The scheme that allowed Lukoil’s middleman to benefit from state aid

Oltchim, the huge petrochemical plant, now bankrupt. SOURCE: Google Maps
Oltchim, the huge petrochemical plant, now bankrupt. SOURCE: Google Maps

In July 2019, the European Commission decided that the aid granted to Oltchim by various state owned companies was “to be considered as unlawful and incompatible aid”. The total amount of the aid, staggering – over EUR 333.6 million: AAAS (State Assets Management Authority) agreed to cancel EUR 216 million of its claims towards Oltchim, Salrom (salt supplier) agreed to cancel EUR 4,2 million of debt, CET Govora SA (steam and electricity supplier) agreed to cancel EUR 21,1 million of debt, National Water Administration agreed to cancel EUR 2,2 million of debt and Electrica (power supplier) agreed to cancel EUR 112 million of debt.

One private company, though, managed to cash in pretty well: more than 90% of the material delivered to Oltchim was paid in full. More than that: most the remaining debt was secured. And we’re not talking about small change: only between 2010 and 2012, the company delivered more than EUR 100 million worth of material to the chemical plant, whereas the first contract was signed in 2006 and, at the beginning of 2013, the private company was the sole supplier of a certain type of substance to Oltchim. The name of the company is not quite important given it was only a middleman: the real provider of the stuff was the Petrotel Lukoil refinery.

Oltchim in bankruptcy: EUR 800 million debt

According to the European Commission, Oltchim was until recently one of the largest petrochemical companies in Romania and South-East Europe. The Romanian State (currently via the Ministry of Economy) maintains a controlling stake of 54,8 % in the company. Oltchim mainly produced liquid caustic soda, propylene oxide-polyols, plasticisers and oxo-alcohols. Oltchim was the biggest producer of liquid caustic soda on the European market (EU market share of 41% in 2015), the only producer of caustic soda beads in Central Europe, as well as the only producer of polyvinyl chloride and polyethers in Romania and third in Europe.

Oltchim exported over 74% of its production inside and outside of Europe.

However, on the second half of 2019, after six years of insolvency, the company finally went bankrupt leaving huge debts unpaid: around EUR 800 million. As most of the valuable assets of the petrochemical plant were already sold at the end of 2018 (for EUR 141 million), it is quite obvious that 80% of the debt will remain unpaid for good so both state and privately owned companies have to admit big financial loss.

The very few secured creditors

One private company, though, has nothing to worry about: Bulrom Gas Impex SRL, Oltchim’s favorite propylene supplier.

Based on the report made in 2013 on the causes that led to insolvency, the first contract was concluded in 2006 for five years, until the end of 2011. A second contract was signed in 2011. The deal was simple: Bulrom Gas Impex SRL was to deliver propylene which Oltchim had to pay for. Unlike other contracts that Oltchim concluded, this one went on pretty smooth given the very bad financial shape that the communist petrochemical plant was in for years and years. According to the aforementioned report made in 2013 on the causes that led to insolvency, after five years of propylene deliveries on a regular basis to Oltchim, Bulrom Gas Impex SRL decided it was time to secure some of the debts, money Oltchim couldn’t pay at the time. Seven months (June 2011 – January 2012) and four notary deals were enough for Oltchim to hypothecate assets and guarantee in favor of Bulrom Gas Impex SRL almost RON 96 million (EUR 20 million) in real estates.

Other partners that Oltchim had for years in a row were not that lucky. Based on the bankruptcy creditors list, here are a few examples: CET Govora (provider of steam and electricity) has unsecured debts of more than EUR 30 million, the Romanian National Water Administration – almost EUR 3 million in unsecured debts, Electrica SA (main provider of electricity) – unsecured debts of more than EUR 100 million, Erste Group Bank – EUR 25.7 million unsecured, CFR Marfă (railroad transport) – EUR 25.3 million unsecured, MFC Commodities GmbH – unsecured debts of almost EUR 33 million.

Bulrom Gas Impex, a very special client

There’s no surprise, then, that in 2013 Bulrom Gas Impex SRL initiated enforcement measures to recover the duties, the European Commission noted down in the state aid report. The Commission adds that Bulrom Gas Impex SRL has now “both secured and unsecured debt” but does not deliver data on the unsecured amount (which is mentioned, though, in a report posted on Oltchim website: RON 12 million – not even EUR 3 million). However, it mentions the secured debt: EUR 5.2 million. Which is half the amount that Bulrom Gas Impex SRL had to receive in 2013 – RON 48.2 million (a bit more than EUR 10 million).

In conclusion, right now, according to the report on the causes that led to insolvency, Bulrom Gas Impex SRL has to recover around EUR 8 million debt (which is less than 10% of the amounts already cashed in by the end of 2013), out of which more than EUR 5.2 million is secured (it is worth mentioning, though, that the the report made in 2013 on the causes that led to Oltchim’s insolvency speaks about EUR 20 million worth of assets having been hypothecated in favor of Bulrom).

