Chinese Companies Eye Polish Energy Sector-Espirito Santo

China's Three Gorges Corp. and China State Grid Corp. would be interested in making acquisitions in Poland's energy sector in order to build up their European presence after buying into Portuguese utilities, Banco Espirito Santo Investimento (BES.LB) chief executive said Wednesday.

Espirito Santo, which advised on Portugal's sale of stakes in utilities EDP-Energias de Portugal SA. (EDP.LB) and REN-Redes Energeticas Nacionais SGPS SA (RENE.LB), now expects to advise the Chinese companies in their efforts to enter the Polish market.

"We are talking to Chinese companies that invested in Portugal to come to Poland," Jose Maria Espirito Santo Ricciardi told reporters in Warsaw. "Thanks to our experience we will be able to advise them in their plans for Poland and specifically the energy sector."

The two Chinese companies bought minority stakes in Portuguese utilities in December 2011 and in early 2012.

Espirito Santo, which has an investment bank operation in Poland, expects some merger-and-acquisition action in Poland this year despite the European debt crisis, most likely in the construction sector.

As the construction sector took a severe blow on infrastructure projects with razor-thin margins forcing several companies, like Dolnoslaskie Surowce Skalne SA (DSS.WA) to seek bankruptcy protection, it opened chances for healthier companies to increase their market share through acquisitions.

The bank also expects some acquisitions in the Polish renewable energy market in early 2013, as big utilities will have to significantly increase their production levels of renewables due to implementation of new regulations starting from 2013.

So far Poland's state-controlled energy producers were slow to invest in renewable energy, mainly wind farms, leaving the niche to smaller and more specialized companies as well as foreign utilities.

However, the state companies like PGE Polska Grupa Energetyczna (PGE.WA) or Tauron Polska Energia (TPE.WA) are likely to step up their efforts in this area through acquisitions in order to quickly increase production levels of renewable energy.

-By Patryk Wasilewski; Dow Jones Newswires; [phone]; [e-mail]