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Polish oil refiner PKN surprises with plan to take over utility Energa

Poland’s biggest oil refiner, state-run PKN Orlen, unexpectedly announced (in early December) that it plans to take over state utility Energa to strengthen its position in the electricity market.

PKN said it will offer 7 zlotys per Energa share, valuing the company at 2.9 billion zlotys ($744 million). Shares in Energa, which is also state-run, closed down 1.8% at 6.8 zlotys.

“We will be selling not only fuels but also electricity, strengthening the group on the whole market,” PKN Orlen Chief Executive Daniel Obajtek told a news conference. He added that PKN has notified the European Commission of the planned deal, which is expected to be completed by mid 2020.

Both PKN and Energa have heavy and politically-motivated investment projects in their pipelines.

PKN, which has a market capitalization of 37 billion zlotys, also wants to take over smaller rival Lotos, with a market cap of almost 16 billion zlotys, a move encouraged by some prominent members of the ruling Law and Justice (PiS) party.

That deal is still waiting for regulatory approval from the European Commission, which had been expected by year end although that now seems unlikely. The Commission is expected to approve the deal but only under condition that the merged group sell some assets.

Obajtek said that PKN Orlen, which has described the transaction as a difficult one, had not given up on the plan to buy Lotos and that cooperation with the Commission was “good”.

Energa plans to build a coal-fueled power plant in Ostroleka, north-east Poland at a cost of around 6 billion zlotys but is struggling to secure financing at a time when banks are refusing to back such projects for environmental and sustainability reasons.

“We have to analyze each investment process and after that we will take a decision,” Obajtek told reporters when asked whether PKN would continue with the project after buying Energa.

The Polish state holds a 27.52% stake in PKN and 51.52% in Energa. Analysts said that PiS may want to try and merge more state-run companies to strengthen their market position.

“One may wonder whether this is just the first such transaction and if there are companies interested in, for example, Tauron which faces bigger challenges,” said Pawel Puchalski, equity analyst at Santander Brokerage Poland, referring to another Polish energy company.

Source: Reuters

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