Poland backs launch of $14 bln privatization drive


Poland vowed on Tuesday to sell stakes in 740 state-controlled companies to raise more than $14 billion in the next four years but left several of its largest firms off the list.

Stakes in its largest power groups, the airline LOT and some units of PKP railways are to be sold by the end of 2011 under plans approved by the centre-right cabinet at its weekly sitting. Among the more than two dozen companies excluded were top refiners PKN Orlen and Lotos, gas distributor PGNiG and copper miner KGHM.

“We want daring privatization and that is underscored by its scope,” Prime Minister Donald Tusk told a news conference. The renewed drive to sell state assets in the European Union’s largest ex-communist economy contrasts with a virtual freeze on privatization under the conservative government that was voted out of office last October. It comes despite slowed global merger and acquisition activity as a result of tighter credit markets since the onset of the US subprime mortgage crisis last year.

Most of Poland’s larger planned privatizations are to take the form of initial public offerings on the Warsaw bourse, while smaller sell-offs will be sold through tenders. The “privatization map” presented by the government also includes small companies in various sectors, including health spas and home furnishing firms that remain in state hands nearly two decades after the fall of communism. Tusk said at least one top firm left off the list this time could be subject to privatization later. “We publicly said, that we would not privatize KGHM further during this government’s term but as a target it should be privatized further," Tusk said.

Treasury Minister Aleksander Grad said Poland expects to raise more than 30 billion zlotys ($13.91 billion) from privatization but noted the government wants to retain control of second-largest bank PKO BP and could lower its 51% to 30%, but no lower. “We want to ensure that there is no strategic investor (other than the state),” Grad said. Delays and the exclusion of some firms have raised worries among proponents of market liberalization while others have said the government may struggle to reach a treasury target for this year of 5 billion zlotys given a tight global credit market and weakened stock prices. “The (stock) market is limping along so any privatization through the stock exchange or based on stock market valuations is under a question mark,” said one investment banker. “The ministry also seems to have an overly rosy timeline. These things take time, more time than they expect.”

Observers say Grad also faces the same obstacles that have hampered previous governments, including opposition from trade unions and concerns over losing control of what some politicians consider strategic assets. (Reuters)

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