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The Management Board of PETROLINVEST S.A. (the “Company”) announces that on 18 November 2010 the Company and the Morgan Stanley Capital Group, Inc. (“Morgan Stanley”) concluded an agreement concerning the final settlement between the parties in connection with the termination by Morgan Stanley of the LPG supply agreement of 4 November 2009 concluded between the Company and Morgan Stanley (the Company announced the conclusion of this agreement in current report No 99/2009 of 5 November 2009) (the “Agreement”). The subject matter of the Agreement was the purchase of 140,000 tons of LPG in total by the Company in the years 2010–2011. The estimated value of the contracted deliveries was to be in excess of USD 90,000,000. The Agreement was terminated on 13 October 2010. The reason provided by Morgan Stanley for terminating the Agreement was the failure of the Company to establish, pursuant to the terms of the Agreement, collateral on behalf of Morgan Stanley for the Company’s payment for LPG deliveries under the Agreement in the form of documentary credit.
Pursuant to the terms of the agreement concluded on 18 November 2010, during the final settlement between the parties in connection with the termination of the Agreement, the Company will be obliged to pay to Morgan Stanley the amount of USD 2,450,000, corresponding to the excess of the margin which Morgan Stanley would have generated delivering LPG to the Company, in comparison with deliveries to other recipients, which the Company indicated in current report No 99/2009 of 5 November 2009. The settlement amount is fully covered by the provision created in 2008, and therefore the payment of the settlement amount will not be charged to the Company’s financial result in 2010.
In the opinion of the Company’s Management Board, because of the ongoing situation regarding price relations on the LPG market between the Western and Eastern European purchase areas, performance of the Agreement would not have brought the Company the expected economic effects. Therefore, the Management Board emphasises that the conclusion of the agreement will allow to limit the negative economic effects of the Agreement.
Termination of the Agreement with Morgan Stanley is another element of the restructuring of the Company’s LPG sector operations, which is nearing completion. As previously signalled, operations in this segment became more dynamic at the beginning of the year, results of which included the signing of a contract with Orlen Gaz Sp. z o.o. for LPG deliveries, which was the subject of current report No 69/2010, and the significant growth in sales volume.
In the opinion of the Company, the termination of the Agreement will not have any other negative financial consequences for the Company and the PETROLINVEST Capital Group. The Management Board of the Company emphasises that the abovementioned agreement with Morgan Stanley settles all the relations of the Company with this trade partner arising from the Agreement of 4 November 2009 and covers all claims of Morgan Stanley against PETROLINVEST S.A. Download current report no. 92/2010
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