Poland looks for chemical brothers abroad

By bne IntelliNews April 22, 2009

Jiri Kominek in Warsaw -

The Polish government intends to press on with plans to privatise key parts of the country's chemicals industry in the second half of this year despite the global economic recession. Even though the assets will probably go for less than initially hoped for, the government remains far from meeting its privatisation goal of PLN12bn (€2.73bn) this year, having raised only PLN382m by the end of March.

The first step was hiring an adviser for the privatisation. On March 19, Nafta Polska, a special government agency set up to privatise the chemicals industry on behalf of the Treasury, hired Raiffeisen Investment's Polish subsidiary as its main adviser. Raiffeisen Investment will be supported by Lazard & Co. and Bank Zachodni WBK (BZW). "Raiffeisen along with Lazard and BZW will provide analysis, evaluation, transaction structures and timetables for the upcoming privatisation, and should submit their report to us by the end of May," Wieslaw Skwarko, vice president of Nafta Polska, tells bne. "We will proceed with the privatisation based on the advice we are given and this could mean that the process will move forward during the second half of this year."

Nafta Polska intends to divest its 80% stake held in Zaklady Azotowe Kedzierzyn (ZAK) and 49.1% in Zaklady Azotowe w Tarnowie-Moscicach (ZAT). Nafta Polska will also act as the government's designated representative to sell a 36.7% stake held by the Treasury in Ciech, although Nafta Polska doesn't hold any shares directly in the company.

All together now

Skwarko says Nafta Polska is negotiating with a number of institutional investors from Europe, the US, Middle East and Far East, including Saudi-based SABIC Innovative Plastics. bne has learned that apart from industry players, a number of Persian Gulf-based sovereign wealth funds are also said to be interested in parts of Poland's chemical industry

Skwarko says Nafta Polska would prefer to sell the stakes in all three companies to a single strategic investor instead of selling parts off piecemeal. But some analysts have told bne that one of the key problems with trying to sell the sector as a whole is that many parts are obsolete, operating with product licenses dating back to the 1960s and 1970s. Another drawback is that the sector requires further integration in order to make it more attractive to an institutional investor.

A number of chemicals sector investors have shown interest in the alcohol and fertilizer divisions of ZAK. Polish media reported in late February that BASF, The Dow Chemical Company and Eastman Chemical Company, for example, were interested in the alcohol-producing divisions of ZAK. "The privatisation of separate parts of ZAK responsible for the production of fertilizers and oxo alcohol is not being taken into consideration," Treasury spokesman Maciej Wewior said in a statement.

Nafta Polska has also given up on earlier efforts to include polyvinyl chloride (PVC) and nitrogen fertilizer producer Anwil in the assets to be privatised. The government couldn't reach an agreement with Anwil's owner, the Polish energy firm PKN Orlen, to reduce its PLN1.5bn asking price for the company, whose holdings include PVC producer Spolana in the Czech Republic. "We have given up on acquiring Anwil into the grouping of chemical companies to be sold," Skwarko says.

Analysts and industry sources say that although PKN Orlen is currently in the red, its Anwil PVC and fertilizer division, although not part of its core business, remains profitable. "PKN management does not want to sell something that is a cash maker at this point," says CDM Pekao director Roland Paszkiewicz.

Plans also appear unclear for an IPO for ZAK, which was to have taken place in late April or early May and raise PLN500m through the sale of a 30% stake. ZAT did its IPO in June last year, raising PLN295m as the state reduced its stake to 60%. "At this point, the IPO market in Poland is frozen, so it is unclear how the government will proceed with the privatisation, since timing and price are the key issues and no one wants to be accused of selling something below price," Paszkiewicz says.

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