Further clarification by the Supervisory Board of Petrol d.d., Ljubljana
Due to various kinds of speculation in the media following the termination of the terms of office of Management Board members through mutual agreement, Petrol d.d., Ljubljana hereby provides further clarification. In order to safeguard the Company’s reputation and avert further harm, Petrol d.d., Ljubljana hereby provides more detailed clarification concerning the divergence between the Management Board and the Supervisory Board as regards the execution of the Company strategy. The agreement to terminate the terms of office of Management Board members through mutual agreement was made to protect the reputation of Petrol d.d., Ljubljana, yet the public response was quite the opposite. To avert further harm to the Company, Petrol d.d., Ljubljana hereby provides the following additional clarification.
The divergence between the Management Board and the Supervisory Board of Petrol d.d., Ljubljana as regards the execution of the strategy relates to proposals made by the Management Board that would lead, if approved, to significant departure from the Strategic Business Plan for the period 2018 – 2022. Moreover, the Management Board never provided the Supervisory Board with any credible materials on which a decision could have been based. The Supervisory Board has requested on several occasions for such materials to be prepared as the materials provided contained errors of several hundred million in cash flow calculations and in the amount of debt required to finance the investments. The Supervisory Board deemed the materials provided by the Management Board to be misleading and was unable to take any decisions based on them.
The materials, which were not approved but would lead, if approved, to significant departure from the Strategic Business Plan for the period 2018 – 2022, were discussed by the Supervisory Board and the Management Board at several Supervisory Board meetings in October 2019. The Supervisory Board called, on several occasions, for additional explanations to be provided by the Management Board and for the materials to be revised in order to be able to carry out a thorough examination of all aspects of such considerable departures from the strategy. The significant departure from the strategy relates both to the amount (a multiple thereof) and the dynamic of investments required in the future as well as to the amount (a multiple thereof) and the type of sources of finance needed to carry out the investments.
As the Supervisory Board expressed doubts as to the accuracy and credibility of the calculation of the required sources and types of finance, the materials were indeed revised several times, but did not reflect the comments made by the Supervisory Board and its requests for additional clarification and revisions. In this respect, the materials contained misleading information as the envisaged amount and type of debt (including a more expensive, subordinated debt) were deeply erroneous. The importance of the dynamic and amount of the envisaged investments as well as the related risks were also highlighted by Standard & Poor's Rating Services in their credit rating justification, pointing out a key risk of making large investments (of EUR 521 million, according to the strategy) mostly outside the Company's core activities in the coming years.
In the materials submitted to the Supervisory Board for discussion, the investments were significantly higher and would take place over a relatively short period of time, compared to the figures approved in the strategy. As a result, the amount of debt required by Petrol d.d., Ljubljana would be considerably higher and more expensive due to its different types, in a time when macroeconomic data shows that the peak of the economic cycle has already been reached.
It is a fact that calculations in the materials contained critical errors that were not or refused to be corrected in spite of repeated warnings by the Supervisory Board. This led to a loss confidence in the Management Board on the part of the Supervisory Board, given the importance of the proposed decisions. An approval and execution of the proposed decisions could have been detrimental to Petrol d.d., Ljubljana. The Supervisory Board considered that continued cooperation with the Management Board would have been extremely difficult and would undermine the performance of Petrol d.d., Ljubljana in the future. Supervisory Board members acted completely independently, professionally and with all due care, taking the decision unanimously. On 24 October 2019, an agreement was reached with the Management Board president and the two Management Board members to terminate their terms of office through mutual agreement. The termination of the terms of office through mutual agreement was deemed as the most suitable solution and one that would cause least harm to Petrol d.d., Ljubljana.
With regard to references in some media to high severance payments to former Management Board members, the Company's Supervisory Board states that the above agreement is compliant with applicable laws and employment contracts of Management Board members.
The Supervisory Board will be able to provide more detailed and, if necessary, quantitative clarifications at the General Meeting of Shareholders.