Energy sell-offs set to continue as investors grumble
Energy sector privatization is continuing apace despite grumbles from foreign investors that the sell-offs of state concerns are still far too slow. Local industry analysts reject the mounting criticisms saying government privatization targets for the industry have largely been achieved this year.
"The major transactions that were planned have taken place," said Filip Busz, director of the Treasury Ministry's foreign cooperation and European integration department.
Busz said these included combined heat and power plants (CHP) Elektrocieplownie Warszawskie, Kogeneracja and Wybrzeze, and the Bedzin and Polaniec power plants. He also said other sell-offs had gone ahead as planned, including the sale of oil giant Polski Koncern Naftowy Orlen and tele-monopoly Telekomunikacja Polska (TPSA).
While an Electricite de France/Gaz de France consortium recently paid $60 million for a 45% stake in Wybrzeze CHP, Kogeneracja chose the IPO route to privatization and listed on the Warsaw Stock Exchange in May for zl. 52 per share, roughly 6% above current prices. It recently announced plans to bid for shares of CHPs located in Zielona Gora and Tychy, which are due for privatization by 2001.
Elektrocieplownie Warszawskie sold a 55% stake to Swedish firm Vattenfall in February for $230 million. As for plants that only generate electricity, German MEAG took 52.5% of Bedzin in June and Belgian Tractabel 25% of Polaniec early this year.
One plant that missed its June deadline for privatization, however, was Rybnik. A consortium made up of GE Capital, Marubeni Corp. and NR Generating International pulled out of exclusive talks with the treasury after disagreements over coal supplies.
But Busz believes that the plant's privatization is only a minor delay and that it's not practical to hold the treasury to strict deadlines when the market decides much of what happens in the sector.
Dariusz Mioduski, head of the energy and projects department with Cameron McKenna law firm, agrees. "I think it's a general issue of the market and the development of that market," he said. Also, he said, it is an issue of the legal and regulatory environment.
Recent amendments to the energy law allow the Energy Regulatory Authority (URE) to release energy producers from tariff regulation, which should make the energy market more competitive and attractive to potential investors.
Mioduski also said long-term price-setting contracts among electricity producers and the Polish Power Grid (PSE) are being retired early via compensation payments to the PSE. Although consumers might find themselves funding those compensations in the short-term, the market is opening up.
Elsewhere, northeastern CHP Bialystok has only been able to attract a handful of interested investors during its second call for a public tender. Now, the treasury hopes to have a stake sold-off by the end of the year.
Also slated for privatization by year's end is Silesian-based Gornoslaski Zaklad Energetyczny, the first of Poland's 33 distributors up for grabs. Germany's RWE, Vattenfall and U.S.-based Public Service Group were shortlisted last month for the 10-25% stake and industry analysts expect it to go to one of the first two.
RWE recently reiterated its intention to invest DM 2 billion-DM 4 billion in Poland's energy sector, but Marek Palonka, managing director for RWE's Warsaw office, worries the treasury could get political and decide to exclude a German company from owning its biggest distributor.
That would leave the company, which has investments throughout Europe and saw O38.4 billion in 1999 revenue, looking for another entry into Poland, possibly through Warsaw distributor Stoen. RWE has long made known its interest in Poland's largest power plant, Belchatow.
Palonka said Poland must speed up its energy privatizations if it wants to be accepted into the European Union. "It's necessary to prepare our companies as quickly as possible for the open market," he said. "It's going too slowly in Poland."
Industry participants fear that with Deputy Treasury Minister Jan Buczkowski responsible for energy privatization on the way out, and the recent dismissal of Treasury Minister Emil Wasacz, privatization in the energy sector will suffer. They're hoping Buczkowski is replaced with Grazyna Karlowicz-Stoma, who served as his sidekick and understands the industry.
