Poland’s State Treasury has been having a hard time meeting its privatization revenue targets this year. Out of the planned zł.5 billion in privatization revenue set for 2013, it has managed to raise only zł.1.89 billion so far, through the sale of 2 percent of shares in PKO Bank Polski for zł.860 million, 12 percent of shares in chemicals giant Grupa Azoty for zł.630 million and 25 percent of real estate holding firm Polski Holding Nieruchomości (PHN) for some zł.240 million.
The Treasury could make up for a significant chunk of the funds it is missing once it floats energy giant Energa on the Warsaw Stock Exchange. According to recent statements by Deputy Treasury Minister Paweł Tamborski, Energa’s IPO prospectus should be filed with the Financial Supervisory Authority in mid-September. The value of the firm’s bourse debut is estimated at zł.2 billion.
Energa's IPO, valued at some zł.2 billion, was originally scheduled for mid-2013, but has been pushed back
Courtesy of Energa
But Energa’s IPO has already been pushed back – it was previously expected to take place at mid-year. And the debut presents some tough challenges. Without a law on renewable energy sources, it will be next to impossible to value the company, experts say. Despite Deputy Prime Minister Janusz Piechociński’s assurances that the so-called “energy three-pack” legislation, which will regulate renewables, will still be adopted this year, market analysts remain skeptical. Without the Energa IPO, however, it is unclear how the Treasury would be able to avoid creating a much larger-than-expected budget deficit this year.
[WBJ_GRAPH_1The Treasury may be willing to sell some more of its shares in PHN, in which it holds 75 percent, a stake worth about zł.860 million. The ministry had earlier signaled it would sell a majority stake in the firm to a strategic investor.
Digging for pennies
The Treasury is, however, hard-pressed to come up with other assets for privatization. Reports suggest it may want to sell its 39 percent stake in chemicals producer Ciech this year, which experts value at zł.500 million. However, analysts quoted by business daily Parkiet suggested that the sale would be more profitable after the company completes its restructuring. The company has been trying to focus its activity on soda-ash production by offloading unprofitable assets, such as its production plant in Romania.
Finding a buyer for Ciech before it has completed its restructuring will not be easy. With soda-ash manufacturers reducing production volumes, it’s doubtful the state will find a sector investor willing to pay what the Treasury expects to receive. “Currently, the most likely choice for offloading Ciech shares is to sell it to an equity fund,” Tomasz Kasowicz, an analyst from the DM BZ WBK brokerage house, told the newspaper.
Another state-owned company on the list is sugar producer Krajowa Spółka Cukrowa (KSC), which the Treasury has already tried to offload twice. The most recent attempt in April this year was canceled when the Treasury realized changes on the EU sugar market could bring the company’s value down.
A new privatization proposal should be ready in late Q3 or early Q4 2013, according to the ministry. However, it will not offer the firm’s shares on the Warsaw Stock Exchange. This option was considered in 2012, but it was not approved by the firm’s employees and sugar-beet growers, who have pre-emptive rights to KSC shares.
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