Polish Companies Plan $3.9 Billion Investment in Petrochemical Plant

By Patryk Wasilewski

WARSAW--Poland's state-controlled companies Grupa Lotos SA (LTS.WA) and Grupa Azoty SA (ATT.WA) want to build a 12 billion zloty ($3.9 billion) petrochemical plant as part of the government's plan to strengthen national champions.

Despite years of privatization, the Polish government still plays a major role in a number of industries, controlling companies ranging from mining to refining to airlines.

Seeking ways to give the economy a boost, the government has turned away from its pre-crisis declarations of continuing asset sales while keeping only a handful of companies it sees as strategic. It has adopted a more hands-on approach that focuses on strengthening the state companies it still has and using them to start new projects, mostly in heavy industries.

The two companies, Lotos and Azoty, signed a deal Tuesday to conduct a feasibility study for a petrochemical plant to be located near Lotos' refinery with the chemical group Azoty the main customer.

The companies have up to PLN750 million tentatively available in financing from the government's investment vehicle, Polskie Inwestycje Rozwojowe.

"I am very pleased with this project," Treasury Minister Wojciech Karpinski said after the signing ceremony. "It clearly fits what I've been promoting for last six months--building synergies between our national champions in order to strengthen their position and allow an international reach."

Polish industrial heavyweights have tried to cooperate with each other. Power utility Tauron Polska Energia SA (TPE.WA) and gas firm PGNiG SA (PGN.WA) are on track with their plan to jointly build a gas-fired plant in Stalowa Wola. But some other state-controlled companies have dropped similar plans in other locations.

Last year Prime Minister Donald Tusk said the government wants the corporate sector to increase its investment drive, making up for weak public investments in the face of public spending limits.

In order to make financing of such ventures easier, the government set up the PIR investment vehicle, which has only signed one financing deal--with the Lotos refinery.

The Polish government recently ordered the country's largest power utility, Polska Grupa Energetyczna SA (PGE.WA), to go ahead with a PLN11.5 billion coal-fired power plant despite concerns by the company's management that the project would not be profitable.

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