Tim Gosling in Prague -
Offering further support to the troubled construction group, the Polish government stepped in on September 21 to push through a stalled PLN6.3bn (€1.52) contract for Polimex to build a giant coal-fired power plant for state-controlled utility Enea.
The final signing of Polimex's joint contract with Hitachi to build the 1,075-megawatt unit in Kozienice had been put at risk by the builder's creditors, led by PKO and Pekao, which held up required bank guarantees. However, with the tottering construction sector putting the wider economy - and especially the banks - at risk, Warsaw has set aside ideological debates to offer support in recent weeks.
"No reaction to the unstable situation would mean a reduction in jobs, weakening of the country's energy security and, in the longer perspective, of the entire economy," Treasury Ministry Mikolaj Budzanowski said in a statement, according to Reuters.
The country's banks are also heavily exposed to builders such as Polimex and PBG, which are struggling to survive after taking on state contracts on razor thin margins in the infrastructure push ahead of the Euro 2012 football championships that Poland co-hosted with Ukraine in June.
PBG entered bankruptcy protection the same month, kicking off debate amongst ministries over whether Warsaw should offer direct support. On September 19, state development agency ARP agreed to take a stake of up to 33% in Polimex, offering the company a boost of PLN150m-250m. The company's creditors have already agreed to waive interest payments for four months to give it time to restructure its PLN2.5bn of debt.
Polimex still needs to reach a wider agreement with its creditors that will likely include a debt-for-equity swap that will significantly dilute the stakes of its current shareholders. However, the market welcomed the latest steps from the government, taking it as a signal that Polimex will clearly not be allowed to go under. The company's shares gained 9% in afternoon trade following the announcement that the deal has been finalized.
Following the huge problems created by the Euro 2012 infrastructure frenzy, Polish builders are looking to the government's ambitious plans to expand the country's power and shale gas capacities in a bid to raise energy independence.
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