7/07/2006

PSE energy group to build Poland's largest company

Polskie Sieci Elektroenergetyczne (PSE) will build the national champion energy giant which in 10 years will have PLN 3.5 billion of net income.

Late on Tuesday, the government has finally decided that PSE will integrate the country’s energy companies into Polska Grupa Energetyczna (PGE), which in the future will be the biggest energy holding. The government plans also to create a similar group in southern Poland but decision has not been made yet in this case. Today, special committees responsible for the integration and the evaluation of consolidated companies will be built. Although the scenario of PSE building the holding seemed certain, two months ago Pawel Skowronski, the new CEO of BOT energy company criticized it. He believed that the financial situation of his company was endangered as well as Poland’s energy security.

However, according to analyses made for PSE by a group of consulting companies, the future PGE will have no financial troubles. On the contrary. There are two scenarios. The real one provides that in the first years after the consolidation, the energy prices in Poland will grow 3 percent over the inflation and in the next years – equally with inflation. Then the dynamics will fall. It was assumed also that the privatized energy producers will not give up their long-term contracts with PSE and the group will have to fulfill these agreements. Then, PGE would have PLN 870m (EUR 215.8m) of net income in the first year after the consolidation and PLN 1.8 billion in 2009. In ten years, the group should generate over PLN 3.5 billion of net income annually.

In the first five years after the consolidation, PGE should have PLN 3.4 billion for investments annually . The group will be able to invest PLN 17 billion in this period. Part of those funds will have to be spent to develop and modernize the transmission network of distribution companies which will enter the group, i.e. six electric energy distributors from eastern Poland and two energy firms from around Lodz.

“According to our analyses, PGE integrated by PSE will manage to pay back debts and invest in all entities building the group. Many PSE companies are liquid assets. It is easy to e.g. sell Polkomtel telecom. The operator must have transmission assets”, Jacek Socha, PSE CEO said.

“I hope we will build a strong group finally. BOT will need at least EUR 2 billion in the first five years after the integration”, Pawel Skowronski, BOT CEO commented.

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