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WARSAW/FRANKFURT (Reuters) – Buyout group CVC Capital Partners is starting preparations for a sale of its Polish utility PKP Energetyka in a deal potentially worth up to 1.8 billion euros ($2.1 billion), people close to the matter said.
Given the political challenges linked to Poland’s determination to control strategic energy assets, any potential buyer will likely need a local partner to navigate the process, the sources said.
CVC bought PKP Energetyka, one of Poland’s biggest energy groups and an electricity supplier to the national railway, from the state-owned railway firm in 2015 for 1.97 billion zlotys ($507 million), including debt.
The ruling Law and Justice party (PiS), which won the parliamentary election later that year, tried to annul the transaction in court, saying selling assets such as PKP Energetyka contravened Poland’s national security interests.
CVC declined to comment, while PKP Energetyka and the Polish government were not immediately available for comment.
CVC is expected to engage a sell-side advisor in early 2021 and start an auction soon thereafter, the sources said.
It has started to reach out to other private equity firms and to energy groups from outside Poland on the sale, they added.
The company is expected to post earnings before interest, tax, depreciation and amortization of 150 million euros this year, compared to 130 million euros in 2019.
One person familiar with the matter said bidders were expected to offer a valuation of about 7.5-8 times PKP Energetyka’s core earnings, or 1.1-1.2 billion euros, including debt.
Another said PKP Energatyka’s enterprise value could reach 1.8 billion euros, or up to 12 times core earnings.
Infrastructure investors such as KKR, EQT (NYSE:EQT), Macquarie and First State showed interest in PKP Energetyka in 2015, but some of them may shun the auction in the face of PiS’ expected reluctance to sell the asset to a foreign investor.
The Polish government has also tightened regulation of the energy market, and PKP Energetyka has suffered from a cap on power prices introduced in 2019 to protect consumers from the impact of rising carbon emission costs.
Puls Biznesu daily said on Thursday that the company has claimed 85 million zlotys in damages from the state to compensate for losses resulting from the cap.
Since 2015 CVC has been approaching PiS representatives and allies to ease the conflict and convince the government it is raising the company’s value, people close to the matter have said.
Local media have also reported that PiS actions against CVC may undermine good relations with Washington.
($1 = 3.8859 zlotys)
($1 = 0.8590 euros)