Bulrom Gas Impex SRL owns only a few filling stations. SOURCE: facebook.com
Bulrom Gas Impex SRL owns only a few filling stations. SOURCE: facebook.com

The 2013 insolvency report also shows that, at the end of 2012, the most significative of Oltchim’s debt to Bulrom Gas Impex SRL (RON 36 million – around EUR 8 million – out of RON 47 million) was not more than six months old whereas Electrica SA, for instance, had not been paid a cent for more than a year (at the time, the amount was RON 611 million).

Invoiced, not delivered?

More data is available to prove that Bulrom Gas Impex SRL has a privileged status in connection to Oltchim. Also based on the report on the causes that led to Oltchim insolvency, Bulrom supplied RON 496 million (around EUR 115 million) worth of propylene between 2009 and 2012 (all other four suppliers provided RON 551 million worth of propylene; but in 2011 and 2012, Bulrom had to compete with first three and then only two other companies that delivered combined less propylene to Oltchim compared to their rival).

And there’s more. Based on the report made in 2013, the cost of the propylene supplied by Bulrom Gas Impex SRL Oltchim was higher than the ICIS monthly average price, which led to Oltchim paying an additional EUR 3 million over three years of propylene deliveries. Apparently, the authors of the report noted down, that was no coincidence: the annual average price of the propylene that Bulrom Gas Impex SRL sold to Oltchim was higher than that of other significant players on the market.

There were even indications of corruption: according to the cited report, “we couldn’t conclude that the amount of propylene which is mentioned in the invoices was actually delivered.”

The actual supplier: Petrotel Lukoil

Where did that propylene come from, anyway, before getting to Oltchim? Bulrom Gas Impex SRL is only a distributor of liquefied petroleum gas. The report on Oltchim’s insolvency causes lets no room for mystery: “Bulrom Gas is a distributor of Petrotel Lukoil oil products, amongst which there is also the propylene supplied to Oltchim.”

Is that relationship between Bulrom and Lukoil a short term one? It certainly doesn’t seem so. First of all, the main tanker owned by Bulrom is located at the Petrotel Lukoil refinery site. Secondly, the company which is in charge of the tanker security, Traun Guard HMS SRL, is also in charge of Lukoil’s facilities security (not to mention that Traun Guard HMS SRL was founded by Lukoil). Thirdly, a newly established company controlled by the people that own Bulrom Gas Impex SRL, Octano Downstream SRL, appointed a general manager (Grigore Guzun) that used to work for 15 years for Lukoil Romania (1999 – 2014).

The Petrotel Lukoil refinery near Ploiești. SOURCE: Google Maps
The Petrotel Lukoil refinery near Ploiești. SOURCE: Google Maps

Empathy for the bankruptcy devil

Three other companies with connections to Romania and Bulgaria are related to both Oltchim and Lukoil (except this time it is the Bulgarian branch, Lukoil Neftochim Burgas AD).

The most important of those three is MFC Commodities GmbH Vienna, Austria (that established a Romanian branch, MFC Commodities Romania SRL). The Austrian company was one of the biggest clients that Oltchim had, now listed as one of the main creditors of the petrochemical company in bankruptcy (almost EUR 33 million in unsecured debts and almost EUR 3 million in secured debts). However, for years, MFC Commodities GmbH benefitted from the low price policy that Oltchim applied when selling all sorts of substances produced by the plant, according to the report made in 2003 on the causes that led to the plant insolvency. At the same time, says the European Commission (in the above mentioned report on the state aid granted to Oltchim), MFC Commodities GmbH decided, though huge debt unpaid, “to deliver raw materials required for the restarting of Oltchim’s activity (…). The base of such decision would have been the likelihood of recovering a larger amount of the debt in case the activity was restarted, the business became viable and the subsequent sale had succeeded.”

The Bulgarian connection

Two minor clients are also Alpton Invest & Trade Inc US and Prochema Handelsgesselschaf MBH Austria, companies that used to purchase Propylene glycol from Oltchim.

All three companies (MFC Commodities GmbH, Alpton Invest & Trade Inc and Prochema Handelsgesselschaf MBH) have a Bulgarian national in common: Svetlozar Ivanov Grigorov.

Svetlozar’s connection to MFC Commodities GmbH is Cosmin Tomulescu, the CEO of MFC Commodities Romania SRL (Svetlozar and Tomulescu own together a Bulgarian company, Alfera Trade OOO).

Svetlozar’s connection to Prochema Handelsgesselschaf MBH Austria is Prochema Bulgaria, a branch which Svetlozar used to manage until the company shut down a few years ago.

Finally, Svetlozar’s connection to Alpton Invest & Trade Inc US is George Eduard Vintilă, a Romanian business man which set up some companies in both Bulgaria and Romania (under the L & M Trading name) in association with Svetlozar.

Vintilă is the representative of Alpton Invest & Trade Inc US (based in Delaware). Vintilă and Alpton Invest & Trade Inc US owned in shifts shares in a Romanian company called Invcorexim SRL. This company doesn’t seem to be particularly successfully financially (the annual turnover is usually less than EUR 1 million), but what’s interesting is that Lukoil Neftochim Burgas AD agreed to guarantee for Invcorexim EUR 335,000 in bank loans and factoring operations.

Questions sent to people and companies mentioned in this story have remained unanswered so far.

This research was enabled by “Reporters in the field”, a program by Robert Bosch Foundation hosted together with the media NGO n-ost.

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