Sample News Story
Poland’s Electricity Privatisation Puts Gas on the Back Burner
28/09/1999
Poland, which has until now been slow to organise the privatisation of its strategic industries, has published a very ambitious programme for the privatisation of its electricity sector. Whether the target of complete privatisation by 2002 can be met remains to be seen, but just trying to achieve it is likely to absorb all the resources which might have been used to get privatisation moving in the gas sector.
Ambitious Poland, which has until now been hesitant over the privatisation of its strategic industries, has taken a decisive step towards speeding up the privatisation of its electricity sector. Privatisation will be carried out in a number of stages, but the Polish government has set itself an ambitious task of completing the sell-off of the electricity sector by 2002.
Gas lags behind Poland is starting with electricity privatisation mainly because the sector is already internally restructured, with production, distribution and transmission separated. The gas sector lags behind, with the separation of oil and gas into two separate businesses, and the separation of distribution only aimed to be complete by the end of this year.
30% by 2001 The Finance Ministry has already received bids from companies wanting to set up Poland’s energy exchange, and hopes that the exchange will start work in May or June next year, with almost 10% of electricity traded through the pool by the end of 2000. By the end of 2001, the exchange should be handling 30% of electricity demand.
Long term contracts At the moment, 70% of all electricity is supplied on the basis of long-term contracts, under which electricity prices are much higher than for electricity bought outside such contracts. The ministry hopes that an increasing amount of trading through the exchange will gradually resolve such problems, but it seems clear that the share price of companies which have signed long-term contracts with the Polish Electricity Grid Company will see the effect in their share price.
The first stage As part of its plan to complete the privatisation of the electricity sector by the end of 2002, the finance ministry intends to sell stakes in heating and power plants either to strategic investors or through the Warsaw Stock Exchange. In the first stage, which is already under preparation by the ministry, Poland wants to sell stakes in heating plants, with the first plant to be sold off by the end of this year. Such sales can proceed before the Energy Exchange is set up, and the problem of long-term contracts is not relevant. Strategic investors will have the opportunity to buy between 20-45% of shares in the plants and the later possibility of increasing their stakes by investing in the companies or buying more shares from the state.
Lower stakes With the 17 main power plants, the process will be different. Strategic investors will have the chance to buy only 20-35% of shares, allowing the state to keep a controlling interest. Investors will, however, have the chance to raise their stakes later by investing in and modernising the plant. The finance ministry reserves the right to sell the remaining shares on the Warsaw Stock Exchange or to the investors.
Distribution and the The most difficult privatisation will be that of the 33 distribution companies. Grid come last The intention is to sell groups of up to four of these utilities in the same region. Interested investors will submit offers, on the basis of which the state will decide to whom it will sell the stakes. The criterion will be that each investor should hold up to 12-15% of the total market. The largest distribution companies are likely to be sold through the Warsaw Stock Exchange. Finally, the finance ministry would like to privatise the Electricity Grid Company in 2002.
Gas lags behind The fact that the electricity sector has been given such major priority, and a timetable which seems extremely ambitious suggests that privatisation of the gas sector has receded far into the future. Would-be investors take note!