RWE secures Warsaw Stoen for $363m

16 October 2002 – Poland’s government agreed Tuesday to the sale of an 85 per cent stake in Stoen, the electricity distribution and retail utility serving the Warsaw area, to German utility RWE Plus.

The deal gives RWE access to the lucrative Warsaw market while the Polish government obtains much-needed funds for budget financing in return.

The acquisitive German group will pay 1.5bn zlotys ($363m) for Stoen, gaining control over its 780 000-plus client base and over five per cent of Poland’s power distribution market.

The state treasury said RWE would invest an additional 422m zlotys in the Warsaw group over a period of three years. No further details of the deal were revealed.

The deal will give RWE a strategic foothold in the region’s top power market, due to liberalise and offer new cross-border opportunities as Poland and its eastern European neighbours move towards joining the European Union in 2004.

“The participation in Stoen is another important step in expanding our involvement in Central and Eastern Europe”, said Heinz-Werner Ufer, CEO of RWE Plus, when commenting the stake purchase.

Stoen buy is seen as a part of multi-utility regional push by RWE, which has strong holdings in Slovak and Hungarian power distributors and controls Czech natural gas market.

RWE’s bigger domestic rival E.ON has failed so far in it attempts to acquire Poland’s top utility group G-8, after talks with the state treasury collapsed over price last month.

The Warsaw foothold will enable RWE to reap benefits from demand forecast to rise by half over the next decade as increasingly affluent Poles plug in more dishwashers and microwaves, and economic growth fuels industrial demand.

German power actually costs less to produce than in Poland, so the planned liberalisation of power trade in an enlarged EU would offer a potential outlet in Eastern Europe for RWE’s domestic capacity.

“Due to its high growth rates, the proximity to the domestic market and the future joining of the EU, the Polish market is one of the most attractive markets for German utilities,” said Hartmut Moers, analyst at Sal Oppenheim in Frankfurt.

The sale is key for the government’s budget financing plans and is likely to be Poland’s biggest privatisation deal this year after several large state sell-offs stalled.

With a population of 39 million, Poland is one of the largest markets in Central and Eastern Europe. If interest rates and the level of inflation stay low, the gross domestic product is expected to grow by 3-4 % annually. Poland is Germany’s major trading partner in Central and Eastern Europe and an EU accession country in 2004/2005.

The transaction is still subject to approval by the supervisory bodies and the Polish authorities.

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