Sale of G-8 group in hands of SLD

"The latest developments of this sale have cast some doubts about the transparency of the deal."
By : Leo Broomfield

   A new government headed by the Democratic Left Alliance (SLD) could reopen the sale of a 25% stake in the northern G-8 group of power distributors, industry analysts said.

   “I would be surprised if anything serious happens with G-8 prior to the elections,” said Piotr Samojlik, managing director of corporate finance at CAIB in Warsaw, last week. “But I think there are two options: retender or a new privatization strategy to be announced by the SLD.”

   The deadline for exclusive negotiations with Spain’s Iberdrola expired two weeks ago.

   Belgium’s Electrabel, one of the companies that dropped out in the first round of bidding for the G-8, said last week it was interested in taking part in a new tender and pledged it would pay $400 million for the stake and invest E1.5 billion thereafter.

   “I confirm that Electrabel is still interested in the purchase of G-8,” said Jean-Claude Dorcimont, Electrabel’s representative in Poland. “The latest developments of this sale have cast some doubts about the transparency of the deal. Why was Iberdola, and only Iberdrola, authorized to raise its binding offer? Why is the sale being done with Iberdrola at a price lower than that offered by Electrabel? Certainly these questions will have to be taking seriously by the next treasury minister.”

   Marian Miłek, deputy treasury minister for energy sector privatization, had said the G-8 would be sold in October or November, and that a further stake would be sold in a second phase that would see the chosen investor take a majority stake in the firm. That timetable will now have to change.

   One of the reasons behind the failed talks with Iberdola was a lack of certainty regarding the treasury’s condition that the chosen investor commit itself to buying one of four power generators. But the treasury has not yet said which of the four power generators – Dolna Odra, Kozienice, Ostrołęka and Stalowa Wola – the government wants to tie into the deal, and neither Iberdrola nor treasury officials would comment on the matter last week.

   Dorcimont said his company would be interested in buying the Dolna Odra generator if it won a new tender.

   Analysts, however, were skeptical about the attractiveness of any of the four generators. “If any, I believe Kozienice would be the best bet – provided it can get an attractive coal contract.” Samojlik said.

   Other analysts said the best of the four was Dolna Odra, which supplies 4.7% of the domestic market and recorded profits of zł. 92 million ($22 million) last year.

   The G-8 sale would mark Poland’s largest energy sector privatization this year, covering distributors in the northern regions of Koszalin, Słupsk, Gdańsk, Elblšg, Olsztyn, Toruń, Płock and Kalisz. The eight companies combine for about 16% of the nation’s total distribution market. In supplying energy to some 2.6 million customers, the G-8 yielded turnover of zł. 3.3 billion ($785 million) in 2000.