Overcoming miner obstacles

By D.S. | BERLIN

SIX weeks ago workers demonstrated outside Poland's Treasury against plans to privatise JSW, their Silesian coalmining employer. But on July 6th, when the Warsaw Stock Exchange celebrated the first day of trading in JSW shares, there was no resistance. A gift of 17% of the company's total equity to the company's 22,000 workers had helped to concentrate minds.

It is more than two decades since communism crumbled in Poland but even after all this time the state still owns some large chunks of the country's industry. There was a privatisation push around the turn of the century but it ran out of steam (see chart below). In 2008 the present government relaunched it with the ambition to sell 800 companies in four years and raise 55 billion zloty ($20 billion at current rates) for the state's coffers. Some 500 have been dealt with so far, and 42 billion zloty raised. But the programme is not quite what it seems.

Ryszard Petru, an economist at demosEuropa, a think-tank, puts it rather bluntly: “I wouldn't call it a privatisation.” His argument is that none of the flagship companies which have been put on the block has passed properly into private hands. The government still exercises control either through a majority stake, or through a change to the statutes which gives it what amounts to a “golden share”. Expect no hostile takeovers or merger speculation here: that will not happen to PZU, the country's biggest insurer, to PKO BP, its biggest bank, or to energy companies PGE, PGNiG, Enea or Tauron. The first such partial sale began with an initial public offering of PKO BP shares in 2004. The Treasury has learned that it can have its cake and eat it, by releasing more tranches in these big companies but keeping control.

In whose interests?
The concern of some institutional investors is that they have too little influence on the management of such firms. Polish pension funds cannot vote with their feet: they are more or less obliged to invest in companies that join the WIG20 index of top listed firms. Each incoming government can appoint its cronies to senior management with impunity. The risk is that the company will be run in the interests of its biggest owner, the state, rather than that of all shareholders. Investors saw evidence of that recently when the government demanded higher dividends from PKO BP and PZU.

But this does not seem to deter foreign investors much. They are taking a punt on Poland as a whole, rather than looking for winning stocks, and they probably like the stability that state participation brings. Krzysztof Walenczak, a Lehman Brothers refugee who runs the Treasury's share sales, sees it as a transitional stage on the road to Anglo-Saxon capitalism. It is bringing liquidity to the Warsaw Stock Exchange and spreading share ownership: the number of shareholding accounts in Poland has nearly doubled since 2005, to 1.5m.

But if the goal is to shake companies out of their post-communist slumber and bring in talent from outside, this may not be the best way. The Treasury has had less success selling companies wholly or partially to trade buyers. Electricité de France (EdF) and Vattenfall of Sweden were both interested in buying Enea, and for a while EdF had exclusive negotiating rights, but they found the price and the conditions attached to the sale—a promise to complete a planned power station—too steep. Likewise, Rabobank of the Netherlands was keen to buy the government's stake in BGZ Bank before the Treasury changed its mind and floated a piece of it into a jittery market in May. But JSW's coalminers are happy now they are enjoying their share of the fruits of capitalism. And workers at two more state mining companies have been clamouring to be privatised.

Read on: Experience suggests Greece's privatisation plan is too fast