Elektrim sees future in rearview mirror
And despite a recent and notable surge in its share price, most stock exchange investors and analysts shrink from having anything to do with it.
Paweł Puchalski, analyst at Raiffeisen seems to sum up current feeling: "I cannot imagine anyone covering Elektrim. No one would cover it because it's just not an investment target."
What's more, Elektrim's choice assets of Polska Telefonia Cyfrowa, El-Net, and ZE Pątnów Adamów Konin (PAK), are all caught up in one battle or another, be it legal or corporate in nature. Add to that the millions that it owes bondholders, and few people can see anything concrete in the company's future.
Yet, Piotr Nurowski, supervisory board member and interim chief executive, sees things rather differently. He said that under his stewardship the company image will be restored to one of credibility and viability, something he said has already been evidenced by the stock price rising roughly a złoty and a half since he was installed by the supervisory board some eight months ago.
His plan is concise. Elektrim will move forward by looking over its shoulder.
"Elektrim would like to go back to its roots," Nurowski declared.
In other words, the future of Elektrim is a direct reflection of its past: Elektrim will be an energy company.
"The roots of Elektrim are in the energy sector," he said. "And that's the direction we feel comfortable going in."
Telecom is out; Energy is in.
Along with austerity measures, he said his to-do list includes three key events that will hopefully take place over the next couple of years: Renew investment in the European Bank for Reconstruction and Development-backed Pątnów II power project; buy the government's 50 percent stake in PAK; and consolidate the two coal mines that supply PAK.
Energy. Energy. Energy.
These priorities could almost lead one to forget that the company is currently embroiled in a much-publicized battle over the sale of its indirect stake in PTC, the nation's largest mobile provider, and that its bondholders expect to be paid zł.2 billion (€437 million) - plus interest - by the end of next year.
Though he does recognize the challenges ahead, he does not expect those hurdles to be too high to jump.
"Two years from now the plan is to be the main energy producer, with European Standards and - most importantly - inexpensive products," he said.
That way, Elektrim could endure a weak economy better then it has since it was listed on the Warsaw Stock Exchange in 1992. In its history, the holding company has made investments in everything from chicken farms to telecom. A more focused approach could make all the difference, he said.
"Whatever happens in the economy, energy is always needed," he said. "The potential investor has to see that. And when he does, he will invest." Under this scheme, Nurowski would be able to improve Elektrim's credibility with investors.
"In the past 7 to 10 years Elektrim has been one of the key placers on the WSE. However, I do not wish to speak about my predecessors but what happened was that we got the tag of a bankrupt company and - for the press - it was a question of when rather than if it would happen. But our image has been improving."
Still, the question remains as to how much it is improving.
Stock analysts, for their part, do not expect to be publishing anything on the company any time soon. That often reflects investor attitudes.
"That's a good question: when will we begin to cover Elektrim," said one analyst. He declined to be named citing bank policy of not commenting on stocks that analysts do not cover.
"I think that's a question for (Zygmunt) Solorz," the analyst continued. "No one knows what is going on at that company. There's no official plan, telecom or energy. It's best a stock for speculators."
But that's not to say that there has been no interest in Elektrim stock.
Solorz, the owner of TV channel Polsat, made a move to buy up Elektrim shares last year. Today, Polsat Media SA, along with related holding company TCF, owns more than 30 percent in the company - more than any other single shareholder.
A source close to Elektrim's previous management board - before Solorz became chairman of the supervisory board - said that Polsat's investment was betting that it would be able to resolve the long-standing dispute over the ownership of PTC.
Debt-ridden Vivendi is looking to sell off its stake in PTC to Deutsche Telekom, which owns 49 percent in the operator of Era. Elektrim Telekomunikacja (49 percent owned by Elektrim) and Vivendi own a 51 percent stake in PTC.
But that deal has been put on ice for the time being, as all parties work to resolve the disputes.
Nurowski, who has been on the supervisory board at Polsat since 1998, not surprisingly sees Solorz's arrival on the scene as a good thing.
"In the past, the stakeholders were so diverse and spread out that, in my opinion, everybody was working for themselves," he said. "Everyone was just waiting to get their share of the profits and not really working in the interests of the whole company."
Indeed in the past, even when Elektrim made headlines as Poland's most aggressive investor in the "New Economy" not everyone was exactly sure in which direction the company was headed.
The country's and Elektrim's heady days hit an apex in early 1999 with the arrival of Barbara Lundberg as the company's chief executive. The Wall Street trained venture capitalist came on the scene armed with a Western management style and an acquisitive appetite ready to snap up businesses throughout Poland - the bigger the better.
The crucial factor of Elektrim's strategy at that time was something that no other company has come even close to completing today: the creation of a rival to TPSA. In the summer of 1999, with Lundberg at the helm, the company spent over zł.1 billion on three deals to cobble together a rival. The most important of these acquisitions was the zł.1.1 billion ($300 million) purchase of the second fixed-line license in Warsaw. Except that the government then allowed the sale of another license to Netia, which quickly sapped Elektrim's competitive advantage.
