Polish Utility Merger Plan Scrapped by New Treasury Minister

The consolidation of Polish state-controlled power producers can’t take place for now as the country needs to secure stronger customer protection, Treasury Minister Andrzej Czerwinski said on Wednesday.

Czerwinski, who took his post on Tuesday, is retreating from a plan that saw mergers among the country’s four biggest utilities as a way to make them more competitive as European power prices declined. The government, which will face elections in October, didn’t present a detailed scenario for transactions that would have involved PGE SA, Tauron Polska Energia SA, Energa SA and Enea SA.

The utility consolidation may become a feasible plan again “in the long run” as the market isn’t fully competitive yet and retail customers need more rights, Czerwinski said on Polish Radio Three. “I’ll do my best to protect the end-client, and there is much to do in this field,” he said.

Prime Minister Ewa Kopacz shuffled her cabinet last week to respond to a changing political landscape after opposition-backed Andrzej Duda won a presidential election last month. The result of the ballot signaled rising chances of a government change this year. The utility merger plan also sparked fears about the treatment of minority shareholders.

‘Positive News’

“The retreat from an earlier plan is positive news for Energa and Enea shareholders, as these companies seem to be more attractive as separate entities,” Bartlomiej Kubicki, a Warsaw-based analyst at Societe Generale SA, said by e-mail.

Enea rose 0.3 percent at 11:51 a.m. in Warsaw, while Energa shares were down 0.5 percent.

There isn’t enough time before the elections to implement new regulations, including a law on smart power grids, that would strengthen consumer rights, Czerwinski said. His ministry may complete an analysis by the end of this month on whether merging power utilities makes sense, but “it won’t start implementing such a plan,” he said.

While Czerwinski sees links between power utilities and coal mining companies as more important for the government now, he ruled out the possibility of power companies only providing financial aid to coal miners.

Approaching elections are gaining more prominence in investors’ risk assessments, according to Tomasz Duda, a Warsaw-based analyst at Erste Group Bank AG.

“Shareholders should now focus more on plans by the opposition and new parties for the industry, as they may bring completely new risks,” Erste’s Duda said by phone. “In this respect, an adjustment in the consolidation idea by the ruling coalition won’t have a big impact.”

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