Polish Treasury Official Says Country Is Done with Large Privatizations

By Marcin Sobczyk

WARSAW--The Polish government plans to retain control over its top companies and won't conduct any more large-scale asset sales, a senior treasury official said, undoing a policy cornerstone that saw the country transition from a centrally planned economy to a free market after the fall of communism.

Instead, the government is urging the large companies it controls to grow their businesses in Poland and beyond.

The privatization of state enterprises had propelled the Warsaw Stock Exchange into the top 10 of Europe's markets by value of listed companies, with the government responsible for some of Europe's largest initial public offerings in their respective years: insurer PZU SA was the second-largest IPO in 2013, fetching EUR1.99 billion; while coal miner JSW fetched EUR1.35 billion in 2011, the fourth-largest European IPO that year.

But trading volumes were disproportionately small, partly a result of the state retaining large chunks of shares in Warsaw blue chips.

In May, the Warsaw Stock Exchange was the eighth-largest market in Europe by value of domestic companies traded--around EUR149 billion-- but trading volume was only EUR3.9 billion, similar to the market in Athens which is half Warsaw's size in terms of the value of listed companies, according to data from the Federation of European Stock Exchanges.

Eager to keep control of what is left of the family silver, the government won't hold any large IPOs in the foreseeable future, said Deputy Treasury Minister Wojciech Kowalczyk, a former deputy finance minister.

"Our main goal is building value and not privatization for privatization's sake," said Mr. Kowalczyk, who was appointed to his new job in June. "Large privatizations are behind us," he told reporters.

With much investment needed in power generation, oil and gas, and roads, Poland designed a public-investment program fueled with government-owned stocks.

On Wednesday, the program's operator--known by its Polish acronym PIR--raised about 1.2 billion zlotys ($396 million) selling shares in Poland's largest power utility PGE SA (PGE.WA). But even after the transaction, the government still controls more than 58%.

Given the new approach to asset sales, Poland is likely to generate far less in privatization revenue than in recent years. Last year, it budgeted for PLN3.7 billion in such revenue in 2014, a goal it has in the meantime dropped.

"Privatization revenue for 2015 could be lower compared to this year, when it may also be lower than projected in the government budget," Mr. Kowalczyk admitted.

Write to Marcin Sobczyk at [e-mail]