Consolidating power

Now that it has begun to consolidate state-owned energy companies to create the Polish Energy Group (PGE) and South Group led by Południowy Koncern Energetyczny (PKE), the government is considering further consolidations in the energy sector. "We are very close to consolidating the next two groups," says Michał Krupiński, Undersecretary of State in the Treasury Ministry.

Next year will probably see the consolidation of Kozienice power plant with the distribution group ENEA and Bogdanka mine in the west of Poland. The other group will be created in the north, comprising the distribution group Energa and the Ostrołęka power plant. Krupiński adds that the value of consolidated companies should go up by 20 to 25 percent.

All groups are to be privatized in 2008. "Privatization through IPOs will be preferred," he stresses. However, the State Treasury will retain control over PGE, the biggest energy company, and the group in the south. The privatization models for the two smaller groups are not known yet.

Consolidation is one of the key elements of the governmental program to create a competitive energy market. By the end of the year, the reform should also solve the problem of long-term contracts, which currently comprise 55 percent of the market and block competition.

According to the Undersecretary of State in the Ministry of Economy' Tomasz Wilczak, one of the biggest problems in the sector is the increasing demand for energy. "It's growing 2.5 to three percent annually, so in 10 years the demand will be 30 percent higher," he says. Wilczak also hopes that thanks to the reform there will be more money in the sector for investment. He says that some "zł.5-7 billion is needed annually."