Polish chemicals group Azoty notifies prosecutor over contract with PiS-era foundation

Poland’s largest chemicals company, Grupa Azoty, believes that a crime was committed when it signed a contract obliging the company to contribute to a state-funded body without the possibility of withdrawing, even in the face of financial difficulties.

Azoty, which has been struggling financially since 2022 and in which the Polish state has a 33% stake, has notified the prosecutor’s office of the potential crime of “causing damage of great magnitude to the company”.

The company’s claim relates to a contract with the Polish National Foundation (PFN). Aside from Azoty, 16 state-owned companies, including energy giant Orlen, signed similar agreements with the PFN, which has been accused of being used by the then-ruling Law and Justice (PiS) party to support its political goals.

🔵 Grupa Azoty S.A. złożyła do prokuratury zawiadomienie o podejrzeniu popełnienia przestępstwa w sprawie wyrządzenia Spółce szkody w wielkich rozmiarach polegającej na doprowadzeniu do powstania oraz działań i zaniechań dotyczących podejrzenia nieprawidłowości i niezgodności z… pic.twitter.com/kDB2XmzxPR

— Grupa Azoty (@Grupa_Azoty) August 23, 2024

The PFN, tasked with promoting Poland abroad, was established in 2016 by 17 founding companies. According to Azoty, at that time, the company’s then-board unconditionally committed to contribute 45.5 million zloty (€10.63 million) over ten years.

“The possibility of withdrawing funding from the foundation even in the event of a worsening of the company’s financial situation was not guaranteed,” said Adam Leszkiewicz, Azoty’s CEO since March.

A number of state companies saw changes in management at the beginning of this year after the new ruling coalition replaced PiS in power in December.

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“It is important to note that despite the record levels of losses reported by the company in the last six quarters, there has been no attempt to withdraw funding and there have been reports in the public space of mismanagement in the spending of PFN funds,” added Leszkiewicz.

In the first half of this year, Azoty recorded a net loss of 748 million zloty (€174.77 million), improving from a loss of just over a billion zloty (€256.49 million) during the same period last year.

Azoty, the EU’s second-largest fertiliser producer, has been struggling in recent years due to high gas prices and unfavourable market conditions resulting from the easing of import restrictions for fertilisers following the full-scale invasion of Ukraine.

The company said that as a member of the PFN board, it would request that the terms of payments to the PFN for 2024 and 2025 be changed and that it will take steps to liquidate the foundation.

State energy giant Orlen has signed a letter of intent regarding the acquisition of a fertilizer plant from Poland’s largest chemical firm, Grupa Azoty, which has struggled amid high gas prices and eased import restrictions during the war in Ukraine https://t.co/qX2DYDa6kH

— Notes from Poland 🇵🇱 (@notesfrompoland) June 7, 2023

On Monday, in response to questions from the Polish Press Agency (PAP), state-owned energy giant Orlen confirmed that under a similar agreement with the PFN, it was obliged to make a one-off payment of 7 million zloty (€1.64 million) as part of the founding fund and 3.5 million zloty (€820,000) per year from 2018 to 2026.

“In addition, due to the acquisition of Lotos Group and PGNiG, Orlen has also taken over the companies’ obligations from 2023 until the end of the agreement. Lotos’s obligation is 2.5 million zloty per year, while PGNiG’s is 3.5 million zloty per year,” Orlen’s press office added.

The other companies that fund the PFN are Enea, Energa, PGE, Tauron, PZU, PKO BP, GPW, KGHM, Totalizator Sportowy, Polska Wytwórnia Papierów Wartościowych, Polskie Koleje Państwowe (PKP), Polski Holding Nieruchomości and Polska Grupa Zbrojeniowa (PGZ).

Around 100bn zloty (€23bn) of spending by the former PiS government has been identified as raising “suspicion it was spent illegally”, says @donaldtusk.

He accused the former ruling party of using state funds “for its own political and financial benefit” https://t.co/YQVVd8GBRW

— Notes from Poland 🇵🇱 (@notesfrompoland) August 9, 2024

According to PAP’s sources, other state-owned companies are also analysing their cooperation with the foundation. Decisions concerning its possible continuation also depend on the plans of the new PFN board, reported the agency.

The PFN became embroiled in controversies after it funded a domestic advertising campaign called “Fair Courts” in 2017. The campaign aligned with the goals of the PiS government, which was then working on its contested overhaul of the judicial system.

The foundation has also been accused of spending money wastefully by, for example, paying almost €1 million for a yacht as part of two around-the-world cruises to mark the centenary of Poland regaining independence that together cost over 43 million zloty.

In a 2018 report, state auditor NIK found that most companies did not have control over how the PFN spent its funds. Its annual budget ranged from 38 million zloty (€8.88 million) in 2022 to 115 million zloty (€26.88 million) in 2019, reported the Puls Biznesu daily.

Kupiony przez Polską Fundację Narodową za 900 tys. euro jacht, który miał promować Polskę, jest uszkodzony i znajduje się w remoncie w Portugalii https://t.co/D38k5Ugdp2

— Węglarczyk 🇵🇱🇪🇺🇮🇱🇺🇸🇺🇦 (@bweglarczyk) September 2, 2020

Main image credit: Grupa Azoty press materials