• State-run Enea may buy lignite-fired power producer ZE PAK
  • PAK may be second energy firm to return under state ownership

Poland’s fourth-biggest utility tumbled on Wednesday after a report it could sell shares to purchase its smaller competitor rival ZE PAK SA.

Shares in state-controlled Enea SA fell as much as 4.7 percent, before trading 2.5 percent lower at 9.85 zloty by 2:59 p.m. in Warsaw, the second worst-performing company on WIG20 Index on Wednesday. PAK, which has gained 39 percent this quarter making it the top performer among Warsaw-listed utilities, lost 5.7 percent.

Polish billionaire Zygmunt Solorz-Zak, whose 51.6 stake in PAK is valued at 310 million zloty, “has expressed an interest” in swapping his holdings for shares in Enea, Treasury Minister Dawid Jackiewicz said on Wednesday, PAP newswire reported. Last year, Enea bought hard coal producer Lubelski Wegiel Bogdanka SA for 1.48 billion zloty ($370 million). The potential deal would be a second transaction after Bogdanka in which a publicly listed power company, earlier sold by the government in a public offering, is bought back by a state entity as government tightens its grip over the strategic industry.

The final assessment would depend on “the deal structure and the price to be paid, but strategically that would be a quite surprising move for Enea,” Maria Mickiewicz, an analyst at ING Securities SA in Warsaw, said in a note. Entering lignite-fuelled generation “does not seem fully consistent from Enea’s long-term strategy point of view, potentially also involving additional capex in a company that has already a quite demanding investment pipeline.”

Coal Dependence

The Treasury Ministry earlier this month notified the prosecutor’s office of some irregularities in the sale of KWB Adamow coal mine to Solorz-Zak by the country’s previous cabinet as the price was too low. The ruling Law & Justice party won two elections last year after pledging more state control over the economy and to keep Poland reliant on coal for electricity production.

Depressed power prices and the burden of carbon-dioxide emissions have made coal-fired power plants unprofitable and increasingly difficult to finance. As Poland considers energy security to be of utmost importance its state-run utilities also expressed an interest in buying Polish power assets put on the block by Electricite de France SA and Engie SA.

The Energy Ministry, which oversees Enea, isn’t in talks with Solorz-Zak, spokesman Mariusz Kozlowski said by phone. Enea’s and Solorz-Zak’s spokespeople didn’t respond to calls to their mobile phones.

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