Energy sell-off delays put pressure on treasury
Delays in energy sector privatization could put the squeeze on a vital source of fiscal-debt financing, but the Treasury Ministry continues to pay lip service to its government-backed timetable for sell-offs by 2003, according to critics in the energy industry.
Leszek Juchniewicz, president of Poland's Energy Regulatory Authority (URE), said market values of electricity distributors will increase as new technologies are put in place and third-party access (TPA) allowances are introduced. Market values of distributors will peak around 2005, he was quoted by the Polish Press Agency (PAP) as saying.
But Jan Buczkowski, who recently resigned as the deputy treasury minister responsible for privatizing the energy sector and last week assumed the president's office at the Polish Power Exchange (GE), said that liberalizing the energy sector is the only way for investors to provide financing for new technologies and for TPA principles to apply.
Buczkowski said comments made by Deputy Prime Minister Janusz Steinhoff, who was quoted at saying that the privatization of the distribution segment of the sector should be delayed, have been misconstrued by the press. Instead, the idea was that the privatization of the generation segment should be accelerated, he said.
The Economy Ministry is on the verge of introducing a system of compensation payments to replace long-term contracts that bind generators to the Polish Power Grid (PSE), Buczkowski said. This should free Poland's electricity market even more, he said, adding he expects a boost in turnover on the exchange.
The Treasury Ministry on Friday added to the debate on liberalizing the sector when it announced Sweden's Vattenfall was chosen for final talks for a 25% stake in Gornoslaski Zaklad Elektroenergetyczny (GZE), Poland's largest distributor and the first to enter privatization talks. Germany's RWE Energie and the U.S.'s PSEG were shortlisted, but not chosen.
So far the treasury has sold stakes or floated shares in two power plants and five combined power and heating generators.
Out of $5.5 billion in privatization inflows planned for 2001, about $1.3 billion is connected to the selling of stakes in eight power generators and two distributors, according to Citibank calculations. GZE claims 10% of Poland's distribution market and the 25% stake is estimated at $214,000.
But even if dissenting voices which reportedly include the Economy Ministry manage to slow energy privatization, the ministry can always recalculate the budget, issuing debt instruments to finance the current account (C/A) deficit, said Marcin Mroz, an economist with Wood & Co. brokerage.
The only danger, Mroz said, is if the C/A deficit doesn't improve next year as expected. The usual surplus on Poland's capital account used to finance a reserve FX account set aside to begin repaying Poland's $33 billion in foreign debt in 2002 could run dry.
As for arguments that privatization inflows will strengthen the zloty, Mroz said the currency will be weaker next year as economic growth slows to around 4.3% of gross domestic product, a revision from Wood & Co. earlier forecasts of 5.2%.