The only really substantial element that remains of that Elektrim vision of a TPSA competitor is El-Net, a Warsaw based fixed line provider. And that, along with its other telecom assets, is also up for sale, according to Nurowski.
The company does not want to return to those acquisition heady days.
"Yes Elektrim would like to sell El-Net," he said. Though there are, naturally, obstacles along the way. "That decision has to be made at the next shareholders meeting, but right now the Elektrim Telekomunikacja structure is so complicated. First we have to put that in order before we can have the shareholders meeting."
Even as corporate wrangling seems to have put the skids on any immediate sale of the fixed-line assets, buyers seem to be lining up, however.
Raiffeisen Investment Polska made an unsuccessful bid for El-Net. And BRE Bank has publicly stated its interest in the asset. But CEO Wojciech Kostrzewa declined to go into details of what the financial investor would do with the asset if purchased.
On the other hand, Netia executives would seek to snap up El-Net to follow down the path that Elektrim veered from a few years ago. It plans to create a formidable competitor to market leader TPSA.
Nurowski seemed to be quite happy that Elektrim would soon have little part in the telecom market. It's an almost insurmountable challenge that the company doesn't need as it tidies itself up - image and balance sheet.
Unfortunately, central to Elektrim's image is the market's perception of it as a bankrupt company. Indeed, it almost did go bankrupt in 2002 before the previous management board sealed a last minute deal with its bondholders. Though viewed by the market as a success, Nurowski views that agreement with some scorn.
"I don't want to speak badly about my predecessors," he said. "(But) the agreement the previous management signed wasn't very beneficial for Elektrim, and the effects of this agreement are felt here every single day."
He realizes, however, that he has no choice but to follow the accord. "Although the agreement is very bad we are fulfilling our obligations."
That means that Nurowski expects bondholders to be remunerated in full next year.
He is not so sure, however, whether he will be at the head of the company to see the final deal through.
He commented a little on his past and future at Elektrim: "The situation was that once Polsat became a stakeholder in Elektrim, the previous chief executive officer stepped down. The supervisory board installed me as a sort of interim CEO for two to three weeks. And, well, on January 23 it has now been eight months."
Nurowski, who has an extensive work history in television, ponders his future: "I would like to go back to my job with Polsat. However, from another standpoint I feel that several things need to be carried out in order to save Elektrim first. I say that I would like to come back to television but Mr. Solorz said I have to stay for a while."
The next question is whether Elektrim itself will have better success in getting back to its roots.
Paweł Puchalski, analyst at Raiffeisen seems to sum up current feeling: "I cannot imagine anyone covering Elektrim. No one would cover it because it's just not an investment target."
What's more, Elektrim's choice assets of Polska Telefonia Cyfrowa, El-Net, and ZE Pątnów Adamów Konin (PAK), are all caught up in one battle or another, be it legal or corporate in nature. Add to that the millions that it owes bondholders, and few people can see anything concrete in the company's future.
Yet, Piotr Nurowski, supervisory board member and interim chief executive, sees things rather differently. He said that under his stewardship the company image will be restored to one of credibility and viability, something he said has already been evidenced by the stock price rising roughly a złoty and a half since he was installed by the supervisory board some eight months ago.
His plan is concise. Elektrim will move forward by looking over its shoulder.
"Elektrim would like to go back to its roots," Nurowski declared.
In other words, the future of Elektrim is a direct reflection of its past: Elektrim will be an energy company.
"The roots of Elektrim are in the energy sector," he said. "And that's the direction we feel comfortable going in."
Telecom is out; Energy is in.
Along with austerity measures, he said his to-do list includes three key events that will hopefully take place over the next couple of years: Renew investment in the European Bank for Reconstruction and Development-backed Pątnów II power project; buy the government's 50 percent stake in PAK; and consolidate the two coal mines that supply PAK.
Energy. Energy. Energy.
These priorities could almost lead one to forget that the company is currently embroiled in a much-publicized battle over the sale of its indirect stake in PTC, the nation's largest mobile provider, and that its bondholders expect to be paid zł.2 billion (€437 million) - plus interest - by the end of next year.
Though he does recognize the challenges ahead, he does not expect those hurdles to be too high to jump.
"Two years from now the plan is to be the main energy producer, with European Standards and - most importantly - inexpensive products," he said.
That way, Elektrim could endure a weak economy better then it has since it was listed on the Warsaw Stock Exchange in 1992. In its history, the holding company has made investments in everything from chicken farms to telecom. A more focused approach could make all the difference, he said.
"Whatever happens in the economy, energy is always needed," he said. "The potential investor has to see that. And when he does, he will invest." Under this scheme, Nurowski would be able to improve Elektrim's credibility with investors.
"In the past 7 to 10 years Elektrim has been one of the key placers on the WSE. However, I do not wish to speak about my predecessors but what happened was that we got the tag of a bankrupt company and - for the press - it was a question of when rather than if it would happen. But our image has been improving."
