KMG International Vice President Alexei GOLOVIN:
WE INTEND TO EXPAND OUR PRESENCE IN FOREIGN MARKETS
KMG International (Rompetrol) is ready to buy back a 26.7% stake in Petromidia Refinery from the Rumanian government for $200 million by the end of this year. As soon as the Rumanian authorities grant all required approvals, the deal will be closed, KMG International Vice President for Corporate Development and Strategy Alexei GOLOVIN told Interfax-Kazakhstan in an interview.
– Are there any large international projects KMG International plans to implement in the future?
– In the short- and mid-term, we do not plan any large-scale projects, acquisition or merger deals outside the countries of our presence. We believe that our company has significant potential that has not been fully realized yet. So, we are going to focus on the existing assets in order to achieve their maximum productivity and efficiency.
Of course, our investment should be prioritized from the viewpoint of repayment and added value. Our priority today is to develop the retail chains, build a power plant and improve our logistic infrastructure, which does not require large capex but will bring economic benefit immediately.
As a rule, aggressive expansion should only be pursued after the internal potential has been fully realized and there is a need to expand the geographical presence. Currently, we do not have any expansion projects in our portfolio.
At the moment, we do not plan on any international projects or joint ventures either. As far as our current commercial operations are concerned, we already have long-term partners.
– You said earlier that KMG International was determined to boost non-gasoline sales by 33% in 2021.
- Today, all our filling stations generate two types of revenue: from sales of gasoline and from auxiliary services to our customers such as shops, cafes and others.
In 2017, our non-gasoline revenue in Rumania alone was at $17.5 million. We expect our this type of revenue to increase by 27% in 2019 compared with 2017. Thus, we plan to boost our revenue from non-gasoline sales for 33% by 2021 compared with today’s level.
We are also going to increase non-gasoline sales in the other countries of our presence, too.
– KMG International announced earlier its plan to expand exports from Petromidia Refinery? Have you made any progress in this direction?
- Of course, we are interested in selling the products of our refinery through high margin channels. This is the sales in those regions where we have our own retail and wholesale chains – Rumania, Bulgaria, Georgia and Moldova. However, as we cannot sell all the products through our own supply chains, some of the volume is exported.
Thus, there are two trading directions. First, this is the sea route to Turkey and Greece. We are already working in this direction and no drastic changes in our strategy is expected here. Second, our exports across the land border to Serbia and Macedonia. However, we do not track the movement of our petroleum products to the end customers in these countries. So, we plan to rent terminals and oil storage tanks to sell our petroleum products directly to small wholesale customers.
– Do you plan to expand your presence in the East European markets?
- We plan to expand our presence in the external markets. Our 2021 Development Strategy sets the following objectives: to increase the market share to 15% from 3% in Rumanian, to 22% from 17% in Georgia, to 25% from 23% in Moldova. This is our presence in these markets through our own retail chains.
– Does KMG International plan dividend payments to the shareholder in the midterm?
– It is difficult to say what part of the profit could be distributed to the shareholder. At the moment, we are developing a five-year budget. We also have to synchronize our capabilities with the shareholder’s expectations. In general, KMG International envisages dividend payments to the shareholder in its five-year development plan and the budget.
– What is the status of the negotiations between KMG International and the Rumanian government about repurchase of shares in the Rumania-based assets?
– It should be noted that KMG International does not have any obligations to the Rumanian government concerning debt repayment or assets return. We are committed to all our agreements. In accordance with the memorandum signed in 2013, we are under obligation to buy back the shares of Petromidia Refinery, of which 44% are owned by the government of Rumania. We reached agreement that 26.7% of these shares are to be repurchased for a fixed price of $200 million.
We anticipate reaching final agreement on the creation of a joint investment fund with the government of Rumania in the next two-three months. The negotiations are nearing their completion, and the approval process is now 95% complete. As far as share repurchase is concerned, we have reiterated earlier that we are ready to buy back the shares as soon as the Rumanian government finalizes all necessary procedures and announces a tender. We are sure that this process will be completed by the end of 2018
– Thank you for your time!
July, 2018
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