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Exclusive: CVC mulls sale of Polish utility PKP Energetyka – sources




WARSAW/FRANKFURT (Reuters) – Buyout group CVC Capital Partners is beginning preparations to sell its Polish utility PKP Energetyka in a deal worth up to 1.8 billion euros ($2.1 billion) , said sources familiar with the matter.

Given the political challenges of 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 largest energy groups and electricity supplier to national railways, from the state-owned railway company in 2015 for 1.97 billion zlotys ($507 million), including debt.

The ruling Law and Justice (PiS) party, which won parliamentary elections later that year, tried to overturn the deal in court, claiming that the sale of assets such as PKP Energetyka was against the interests of Poland’s national security.

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 adviser in early 2021 and launch an auction shortly thereafter, the sources said.

It has started contacting other private equity firms and energy groups outside Poland for the sale, they added.

The company is expected to post earnings before interest, taxes, depreciation and amortization of 150 million euros this year, compared to 130 million euros in 2019.

A person familiar with the matter said bidders were expected to offer a valuation of around 7.5 to 8 times PKP Energetyka’s core earnings, or €1.1 billion to €1.2 billion including debt.

Another said the enterprise value of PKP Energatyka could reach 1.8 billion euros, up to 12 times base earnings.

Infrastructure investors such as KKR, EQT, Macquarie and First State showed interest in PKP Energetyka in 2015, but some of them may avoid the auction due to PiS’s expected reluctance to sell the asset to an investor. foreign.

The Polish government has also tightened energy market regulations, and PKP Energetyka has suffered from a cap on electricity prices introduced in 2019 to protect consumers from the impact of rising carbon emissions costs. carbon.

The Puls Biznesu daily said on Thursday that the company had claimed 85 million zlotys in damages from the state to compensate for losses resulting from the cap.

Since 2015, CVC has approached PiS representatives and allies to quell the dispute and convince the government that it is increasing the company’s value, people familiar with the matter said.

Local media also reported that PiS actions against CVC could undermine good relations with Washington.

($1 = 3.8859 zlotys)

($1 = 0.8590 euros)

Reporting by Agnieszka Barteczko and Arno Schuetze; Editing by Jan Harvey