By Andrzej Ratajczyk
24 January 2007

Piotr Kownacki has replaced Igor Chalupec as president of Poland's largest fuel company, PKN Orlen. Despite its political context, the decision has been received by the market quite positively.

Rumors about the possible dismissal of Chalupec could be heard for a long time because he was perceived as a representative of the previous ruling camp. Chalupec assumed the post of PKN Orlen president in October 2004 after coming first in a selection process for the job. He came to the company from the Finance Ministry where he had held the post of deputy minister. Earlier, he had worked for more than 10 years for the Pekao SA bank, where he had held the post of vice-president.

When last year Orlen took part in the tender for the purchase of the Mazeikiu oil refinery in Lithuania, and was eventually selected as its strategic investor, it was almost certain that Chalupec would remain in the post until the closing of the deal. But in mid-December, after Orlen had become the owner of Mazeikiu Nafta, it became clear that his dismissal was only a question of time. On Jan. 18, the supervisory board of PKN Orlen, on a motion from representatives of the Treasury, dismissed Chalupec from the post of president of the PKN Orlen management board and appointed Piotr Kownacki, the company's vice-president for auditing and regulation, to the post. Kownacki had been vice-president of the Central Auditing Office (NIK) at the time when Polish President Lech Kaczyński held the post of NIK president.

Commenting on Chalupec's dismissal, Prime Minister Jarosław Kaczyński said the decision resulted not only from business-related reasons but also from the strategic character of operations conducted by Orlen. Kaczyński said Kownacki would take care of Poland's interests related to energy security better than Chalupec. "Piotr Kownacki has experience and a career path which better meets the needs of the present time," Kaczyński said. Treasury Minister Wojciech Jasiński said for his part that "competence, credibility and confidence were Kownacki's advantages."

Stock market investors reacted positively to the replacement in the president of Poland's largest fuel company. Following the decision of the Orlen supervisory board, the company's stock price rose by over 2 percent.

Chalupec, who was not surprised by the Supervisory Board's decision, said he was satisfied with the job he had done at PKN Orlen, the more so as his team had done more than it had been expected to do. "The Orlen group is one of the largest companies in the region, has a leading position and is now quite different from what it was in October 2004, when I came to the company, and much better regarded," Chalupec said. "However, I have a sense of a suddenly disrupted mission and it's a pity I will not be able to carry out the projects we have started to involve the group in oil extraction operations, diversify oil supplies to Poland and integrate the company with the oil refinery in Mazeikiu." Chalupec was offered a chance to stay in the company as president of the oil refinery in Mazeikiai but refused. He also resigned as president of the Supervisory Board of Unipetrol, a Czech company acquired by Orlen in 2005.

Most fuel sector analysts regarded Chalupec as an efficient manager, who-together with other members of the management board-managed to carry out several strategic projects at PKN Orlen including its internal restructuring and the purchase of a controlling stake in the oil refinery in Lithuania.

PKN Orlen is now one of the largest groups operating in the oil sector in Central and Eastern Europe. Following the acquisition of Unipetrol a.s., the largest Czech group in the fuel and petrochemical sector, PKN Orlen has six refineries in Poland and the Czech Republic. The integrated oil and petrochemical complex in Płock is considered to be one of the most modern and efficient facilities of its kind in Europe. Orlen's total processing capacity in Central and Eastern Europe is 21.7 million tonnes of petroleum annually.

The group also has Central Europe's largest chain of fuel stations. They are located in Poland, Germany and the Czech Republic. The group's retail chain is supported by its logistics infrastructure composed of surface and underground storage facilities and a network of the group's own and leased pipelines.

Zbigniew Chlebowski, an MP for the Civic Platform (PO), has no doubt that the change in the post of Orlen president was politically motivated. "The dismissal of Igor Chalupec from the post of Orlen president and the appointment of Piotr Kownacki as his replacement was a bad decision. They fired an excellent manager whose worth was proven by the company's financial performance, a man to whom Orlen owes the purchase of the Mazeikiu oil refinery and who could guarantee that the company would successfully expand. This man was replaced by a party colleague of the Polish president. There were no substantial reasons to make the change in this post," Chlebowski said. Deputy chairwoman of the Sejm Economic Committee Małgorzata Ostrowska of the Democratic Left Alliance (SLD) voiced the same opinion.

Meanwhile, Andrzej Szczęśniak, a fuel market expert, believes that reasons for Chalupec's dismissal did exist because in 2006 Orlen stock lost in value. "For me the most clear and hard indicator is the value of PKN Orlen. In contrast to other fuel companies listed on the Polish exchange, whose value rose by 10 percent, the value of Orlen stock declined in 2006 by 25 percent. It seems to me this is an assessment of the shareholder value supported by lower Fitch ratings," Szczęśniak said.

It is quite possible that Poland's second largest fuel company, Lotos Group, will also have its management board replaced in the near future. The president of the company, Paweł Olechnowicz, is not connected with the present ruling camp. The Lotos supervisory board is scheduled to meet in the last days of January.

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