Polish treasury moves to sack Lotos chief executive before election UPDATE

Polish treasury moves to sack Lotos chief executive before election UPDATE

	Published : Mon, 10 Sep 2007 16:36 By : Agencies Print this Story

(Updates to add more comments from minister and analysts, background)

WARSAW (Thomson Financial) - Poland's state treasury has asked the supervisory board of oil company Grupa Lotos to sack chief executive Pawel Olechnowicz, as the government moves to complete a reshuffle at state-owned companies ahead of early elections next month.

Officials cited losses for Lotos subsidiaries, unearthed more than two months ago, as being behind the move to remove Olechnowicz, who took over at Lotos in 2003 and steered its launch on the Warsaw stock exchange.

Shares in Lotos deepened earlier losses after the news, closing down 2.92 pct at 42.52 zlotys.

'I have sent a letter to the supervisory board chairman, requesting the removal of Lotos CEO Pawel Olechnowicz,' deputy treasury minister Pawel Szalamacha told a news conference.

Szalamacha said Olechnowicz was 'too slow to act' on financial irregularities reported at its Lithuanian subsidiaries.

'There have been losses in subsidiary assets. 30 mln usd has disappeared,' the minister told reporters, adding prosecutors were informed about the case on July 6.

A Lotos spokesman declined to comment, adding the company will release a statement about the situation at its Lithuanian companies later today.

Olechnowicz has criticised the treasury's plan to merge Lotos and PKN Orlen, saying it would leave the state worse-off. He says any merger should be delayed 2-3 years until the two companies have completed current investment plans.

The treasury has argued the deal, which would create a company with a market value of about 10.8 bln usd, could help fend off competition from foreign oil majors.

Asked whether the merger between PKN Orlen and Lotos was necessary, treasury minister Wojciech Jasinski said: 'I believe that it is. For example, from the point of view of national energy security.'

The Lotos chief executive is the sole survivor of a string of boardroom reshuffles since the conservative government came to power two years ago that replaced managers at copper miner KGHM, Poland's biggest bank PKO BP and oil company PKN Orlen.

Polish MPs on Friday voted to hold early elections on Oct 21.

'I don't think this decision has much to do with the potential merger and Olechnowicz's scepticism,' said an analyst at one foreign bank asking not to be named.

'It's simply the last chance for this government to put their own people in with early elections around the corner.'

Analysts said Olechnowicz's dismissal could hurt the company's plan to secure 70 pct of financing for its 5.6 bln zlotys upgrade plan. The plan aims to boost its refining capacity and raise annual revenues to 20 bln zlotys in 2010.

'The process of finding financing for the plan was supposed to be closed by the end of the year,' said Kamil Kliszcz, analyst at BRE Securities in Warsaw. 'The hassle surrounding the chief executive may cause uncertainty among the banks.'

piotr.skolimowski@thomson.com adrian.krajewski@thomson.com +48 22 447 24 36

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