More blue-chip sales to power Polish growth fund

By bne IntelliNews January 28, 2013

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Following an accelerated bookbuild to sell 12.1% of lender PKO BP last week, Poland is mulling similar sales of stakes in the utility PGE and insurer PZU to power its new off-budget fund designed to stimulate the economy, the country's deputy treasury minister said on January 25.

Prime Minister Donald Tusk announced the plan to establish Inwestycje Polskie in October, in a bid to stimulate the flagging economy without increasing state debt or worsen the budget deficit, both of which are close to thresholds. Managed by state bank BGK, the fund will raise finance from privatization of state company shares in a bid to attract private investment, mostly into infrastructure projects, with the full fund planned to total PLN40bn.

"We will be selling these shares [in PZU and PGE] depending on how the program develops and what are its investment needs," Pawel Tamborski said, according to Dow Jones. Under the Inwestycje Polskie plan, the treasury is to contribute shares in PKO, insurer PZU, utility PGE and chemicals company Ciech.

The sale of the stake in PKO, which raised PLN5.2bn, was a first divestment towards the Inwestycje Polskie programme, the newswire reports, with over PLN4bn of the proceeds going to BGK in return for the 10.25% stake it sold - its full holding. BGK is slated to receive a total of PLN10bn in financing for Inwestycje Polskie from the sale of government assets. The treasury continues to hold around 31% in PKO.

Inwestycje Polskie is most likely to finance projects at large state-controlled companies, Dziennik Gazeta Prawna reported on January 25, claiming that projects worth a total of PLN42bn have been passed the first phase of approval. Projects by copper miner KGHM Polska, utility Tauron, oil refiner Grupa Lotos and chemicals giant Grupa Azoty - all of which have been recruited for the government's push to increase the country's energy independence - are among those in the process it adds, alongside the PLN7bn construction of the A1 motorway.

The treasury said that no final decisions have been made yet, and that the key factor will be be the profitability of the planned investments. Polskie Inwestycje is currently looking to hire a CEO and appoint a board of directors.

The sale of blue chips to fill the fund is likely to present an extra challenge to the treasury this year. It struggled to get through the sales of many smaller companies through the crisis in order to fulfill its privatization targets, and was forced to fall back on offloading bluechips to keep up the pace. It fell around 10% short of its 2012 privatization target of PLN10bn as it struggled in the fourth quarter with an IPO of utility Ze Pak and was forced to twice pull a float of property holding PHN. That despite raising PLN5.5bn from accelerated bookbuilds for stakes in PKO and PGE.

The treasury has a privatization target of PLN5bn for 2013. It began book building for the IPO of 25% of PHN last week, and hopes to sell the remainder of the company - valued at PLN1.1bn for the float - to a strategic investor immediately afterwards. It has also said it plans to construct a similar deal to offload utility Energia.

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