After Stoen - fears mount over G-8 privatisation

Power sector observers began to fret this week that the planned sale of a stake in the G-8 group of power distribution companies may be hit by the political backwash from the Stoen affair. It is already on hold until 2003.
The ink is drying on the sale of an 85% stake in Warsaw energy distributor Stoen to German firm RWE Plus for €370 million (zł. 1.5 billion). But the Catholic League and the Lepper faction in the Sejm are opposed to more sales in the power sector, and support from the SLD's minority coalition partner, the PSL, may be uncertain.
Key members of the Peasant Party caucus are complaining that the sale of such a "jewel in the crown" breached an informal agreement with the SLD.
Warsaw power sector analysts say the political ructions around Stoen are probably a source of private satisfaction to Treasury Minister Wiesław Kaczmarek.
"Kaczmarek wants to postpone and delay further privatisation as much as possible," said Arkadiusz Wicik, an analyst at Fitch Ratings. "Such events as happened last week can only help with this strategy."

Becalmed
Wicik said progress on restructuring and privatising the energy sector was in any case more or less becalmed, with no sign of the promised policy blueprint emerging from the long-running joint discussions between the Economy and Treasury Ministries.
"They have a different approach from each other. It is not clear who is driving the strategy," he said. "But after the elections, it is possible things might calm down and some progress could be made with G-8. But it will probably be a very long process to go through."

Majority stake
The G-8 group is slated for the sale of a majority stake following an encouraging decision made in May by Kaczmarek to raise the offering from the original 25%. The State Treasury said that three bidders remain in the ring - Electrabel of Belgium, Germany's E.ON and the only local contestant, El-Dystrybucja.
Sector watchers are convinced that the Belgian and German bidders plan to divide the group between them, leaving the domestic bidder in the cold.

Serious situation
But Krzysztof Rybiński, the chief economist at BPH-PBK, said the issue was much wider than simply the fate of the G-8 process.
"From the Finance Ministry's point of view, it's really a very troubling story," he said. "Public debt is going up like hell. The only way out is with private capital replacing debt financing. It is now quite a serious situation with the possibility of debt going to really quite unacceptable levels. There's only one way to get private capital and that is from foreign investors."
Rybiński agreed that government caution was impelled by the prospect of more job losses coming from restructuring and privatisations.

Posturing
"But the hope must be things will move once the posturing for the elections is over," he said. G-8 has around 10,000 employees.
The consultancy Ernst & Young is acting as an adviser to the treasury on the deal, having acquired the brief by taking over the Polish business of former adviser Arthur Andersen. But the firm was not keen to talk when asked to comment on the latest state of play in the deal. Jacek Antczak, the manager of the energy group, declined to comment, saying he was not authorised to give information about the matter.
But another analyst in the sector said the process would be difficult to frustrate completely because of the momentum it had acquired, although no one should expect things to move at "electrifying speed".
He continued: "The antics in the Sejm were just circus stuff to appeal to the voters. What's really behind it is the differences between two strong ministries, which is always bad news, plus the fact that the opposition parties are putting the squeeze on the coalition vote, and they are looking at the next government election foremost. It is a fact, with that in mind that privatisation is hard to sell here."
Arkadiusz Wicik agreed: "It looks as though the government are really scared of the left wing. And everyone is still waiting to see what is going to be on the table as the result of the discussions on the strategy document we were promised September. It's almost the end of October and still we don't see it."

Left on the shelf
Industry sources pointed to the recent announcement that the government would look to 2006 for widespread liberalisation and foreign investment in the sector, supposedly to build up strength before Poland's anticipated membership of the European Union.
A source close to the deal who asked not to be named said he was sure it would be considerably delayed.
"On the one hand there's a logic which says selling Stoen and G-8 first while the really Cinderella stuff, the genarators - which are in a pretty poor state - are left on the shelf, is the wrong way around," he said.
But he added that was not the imperative now.
"It's all politics," he said. The PSL will use energy to stiffen the SLD in getting a deal from the EU for direct payments for farmers, while in turn the PSL gets a sweetener by having G-8 put off for the forseeable future."