Polish utilities brush off state support uncertainty to buy wind assets

By bne IntelliNews February 27, 2013

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Polish state-owned utilities PGE and Energa announced February 26 they have agreed to buy 75% in Spanish Iberdrola's local wind farm subsidiary for PLN840m (€202m), continuing a drive to increase their renewable energy holdings as the government mulls a new support system. The deal suggests the pair is unconcerned by uncertainty over state support for the renewable energy sector.

PGE also said the two utilities, which had a plan to merge blocked by the country's anti-monopoly office in 2011, want to buy the remaining stake in Iberdrola Renewables Polska from the European Bank for Reconstruction and Development, reports Reuters.

Following the purchase of 75% of the shares in the company, divvying up the assets will mean that Poland's biggest utility PGE will acquire wind farms with a capacity of 70.5 megawatts (MW) and projects that will add a further 36MW, reports Dow Jones. Energa will get wind farms with a capacity of 114MW and projects with a total planned capacity of 1,146MW.

The announcement comes a week after PGE and Energa said they would buy wind farms from Denmark's Dong Energy Wind Power for about PLN1bn. The utilities' rising investment in Polish wind energy comes as Warsaw continues to try to draft a final version of its new support scheme for the sector.

The country is struggling to meet EU targets for 15% of power to come from renewable resources by 2020, from a current level of around just 2.5%, but has still said it aims to reduce subsidies to certain sources, including onshore wind. However, in the face of fury from some investors - including state companies - it is currently on the fourth draft of the bill.

The uncertainty is believed to have helped convince Iberdrola to sell its wind power business in Poland. By way of contrast, PGE has said it's seeking to increase its wind capacity more than sevenfold in the next four years to replace aging power stations with cleaner sources.

Analysts at Erste Bank suggest that despite the unknowns, the deals look good value for the buyers. "We like both acquisitions, as the company purchased projects with off-take contracted likely well above the current depressed market electricity prices," Erste analysts point out. "In the case of Iberdrola, the acquisition price is €1.43m per MW, below construction costs. For DONG, we estimate the adjusted price per completed MW at €1.5-1.6m. These projects should bring over 10% ROIC and a 1-1.5% boost to Ebitda, in our estimates."

Meanwhile, Poland's treasury ministry said early this year that it plans to sell a stake in Energa via IPO at some point in the first half of the year, a bid that will clearly suffer should state support for onshore wind fall dramatically. The ministry said it will then look to unload the remainder of the company to a strategic investor, and says it will give preference to power investors already present in Poland.

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