Elektrim hires Lundberg to repair tarnished image
Analysts agreed that Lundberg's nomination sends a positive signal to investors, especially foreign institutions that have been burned by a free fall in the company's stock price as previously undisclosed agreements have come to light.
"Their reaction will be positive, but the management must avoid any further mishap and improve transparency to clear the relations with investors," said a London-based market analyst, who preferred to remain unnamed.
The company is trying to rebuild its image after recently disclosing two standing agreements that dramatically impact its value. The first was an understanding with Kulczyk Holding to sell shares of mobile telephone company Polska Telefonia Cyfrowa (Era GSM) at a fraction of their present worth. The other is a recently publicized agreement with Deutsche Telekom, put in place in October, that calls for the company to sell shares in local telephone company El-Net.
Lundberg has gained considerable respect in Poland for her work since 1992 as vice president of venture capital firm Enterprise Investors. She was also one of the key individuals behind the success of the Polish-American Enterprise Fund (PAEF), which she worked with as vice president in the early 1990s.
"Barbara Lundberg is not an unknown person for us," said Jan Kolodziejczyk, chairman of Elektrim's supervisory board. "We cooperated when we were buying the cable company in Olarow, and we talked about financing our telecommunications operations."
He said Lundberg seemed the best candidate to represent the company both in Poland and abroad.
Lundberg said that the doubts surrounding Elektrim may make it difficult for the company to raise capital on the public markets, and that the situation can only be improved if investors can again find a level of comfort with the company.
"To do that we need to create transparency and concentrate on the core businesses of the company," she said. "I do not have ready answers."
Active in telecom investments, Elektrim needs funds to pay for building a network in Warsaw. The company and one of its subsidiaries jointly own 60% of El-Net, a firm that recently won the tender for the Warsaw license. El-Net has estimated it will plow at least $700 million into building a network in the capital after bidding a hefty $300 million for the license alone.
"In the long run, Elektrim will concentrate on telecommunications," said Michal Buczynski, an analyst with brokerage COK BH. "In the next few years, about 80% of its revenue will come from this sector."
With a market cap of zl. 3.5 billion ($1 billion), Elektrim is one of the five largest companies traded on the Warsaw Stock Exchange (WSE). Major shareholders include Chemia Polska with 9.59%, Bank Austria with 12.98% and Merrill Lynch with 5.2%.
Elektrim's problems began in November, when it revealed that in 1996 it had agreed to resell shares in Era to Kulczyk Holding at their original price. The agreement sliced the value of the shares from an estimated $190 million to $10 million. The two companies finally agreed that Elektrim would pay Kulczyk $25 million to abandon the option. The payout caused Elektrim to post a zl. 68.2 million ($19.49 million) net loss in 1998.
Long-time President Andrzej Skowronski and Vice President Emilian Bryk resigned over the issue, and the Securities Commission asked the prosecutor's office to look into the matter.
Investors responded by fleeing Elektrim. In five days the company's share price dropped by 28.2% to zl. 28. It has managed to climb up since then, closing at zl. 46.2 Feb. 10, the day after the company announced Lundberg's appointment.
Lundberg said that one thing Elektrim must do to regain investor confidence is to simplify its holding structure, shedding businesses and concentrating on its three main sectors of energy, telecommunications and cable television.
"Elektrim is such a large company, having lots of companies investors do not know much about, that it is important to explain what they are about," Lundberg said. "It takes time to restore credibility, but I think that we know what the issues are."
But the London analyst questioned Lundberg's ability to sell off Elektrim's many subsidiaries at a good price, despite her strong contacts with foreign investors. The analyst said that actually disposing of companies was Enterprise's weakness.
"Even though the fund was successful in acquiring some companies, it has problems with selling them for a good price," the analyst said. "However, somebody was needed who could make the foreign investors give money."
"Their reaction will be positive, but the management must avoid any further mishap and improve transparency to clear the relations with investors," said a London-based market analyst, who preferred to remain unnamed.
The company is trying to rebuild its image after recently disclosing two standing agreements that dramatically impact its value. The first was an understanding with Kulczyk Holding to sell shares of mobile telephone company Polska Telefonia Cyfrowa (Era GSM) at a fraction of their present worth. The other is a recently publicized agreement with Deutsche Telekom, put in place in October, that calls for the company to sell shares in local telephone company El-Net.
Lundberg has gained considerable respect in Poland for her work since 1992 as vice president of venture capital firm Enterprise Investors. She was also one of the key individuals behind the success of the Polish-American Enterprise Fund (PAEF), which she worked with as vice president in the early 1990s.
"Barbara Lundberg is not an unknown person for us," said Jan Kolodziejczyk, chairman of Elektrim's supervisory board. "We cooperated when we were buying the cable company in Olarow, and we talked about financing our telecommunications operations."
He said Lundberg seemed the best candidate to represent the company both in Poland and abroad.
Lundberg said that the doubts surrounding Elektrim may make it difficult for the company to raise capital on the public markets, and that the situation can only be improved if investors can again find a level of comfort with the company.
"To do that we need to create transparency and concentrate on the core businesses of the company," she said. "I do not have ready answers."
Active in telecom investments, Elektrim needs funds to pay for building a network in Warsaw. The company and one of its subsidiaries jointly own 60% of El-Net, a firm that recently won the tender for the Warsaw license. El-Net has estimated it will plow at least $700 million into building a network in the capital after bidding a hefty $300 million for the license alone.
"In the long run, Elektrim will concentrate on telecommunications," said Michal Buczynski, an analyst with brokerage COK BH. "In the next few years, about 80% of its revenue will come from this sector."
With a market cap of zl. 3.5 billion ($1 billion), Elektrim is one of the five largest companies traded on the Warsaw Stock Exchange (WSE). Major shareholders include Chemia Polska with 9.59%, Bank Austria with 12.98% and Merrill Lynch with 5.2%.
Elektrim's problems began in November, when it revealed that in 1996 it had agreed to resell shares in Era to Kulczyk Holding at their original price. The agreement sliced the value of the shares from an estimated $190 million to $10 million. The two companies finally agreed that Elektrim would pay Kulczyk $25 million to abandon the option. The payout caused Elektrim to post a zl. 68.2 million ($19.49 million) net loss in 1998.
Long-time President Andrzej Skowronski and Vice President Emilian Bryk resigned over the issue, and the Securities Commission asked the prosecutor's office to look into the matter.
Investors responded by fleeing Elektrim. In five days the company's share price dropped by 28.2% to zl. 28. It has managed to climb up since then, closing at zl. 46.2 Feb. 10, the day after the company announced Lundberg's appointment.
Lundberg said that one thing Elektrim must do to regain investor confidence is to simplify its holding structure, shedding businesses and concentrating on its three main sectors of energy, telecommunications and cable television.
"Elektrim is such a large company, having lots of companies investors do not know much about, that it is important to explain what they are about," Lundberg said. "It takes time to restore credibility, but I think that we know what the issues are."
But the London analyst questioned Lundberg's ability to sell off Elektrim's many subsidiaries at a good price, despite her strong contacts with foreign investors. The analyst said that actually disposing of companies was Enterprise's weakness.
"Even though the fund was successful in acquiring some companies, it has problems with selling them for a good price," the analyst said. "However, somebody was needed who could make the foreign investors give money."
