Poland to Merge Utilities to Help Them Compete in Europe

Poland is working on a plan to consolidate state-controlled power producers to help them compete in Europe, according to Treasury Minister Wlodzimierz Karpinski.

The plan for the country’s four biggest utilities, PGE SA, Tauron Polska Energia SA, Energa SA and Enea SA, will be presented this month, Karpinski said in an e-mailed statement late yesterday. One option is to merge PGE, the biggest of the four, with Energa, and combine Tauron with Enea, according to two people with knowledge of the situation, who asked not to be named because the information isn’t public.

“We seek to increase the importance of Poland’s energy industry on the European market,” Karpinski said. “Only companies with enough capital and the ability to get cheaper financing will be able to ensure Polish energy security.”

Poland tried to get PGE to buy Energa in 2010 before dropping the plan after it was blocked by the antitrust regulator. Malgorzata Krasnodebska-Tomkiel, the head of the office who made the decision, was dismissed last year. Power utilities, which are currently building 5 gigawatts of generation capacity, will invest 100 billion zloty ($28 billion) by 2020, according to the statement.

“The market will be surprised,” Andrzej Knigawka, head of equity research at ING Groep NV in Warsaw, said by phone yesterday. “After the failure of the PGE and Energa deal any merger plans disappeared. Investors may have their fears as to how minority shareholders will be treated.”

Kompania Weglowa

The four Polish companies have a combined market value of $17 billion. That compares with the value of CEZ AS, the Czech Republic’s biggest power utility, at $13 billion, or Germany’s EON AG at 27 billion euros ($32 billion).

PGE shares declined 0.6 percent to 19.08 zloty at 4:17 p.m. in Warsaw and Tauron dropped 0.8 percent to 5.05 zloty. Energa, which went public in 2013, fell 0.7 percent to 23.06 zloty, while Enea advanced 1.5 percent to 16.68 zloty.

Roman Szyszko, chief financial officer of Energa, said by phone that he has no knowledge of the plan. PGE spokesman Maciej Szczepaniuk, Tauron spokesman Pawel Gniadek and Enea spokesman Slawomir Krenczyk declined to comment. Deputy Treasury Minister Rafal Baniak declined to comment on the details of the plan today.

The merger would help utilities in their expected bid to buy stakes in the mining company that the government is creating to help save Kompania Weglowa SA, the country’s biggest coal producer, according to the statement.

The plan doesn’t include companies such as Polskie Gornictwo Naftowe i Gazownictwo SA, Poland’s largest gas producer, ministry spokeswoman Agnieszka Jablonska-Twarog said by phone yesterday.

Before it's here, it's on the Bloomberg Terminal.