Poland mulls limiting listings as Ze Pak price guidance hits bottom

By bne IntelliNews October 11, 2012

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Contrary to previously announced plans, Poland is set to limit the volume of privatisation carried out on the Warsaw Stock Exchange, an official suggested on October 10. The comments came as the initial price guidance on the IPO of the state's 50% stake in utility Ze Pak was set towards the bottom end of the range.

The IPO prospectus issued on October 10 sets a price range of PLN26-33 per share, according to Bloomberg, which would value Poland's fifth-largest power generator at PLN1.72bn (€421m). The Treasury, which is depending on the country's biggest IPO of the year to help fill its PLN10bn target for privatisation revenues this year, had been optimistic of a much higher price after brokers suggested earlier a valuation of PLN1.5bn-3.7bn.

Around 75% of the 50% stake sold will be offered to financial institutions, with the rest available to retail investors. The shares are to debut on the stock market on, or around, November 30.

While appetite for Polish utilities is declining as the economy slows, and markets across the globe are struggling as the crisis persists, the deputy treasury minister appeared to blame the involvement of retail investors for the lowered price, and suggested Warsaw will look to limit privatisation to direct sales to institutional investors in future. "Retail investors would likely expect special incentives in secondary offers, like a discount against the current share price, which would destabilize prices," Pawel Tamborski told local media, according to Dow Jones.

However, as analysts at Renaissance Capital point out, it's the timing and specifics of the IPO that are more likely the culprits. "We think [the Ze Pak IPO] could struggle to find a sound investor base, with investors potentially concerned about the company's ageing asset base, high capex needs and trailing financial margins," they write in a note. "We think limited interest in global utilities, coupled with uncertain European economic prospects, is more likely to lead to money shifting from already listed companies (predominantly PGE), rather than any inflow of new money into the sector."

Tamborski's aggressive reaction looks to be a response to the building pressure on the Treasury. The ministry, which holds the state's shares in companies, insisted in late September that it is fully confident of hitting the PLN10bn target for privatisation revenue this year, pointing out that it has already collected PLN8bn or so. Tamborski and his boss, Treasury Minister Mikolaj Budzanowski, also claimed that the float of Ze Pak, alongside a planned listing of real estate holding PHN, would push them over the line.

However, the maximum amount that can be raised by selling the 50% stake in Ze Pak is PLN858m, which clearly presents a challenge. The PHN IPO has already been delayed once this year due to a lack of interest from investors for the hastily assembled holding of property assets. The vast bulk of privatisation proceeds raised this year - a full PLN5.5bn - came from accelerated book-building sales of blue chips bank PKO BP and utility PGE to institutional investors.

The state had expected to make a secondary public offering of a PKO stake last year, but cancelled it in December due to market turbulence. A planned attempt to sell a 22% stake in another blue chip - coal miner JSW - was scuppered in its early stages by the economy ministry in late September, while Budzanowski has said a planned divestment of a 10% stake in insurance giant PZU is now looking unlikely this year. That makes the success of the remaining sales in 2012 - planned mostly via IPO - vital.

However, the same day that Tamborski spoke, Budzanowski announced a plan to list yet another utility in Warsaw in the middle of 2013. The announcement of a listing for the country's fourth-largest power company Energa is unlikely to relieve the worries of overhang in the sector that are also helping to pull valuations down. "We don't know yet how large of a stake we will sell," Budzanowski said, according to Reuters.

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