Tim Gosling in Prague -

With risk appetite having perked up in 2012 on the back of better-than-anticipated economic activity in the EU, Poland is reportedly ready to take advantage by selling a 5% stake in top utility PGE. While a window of opportunity appears open for Warsaw to raise funds to help it hit its budget targets, investors may have a few questions on company strategy.

Warsaw is preparing to offer 93.5m shares in PGE, according to Bloomberg, which claims that the state hopes to raise around $600m (€453m). Poland, which currently owns 69.29% of the utility, sold 10% of its shares for PLN4bn (€954m) in 2010.

When Warsaw confirmed late last year that it would maintain a target of raising PLN10bn (€2.4bn) in 2012 from privatisation, it looked pretty ambitious considering Poland spent the second half of 2011 canceling asset sales in the absence of investor interest. However, after its re-election in November, the government has pledged to use every bit of leverage it can to reduce the deficit and level of state debt.

The Eurozone economy, on which Central European states are so heavily dependent, has done far better in the first two months of the year than expected, which has seen appetite for the region's assets pick up after a sharp pullback in the fourth quarter of 2011. The Czech Republic swooped to take advantage of the window with a €2bn Eurobond on February 20. Poland now looks ready to try the same by selling into the bounce.

However, potential investors will likely be keen to hear the government's final plans for PGE, especially as concerns the remainder of the privatisation drive. "Pseudo privatisation" - in which the government sells one state-controlled company to another - is a Polish specialty, and the Treasury Ministry said on February 21 that it might still try to push through PGE's €7.5bn purchase of utility Energa, despite stiff resistance from the country's competition watchdog. Should that fail, reports suggest Energa may be merged with yet another state-controlled utility, Enea.

Many state-controlled companies also face uncertainty connected to the government drive to increase energy security through the development of shale gas. While companies are being pushed to invest in exploration, the commercial potential remains uncertain and those currently exploring worry about the tax system that could be imposed on unconventional energy production.