Joint stock company Ventspils nafta changes the development strategy and will further specialize in the transit area

Today, on December 17, 2008, the Supervisory Council for JSC Ventspils nafta
has approved the change of the company's further development strategy and has
consented to conclusion of a voluminous transaction, which will result in JSC
Ventspils nafta specializing in management of assets related to the transit
area in the near future, by discontinuing the Group's activity in other
wide-ranging areas where the business of JSC Ventspils nafta Group was
conducted as a result of diversification of business risks actively implemented
up to now. By optimizing and reorganizing the activity of JSC Ventspils nafta
Group, only investments into the areas of crude oil and petroleum products
transit and shipping business will be retained in the management of the parent
company. Along with the decision of the Supervisory Council for JSC Ventspils
nafta, the companies working in the area of real property, printing and
publishing will be sold in one set to its associated company JSC Latvian
Shipping Company with the amount of this transaction reaching 82.7 million
lats. The profit of JSC Ventspils nafta will reach about 40 million lats as a
result of this transaction. 

Implementation of the reorganization plan of JSC Ventspils nafta is influenced
by the global and local macroeconomic indices. This influence on the operating
results of the companies of the Group has caused the necessity to change the
further development strategy of both the entire Group and JSC Ventspils nafta
as parent company, in order to ensure the necessary return of investments in
the interests of all shareholders of JSC Ventspils nafta. On the basis of the
recommendations of the local and international experts and advisers, the
transit area, which has been the company's historic basic business, has been
defined as the further strategic development direction of JSC Ventspils nafta. 

Such strategy will enable JSC Ventspils nafta to steadily develop one business
area segment, focusing on its growth and improvement, especially considering
the previous experience of several decades and the success in this area, as
well as the international know-how, which has been actively acquired
particularly in the recent years along with involvement of the international
shareholder. As a result, by declining from the assets of JSC Ventspils nafta
in areas not related to the transit business and by selling them for a market
price accepted by Latvian and international experts, shareholders of JSC
Ventspils nafta will gain significant profit, and the company's long-term
assets will be replaced by assets of more rapid liquidity. A value increase for
the entire Group will thereby be achieved, and JSC Ventspils nafta will obtain
financial resources for further development of the new strategic development
direction in line with the objectives that will be determined by the company's
shareholders. 

 “In the intense conditions of global economic crisis, it would be
irresponsible to pretend that this situation does not affect our Group.
Therefore, we performed comprehensive and detailed monitoring and risk analysis
for all companies of JSC Ventspils nafta Group, seeking a more optimal solution
to ensure maximally efficient operation of the Group in the further years. We
have actively worked, by involving remarkable intellectual resources, and have
found such a model of further development that will minimize business risks of
JSC Ventspils nafta Group on the one hand and ensure its increase in value on
the other hand,” emphasizes the Chairperson of the Management Board for JSC
Ventspils nafta Olga Pētersone. “We hold a view that the active work of JSC
Ventspils nafta in terms of planning further stable operation of the Group will
be a kind of incentive for the common economic development of Latvia in this
economic situation.” 

Another contribution that JSC Ventspils nafta will be making into promotion of
the common economic situation will be the fact that the country will gain
considerable support for the budget in terms or receiving several millions of
lats in taxes as a result of reorganization. The transaction proves to be more
advantageous for JSC Ventspils nafta owing to the fact that the assets to be
sold are going to be in one set not in parts when entering into the
purchase-sale contract with JSC Latvian Shipping Company. The payment structure
of the transaction is planned in three parts: up to 25% of the payment amount
will be received as an immediate payment after conclusion of the purchase-sale
contract today, another 25% - until the end of February 2009 as the property
will be gradually re-registered, and the remaining 50% - not later than until
the end of the first quarter of 2010. JSC Ventspils nafta will additionally
receive interest payments for the payment parts of the deferred payment,
therefore additional income in the amount of several million lats will be
ensured for JSC Ventspils nafta. 

On the basis of then topical economic processes and suggestions of
international auditors, JSC Ventspils nafta was implementing a policy of active
diversification of business risks in the last 10 years, by purposefully making
investments into liquid and growth-oriented business projects outside its
historical basic business area - crude oil and petroleum products transit. A
relevant part of these investments is formed by exclusive real properties that
are listed among the most liquid real properties in Latvia. The said policy
ensured a stable work for JSC Ventspils nafta in the previous economic
conditions, by ensuring favorable economic indices for the shareholders - risk
distribution enabled flexible reaction to changes in the market situation in
any activity segment of the Group. However, as the conditions of the economic
situation are sharply changing, further development and maintenance of these
investments is becoming financially less efficient for JSC Ventspils nafta
parent company as a holding company not undertaking economic activity. 
  
Through reorganization, JSC Ventspils nafta will hence retain its investments
in the subsidiary crude oil and petroleum products transshipment company
Ventspils nafta Ltd, the subsidiary owner and operator of crude oil and
petroleum products pipeline LatRosTrans Ltd (66%) and the associated company
JSC Latvian Shipping Company (49.94%). Whereas it is selling investments into
the subsidiary real property management company Nekustamie īpašumi VN Ltd
(100%) and the subsidiary real property management company Rīgas līcis VN Ltd
(100%), as well as real properties in Riga, Briana Street 3; Ventspils, Talsu
Street 75d; Jūrmala, Dubultu prospect 51 and Lejastiezumi at Renda civil
parish, Kuldīga district. JSC Ventspils nafta is also selling its shareholdings
in the printing company JSC Preses nams (95.4%) and the subsidiary publisher
Mediju nams Ltd (95.63%). The aspect of real property must be considered also
in relation to JSC Preses nams, as it owns several valuable real properties,
and that is the main object of interest of the buyer. Whereas a relevant part
of the printing company's business value is currently formed by orders of the
particular publisher - Mediju nams Ltd. For that reason, business activity of
these investments is in fact inseparable. 

Highly qualified independent professionals were involved in preparation of the
reorganization transaction of JSC Ventspils nafta Group, which included:
certified Latvian real property assessors Biznesa konsultantu grupa Ltd,
Colliers International Ltd; member of the internationally recognized
organization integrating professional qualified financial experts Institute of
Charted Accountant of England and Wales Kelvin Hooke (BSc ACAI); financial
consultants KPMG Corporate Finance; law offices Eversheds Bitāns and Skudra &
Ūdris. 




JSC Ventspils nafta
Further information -
Gundega Vārpa, Public Relations and Advertising Manager,
tel.: + 371 67229182;
e-mail: gundega.varpa@vnafta.lv