EBRD mulls support for Poland's planned stimulus fund

By bne IntelliNews May 22, 2013

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The European Bank for Reconstruction and Development (EBRD) is in talks with the Polish treasury ministry over a potential investment in the country's new infrastructure fund. The news is a boost for Warsaw's flagship scheme to try to boost economic growth.

A treasury ministry spokesperson confirmed talks have been opened with the international development bank over a stake in Polskie Inwestycje Rozwojowe (PIR) - the SPV set up to manage the state-funded Polish Investments. That fund was announced by Prime Minister Donald Tusk late last year, and is planned to eventually swell to PLN40bn (€9.6bn).

"The treasury ministry is in ongoing talks with the EBRD. We are holding consultations and are making use of the bank's professional support and experience," the spokesperson told Dziennik Gazeta Prawna. While she refused to discuss the size of investment being discussed, the newspaper cites unnamed sources which claim the EBRD could buy in for a stake of up to 10%.

Polish development bank BGK is playing the lead role in PIR. The fund is designed to help boost economic growth without increasing state debt or the deficit. The fund is due to start operating this quarter, with BGK to sell off state company shares to raise capital, which it will then use to attract foreign investment to projects. BGK said in mid-May that it plans to issue bonds to boost the fund's capital at some point this year, but added that it is under no pressure thanks to a recent boost to its liquidity from the start of sales of state assets earlier this year.

"We are assuming no bond issue for the bank's own needs in nearest future," CEO Dariusz Daniluk told PAP on May 14. "After selling PKO shares our liquidity situation is excellent, we meet all the ratios. However, there will be some bond issue this year to set up balance sheet and liquidity for coming years."

At the same time, there is concern that Warsaw's target of using the fund to stimulate a slowing economy could be compromised by political concerns. Specifically, with the government's ambitious strategy to improve energy independence appearing in a state of disarray, officials have suggested PIR could be used to help finance those projects that the state-controlled companies have said they must drop in order to keep up with demands for investment in shale gas and nuclear power.

Deputy Treasury Minister Pawel Tamborski said in April that the fund could help with the PLN11.6bn Opole power plant, which was dropped by the country's biggest utility PGE. A role for the EBRD would likely soothe some worries on the part of investors over the imposition of political, rather than purely economic, logic.

At the same time, a vital bonus in the planned fund is that it should help Poland's struggling construction companies overcome their fiscal troubles. Hit by losses on infrastructure projects in the run up to Poland's hosting of the Euro 2012 football championships, the builders are struggling to keep their heads above water - in turn putting the banks at risk, given that the sector is reportedly to owe around PLN60bn to the Polish sector.

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