Still, the question remains as to how much it is improving.
Stock analysts, for their part, do not expect to be publishing anything on the company any time soon. That often reflects investor attitudes.
"That's a good question: when will we begin to cover Elektrim," said one analyst. He declined to be named citing bank policy of not commenting on stocks that analysts do not cover.
"I think that's a question for (Zygmunt) Solorz," the analyst continued. "No one knows what is going on at that company. There's no official plan, telecom or energy. It's best a stock for speculators."
But that's not to say that there has been no interest in Elektrim stock.
Solorz, the owner of TV channel Polsat, made a move to buy up Elektrim shares last year. Today, Polsat Media SA, along with related holding company TCF, owns more than 30 percent in the company - more than any other single shareholder.
A source close to Elektrim's previous management board - before Solorz became chairman of the supervisory board - said that Polsat's investment was betting that it would be able to resolve the long-standing dispute over the ownership of PTC.
Debt-ridden Vivendi is looking to sell off its stake in PTC to Deutsche Telekom, which owns 49 percent in the operator of Era. Elektrim Telekomunikacja (49 percent owned by Elektrim) and Vivendi own a 51 percent stake in PTC.
But that deal has been put on ice for the time being, as all parties work to resolve the disputes.
Nurowski, who has been on the supervisory board at Polsat since 1998, not surprisingly sees Solorz's arrival on the scene as a good thing.
"In the past, the stakeholders were so diverse and spread out that, in my opinion, everybody was working for themselves," he said. "Everyone was just waiting to get their share of the profits and not really working in the interests of the whole company."
Indeed in the past, even when Elektrim made headlines as Poland's most aggressive investor in the "New Economy" not everyone was exactly sure in which direction the company was headed.
The country's and Elektrim's heady days hit an apex in early 1999 with the arrival of Barbara Lundberg as the company's chief executive. The Wall Street trained venture capitalist came on the scene armed with a Western management style and an acquisitive appetite ready to snap up businesses throughout Poland - the bigger the better.
The crucial factor of Elektrim's strategy at that time was something that no other company has come even close to completing today: the creation of a rival to TPSA. In the summer of 1999, with Lundberg at the helm, the company spent over zł.1 billion on three deals to cobble together a rival. The most important of these acquisitions was the zł.1.1 billion ($300 million) purchase of the second fixed-line license in Warsaw. Except that the government then allowed the sale of another license to Netia, which quickly sapped Elektrim's competitive advantage.
The only really substantial element that remains of that Elektrim vision of a TPSA competitor is El-Net, a Warsaw based fixed line provider. And that, along with its other telecom assets, is also up for sale, according to Nurowski.
The company does not want to return to those acquisition heady days.
"Yes Elektrim would like to sell El-Net," he said. Though there are, naturally, obstacles along the way. "That decision has to be made at the next shareholders meeting, but right now the Elektrim Telekomunikacja structure is so complicated. First we have to put that in order before we can have the shareholders meeting."
Even as corporate wrangling seems to have put the skids on any immediate sale of the fixed-line assets, buyers seem to be lining up, however.
Raiffeisen Investment Polska made an unsuccessful bid for El-Net. And BRE Bank has publicly stated its interest in the asset. But CEO Wojciech Kostrzewa declined to go into details of what the financial investor would do with the asset if purchased.
On the other hand, Netia executives would seek to snap up El-Net to follow down the path that Elektrim veered from a few years ago. It plans to create a formidable competitor to market leader TPSA.
Nurowski seemed to be quite happy that Elektrim would soon have little part in the telecom market. It's an almost insurmountable challenge that the company doesn't need as it tidies itself up - image and balance sheet.
Unfortunately, central to Elektrim's image is the market's perception of it as a bankrupt company. Indeed, it almost did go bankrupt in 2002 before the previous management board sealed a last minute deal with its bondholders. Though viewed by the market as a success, Nurowski views that agreement with some scorn.
"I don't want to speak badly about my predecessors," he said. "(But) the agreement the previous management signed wasn't very beneficial for Elektrim, and the effects of this agreement are felt here every single day."
He realizes, however, that he has no choice but to follow the accord. "Although the agreement is very bad we are fulfilling our obligations."
That means that Nurowski expects bondholders to be remunerated in full next year.
He is not so sure, however, whether he will be at the head of the company to see the final deal through.
He commented a little on his past and future at Elektrim: "The situation was that once Polsat became a stakeholder in Elektrim, the previous chief executive officer stepped down. The supervisory board installed me as a sort of interim CEO for two to three weeks. And, well, on January 23 it has now been eight months."
Nurowski, who has an extensive work history in television, ponders his future: "I would like to go back to my job with Polsat. However, from another standpoint I feel that several things need to be carried out in order to save Elektrim first. I say that I would like to come back to television but Mr. Solorz said I have to stay for a while."
The next question is whether Elektrim itself will have better success in getting back to its roots.
