the Gdańsk refinery. Our top priority has been to safeguard our client’s interests in the context of future cooperation that will be necessary to implement the so-called behavioural remedies’, explains Ms. Magdalena Cisowska, the head of the team.
As a result, on 30 November 2022, PKN ORLEN signed the following agreements:
- Share purchase agreements with Aramco Overseas Company concerning shares in the Gdańsk Refinery, LOTOS SPV1 (a wholesale company) and LOTOS-Air BP Polska, and key operational and commercial agreements negotiated with the investor;
- Share purchase agreement with MOL Hungarian Oil and Gas Public Limited Company concerning shares in LOTOS Paliwa and related agreements necessary to implement the required remedies.
On top of this, on 01 December 2022 one more remedy was implemented – the independent logistics operator (ILO) structure was put in place.
Project team
During these final phases of the project we have put together a broad, interdisciplinary team of expert lawyers advising our Client in the following areas:
- Competition – Prof. Maciej Mataczyński and Magdalena Cisowska,
- Negotiations – Tomasz Jaranowski, Magdalena Cisowska, Paweł Łącki, Łukasz Dutkowski and Dr. Izabela Jackowska,
- Corporate matters – Tomasz Jaranowski, Wojciech Sikorski, Dr. Izabela Jackowska and Kinga Dziennik,
- Regulatory – Dr. Marlena Kruszyńska-Kośmicka and Emilia Topolnicka-Łańduch,
- IP / IT – Magdalena Michalska-Niewiadomska, Zuzanna Skurniak and Piotr Ruchała,
- Real properties – Diana Krzyżanowska,
- Logistics and investments – Monika Adamczak, Mateusz Stańczyk,Maciej Tulwin
- Notifications to supervisory authorities – Dr. Paweł Łącki, Maksymilian Saczywko.
Contracts with Saudi Aramco
On the basis of agreements with Aramco Overseas Company, the Saudi corporation acquired full control of LOTOS SPV 1 Sp. z o.o. and purchased a 30% stake in Rafineria Gdańska Sp. z o.o. On top of this, Aramco Overseas Company acquired a 50% share in LOTOS-Air BP Polska Sp. z o.o.
In this area, SMM Legal lawyers worked on the agreements:
- laying down the operational rules for the Gdańsk refinery as the so-called processing refinery – a refinery processing raw materials for two separate processors, PKN ORLEN and a company from the Saudi Aramco group;
- ensuring that the other processor could seamlessly launch its operations in the Polish market.
‘The biggest challenge at this stage was to identify all complex factors and business needs inherent to refinery operations in a broad sense, including production, logistics and the wholesale of refinery products’, explains the head of the team, attorney Magdalena Cisowska. ‘The fact that this first step was taken care of allowed us to draft comprehensive rules governing the mutual cooperation between the parties, which may well remain in force for the decades to come’, adds Ms. Cisowska.
‘This is the first processing agreement of this type in Poland’, clarifies Prof. Maciej Mataczyński.
Eventually, over the last two years, the team composed of Prof. Maciej Mataczyński, Magdalena Cisowska, Dr. Paweł Łącki and Łukasz Dutkowski has prepared and negotiated a number of highly complex agreements, including the Processing Agreement, the Off-Take Agreement, the Rail Logistics Framework Agreement and the Compulsory Stock Framework Agreement.
The other party was advised by Allen &Overy (offices in Dubai, London and Warsaw).
Agreements with MOL and LOTOS Paliwa
On the basis of the agreement with MOL Hungarian Oil and Gas Public Limited, the buyer acquired 100% of LOTOS Paliwa Sp. z o.o. This transaction also involved other agreements with the divested company, LOTOS Paliwa Sp. z o.o., including a fuel purchase agreement and a licensing agreement for the use of trademarks displayed at the petrol stations for a period necessary to complete the rebranding process.
Our lawyers working on this transaction package drafted the agreements and provided our clients in support during negotiations.
The key lawyer responsible for the collaboration with our Client and the coordination of the work of the team dedicated to this project was attorney Tomasz Jaranowski. The other party was advised by CMS.
Independent Logistics Operator (ILO)
One of the subsequent stages aimed at the implementation of remedies involved making a contribution in kind in the form of PKN ORLEN fuel depots to LOTOS Terminale S.A. and putting in place an independent logistics operator structure. Our team of more than a dozen lawyers assisted our Client during this highly complex and multidimensional process as well.
‘The Independent Logistics Operator had to be established to make the divestment in the field of fuel logistics in line with the expectations of the European Commission,’ explains Kinga Dziennik, engaged in the work of the team. ‘The new entity was set up by direct divestment from 100% shares in LOTOS Terminale S.A. and indirect sale of 100% share in LOTOS Infrastruktura S.A., 100% share in RCEkoenergia Sp. z o.o. and 100% share in Uni-Bitumen Sp. z o.o. to the investor,’ explains Ms. Dziennik.
On 01 December 2022, four fuel terminals which made part of the logistics infrastructure of PKN ORLEN in Gdańsk, Szczecin, Gutkowo and Bolesławiec were transferred to a subsidiary of LOTOS Terminale S.A. At this point, the biggest challenge was to minimize the downtime of the four operational fuel depots providing access to fuels in different parts of the country.
‘We had to work in parallel across legal, regulatory, tax and IT workstreams and in consequence also coordinate the collaboration between various authorities and entities located all over Poland,’ explains Dr. Izabela Jackowska. ‘In order to achieve this goal, we engaged a multidisciplinary team of lawyers with expertise in all of these areas’, adds the team coordinator.
Given the nature of the assets that make up the fuel depots, including real property located on port areas, our lawyers in collaboration with the Ministry of Infrastructure and the Maritime Ports Authority developed a custom-made, original legal concept involving the transfer of an organised part of an enterprise. Additionally, in view of the nature of the contribution in kind, we have gathered all information on contracts and administrative decisions related to the fuel depots to be transferred. As a result, the depots were correctly and successfully transferred to LOTOS Terminale S.A.
Conclusion
‘It is thanks to the expertise and involvement of our team that we have been able to add a new chapter to the history of Polish legal practice,’ sums up Prof. Maciej Mataczyński. ‘The first Polish processing agreement drafted during this phase is yet another trailblazing experience that SMM Legal has contributed in terms of advisory for the biggest businesses.
