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The Warsaw Voice » Other » October 22, 2008
Privatization in Poland
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Privatization of the Energy Sector
October 22, 2008   
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Robert Jędrzejczyk, a legal adviser and partner in charge of the Energy and Infrastructure Department of Gide Loyrette Nouel law firm, talks to Beata Gołębiewska.

Recently there have been regular warnings to the public that Poland is facing an energy crisis. The only question is when this will happen and whether government plans to continue the privatization of the electric power sector will help avoid such a scenario.

The problems that the Polish electric power sector is facing have been increasing for years. They result mainly from the long-standing negligence of investments in the production capacity, the lack of development or appropriate maintenance of the electric power transmission grids, and, significantly, from recent coal shortages. The ownership problem is also important, but not decisive.

It is true that, for political reasons, the former government completely abandoned the privatization of the electric power sector that started in 1997. They concentrated their efforts on the consolidation of state energy companies by creating groups of companies such as PGE, Enea and Energa. In addition, the government program of March 2006 provided for the privatization of these merged entities.

Does that mean that the current government will not bring anything new to the sector's privatization?
From what I have heard, the Ministry of the Economy is currently working on a new strategy for the energy sector, though this happens whenever there is a change of government. The grand plans for this sector do not survive the test of time, mainly for political reasons. In reality, the current government is continuing the policy of the former, and focusing on resolving ongoing problems, such as the allocation of CO2 quotas and certain social conflicts.

However, the government's efforts to privatize energy groups are worth noting, specifically when it comes to partial floatations on the stock exchange.

When could this happen and what is the purpose?
Preparations to float companies on the stock exchange are not simple, especially when the situation on the financial markets is difficult. It seems that the floatations planned for the third quarter of 2008 will not now be launched. The end of 2008 or the beginning of 2009 appears to be a more probable date. The listing of these companies on the stock exchange involves the possibility of increasing their capital, which is essential considering the investment challenges these companies face. The creation of new capacity, though costly, is necessary to ensure the country's energy security.

Is privatization through floating companies on the stock exchange a good idea?
This is a crucial question. I have been specializing in the energy sector for many years, and I would say that floating energy companies on the stock exchange and applying rules that normally govern publicly-traded companies to these companies will not, unfortunately, influence their structure and their way of conducting their business activities. These companies, despite being subject to public trading, will still be significantly influenced by politicians, who are not always aware of the challenges that these companies face on their markets.

In my opinion, the lack of a competent industry owner will have severe implications. By this I mean an owner who, in comparison with the state, would be far more knowledgeable about the industry in which they operate.

The Treasury minister has publicly stated that the privatization of energy groups through the stock exchange does not rule out the possibility that an industry investor might take complete control over these entities in the future. It has not been specified, however, whether this will happen in the near future. It is certain that privatization, even if only partial, is a step forward and should be supported. The wait seems to be the worst part.

In my view, the energy sector cannot wait any longer for the introduction of changes. The risk of an energy shortage is quite real. The public will not forgive the government for a lack of power in their homes, even if the government strives to prove that the former administration is to blame.
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