Poland Launches $12 Billion Privatization Drive

WARSAW (Reuters) – Poland said on Wednesday it would ramp up privatisations to bring 36.7 billion zlotys ($12.2 billion) into depleted state coffers by the end of 2010, including sales of key utilities and the rest of copper miner KGHM. (KGHM.WA)

The treasury ministry said that it expected the lion’s share of the proceeds next year, in large part from the sale of power groups Enea, (ENAE.WA) Tauron, PGE and PAK.

“This would be pretty much the end of the privatisation process in Poland,” said Michal Dybula, economist at BNP Paribas in Warsaw.

“About 30 billion zlotys in 2009 and 2010 appears realistic, not to mention badly needed to reduce the risk of public debt exceeding 55 percent of gross domestic product next year.”

With its economy slowing sharply, Poland’s debt level is expected to breach the 50 percent level this year. Under the European Union’s Maastricht Treaty, Poland must keep its public debt below 60 percent of GDP.

Surprising investors, the ministry said it would unload as much as its entire 41 percent stake in Europe’s No.2 copper producer KGHM, sending its shares 6 percent lower.

“In the case of KGHM the most important thing now is to find out how the ministry envisages the sale, whether the idea is to sell the stake to a strategic investor, through the bourse or in a combined way,” said Marek Juras, head of research at BZ WBK brokerage in Warsaw.

Poland will also revive its efforts to unload small stakes it still holds in previously privatised companies, including France Telecom’s (FTE.PA) TPSA TPSA.WA and UniCredit’s (CRDI.MI) Pekao. BAPE.WA

Some analysts fear investor appetite may be tempered for the foreseeable future by lingering market weakness.

Last year, the ministry managed to raise 2.4 billion zlotys from selling stakes in state companies.

Last week, deputies approved a budget amendment that envisages a 27 billion zloty deficit this year.

The figure is nearly 50 percent more than originally planned, despite deep spending cuts, forcing the centre-right government to seek other sources of income.

Privatisation income does not directly reduce the deficit, but provides a cushion of additional funding that helps avoid further increases in state debt.

The zloty and bonds showed little immediate reaction to Wednesday’s announcement. ($1=3.002 Zloty)

By Adrian Krajewski
(Additional reporting by Karolina Slowikowska, writing by Chris Borowski; editing by Karen Foster)