China Energy Company Limited (CEFC) will take over 51% of KMG International and thus get to control Romanian company Rompetrol Rafinare, which owns the country’s biggest oil refinery – Petromidia, and the second-biggest fuel distribution network.

KMG International (KMGI), the majority shareholder of Rompetrol Rafinare, announced on Thursday (December 15) that negotiations between its owner, the National Company KazMunayGas of Kazakhstan, and Chinese group CEFC for a 51% stake in KMG International have reached the final stage.

“An agreement between KMG NC and CEFC stating the strong commitment to pursue the transaction is expected to be signed, along with a restated set of documents, thus confirming the solid partnership between the two companies,” reads an official press release.

“The assets owned and operations carried out by KMGI in Europe and in the Black Sea region will serve as a development platform that will target both the increasing of operational and financial performance of KMGI and expanding at the international level of dedicated activities and operations performed by CEFC,” according to the same statement.

The strategic partnership will establish the necessary framework for future joint projects and will contribute to the economic and social growth of the areas where those projects will be implemented, most of them being in Romania, according to KMG International.

In May 2016, CEFC announced it would take over 51% of KMG International for USD 680 million. The Chinese group also committed to investing some USD 3 billion in developing KMGI’s operations, in the next five years.

KMG International had an operational result (EBITDA) of USD 145 million, in the first nine months of this year, up 6% compared to the level reached in the January-September 2015 period, as its gross turnover was about USD 5 billion.

Rompetrol Rafinare, the group’s biggest company, had a gross turnover of USD 2.57 billion and an operational profit (EBITDA) of EUR 121 million, in the same period.

Rompetrol Rafinare is the third biggest company in Romania based on turnover, after car maker Dacia and oil & gas group OMV Petrom. The company controls the Petromidia refinery, with a processing capacity of over 5 million tons of oil per year, and a network of 729 fuel stations operated directly or in partnership with local investors.

KMG International, the former Rompetrol Group, was set up by Romanian investor Dinu Patriciu in 1999. In 2001, Rompetrol bought the Petromidia refinery from the state. In August 2007, Patriciu and his American partner Phillip Stevenson sold 75% of Rompetrol Group to the state oil company of Kazakhstan – KazMunayGas for a reported USD 2.7 billion. Patriciu died in August 2014.

Rompetrol group’s history is a controversial one. Dinu Patriciu was sent to court for embezzlement, money laundering, and capital market manipulation, among others. The court actions against his partners continued after his death.

In May 2016, just as KMG International announced the deal with CEFC, the Romanian anti-organized crime prosecutors started investigating a case related to the privatization of the Petromidia refinery. Several former ministers involved in the privatization process were called in for questioning while the prosecutors also decided to freeze KMGI’s assets in Romania. The decision, which was challenged by KMGI, made the deal uncertain.

editor@romania-insider.com