Poland reportedly set to accelerate Ciech privatization

By bne IntelliNews October 18, 2013

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Poland will accelerate the privatisation of chemicals group Ciech to complete it before the end of the year, unnamed sources claimed on October 17, as Warsaw seeks financing for state infrastructure fund PIR.

Previously anticipated to be sold in 2014, the PLN500m (€120m) stake in soda ash producer Ciech is ready to go, the sources said. Warsaw is likely eyeing the window of opportunity provided by the growing recovery across the global economy. While that is improving sentiment on markets, the US Federal Reserve is set to return to the idea of tapering its quantitative easing programme in December, and the current appetite for emerging markets assets is unlikely to remain for long.

Poland apparently doesn't want to miss its moment. "There is no strategic investor seen for Ciech so the treasury decided to sell ... in an accelerated book building by the end of this year," a market source said, according to Reuters.

Poland announced it would set up the Polskie Inwestycje Rozwojowe infrastructure fund in late 2012, in a bid to stimulate growth by investing in large projects. The government has already approved the transfer of its 39% stake in Ciech to the fund, alongside stakes in utility PGE, the country's largest bank PKO and insurance giant PZU.

That puts the chemicals company at the head of the line of assets to be sold. While the others are ranked among the country's most strategic companies, Ciech did not even make the revised list of such assets when it was drawn up in March 2012.

On top of that, the government's stakes in the blue chips have been whittled away in recent years as the treasury has been forced to rely on them to fulfill its privatisation targets. Another slice of Warsaw's PKO stake was sold earlier this year. In addition, a special elevated dividend is in the pipeline from PZU this year.

"Ciech is the most probable from the group [of stocks handed to PIR]," a Warsaw-based fund manager told Reuters. "The company underwent restructuring, improved results, and its share price is relatively high."

Meanwhile, the treasury is still struggling to hit its 2013 privatisation revenue goal of PLN5bn, and by sucking up investor allocations, the sale of the Ciech stake will clearly not help it achieve that. The ministry needs to complete the IPO of utility Energa, and to find a strategic investor for real estate holding PHN, but is finding progress slow, and by the end of August it had collected just PLN1.89bn.

For investors, exposure to both the Polish economy and food prices via Europe's second largest soda ash producer could prove attractive. However, it was only in July 2012 that the treasury refuted reports that Czech "coal king" Zdenek Bakala was sniffing around the company, insisting it saw no interest whatsoever in Ciech from investors.

Warsaw's decision the preceding April to form a chemicals sector giant - the sudden merger of Azoty Tarnow and Pulawy, rather than selling them off as originally planned was a defence against Russian interest - likely does little to make Ciech more attractive. At the same time, the government sees the sector as a vital support to its drive to develop Poland's energy resources, and gas in particular. The potential for state interference on energy supply options may also be a worry for investors.

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