Enea Opens Polish IPO, Undeterred by Tumbling Stocks

By Katarzyna Klimasinska

Oct. 23 (Bloomberg) -- Enea SA, the first Polish power distributor to sell shares on the Warsaw Stock Exchange, started its 2.87 billion-zloty ($969 million) initial public offering, undeterred by the global plunge in stocks.

Enea is selling a 30 percent stake, all new shares, seeking cash to build new power plants. The Poznan, Poland-based company already postponed the offering twice this year and at least six other Polish companies canceled or delayed IPOs over the last month, as the benchmark WIG20 Index declined 34 percent.

``This is the worst possible timing for an IPO,'' said Kamil Gaworecki, who helps manage about 4.9 billion zloty at pension fund Nordea PTE SA, adding that the estimated 2008 price-earnings ratio of 40 valued the company higher than its European peers. ``The State Treasury may have trouble closing this offering.''

Enea, owned by the Polish government, will sell shares at a minimum of 19.25 zloty apiece to power-industry investors, and to retail and institutional investors at a 10 percent discount, it said on its Web site. The subscription period will begin tomorrow and the company expects to start trading on Nov. 10.

Enea is coming to the market as banks such as Goldman Sachs Group Inc. and Merrill Lynch & Co. cut their forecasts for growth in central Europe's largest economy. CEZ AS of Czech Republic, the largest electricity provider listed on the Warsaw bourse, has lost 45 percent this year.

EBRD Support

The IPO does have support from the European Bank of Reconstruction and Development, which will subscribe for as much as 15 percent of the offering, according to the London-based bank's Web site. Enea also wants other power producers to buy two-thirds of the new shares.

The government, which now holds 100 percent of Enea, plans to sell its holdings to a power company next year. Investors interested in the controlling stake will probably bid in the IPO, said Deputy Treasury Minister Joanna Schmid, declining to name potential bidders.

Poland predicts that within years its largest cities may face power shortages during peak demand times, because the country has failed to build enough capacity to meet rising demand from air-conditioned offices and factories.

``Our target is to get funding for the company, whatever it takes,'' Chief Executive Officer Pawel Mortas said during a press conference in Warsaw today. ``The company is in very good condition, it has no debt.''

Bank loans would be a more expensive way of raising capital than a share sale and Enea may cancel some investments if the IPO fails, Mortas also said.

Bank Zachodni WBK SA and Credit Suisse Group are arranging the sale.

Warsaw overtook London to become Europe's hottest market for IPOs this year. Six companies debuted in Poland since last month's bankruptcy of Lehman Brothers Holdings Inc., bringing this year's total to 68, data compiled by Bloomberg show. In the U.K., 59 initial share sales took place in 2008, the data show.

To contact the reporter on this story: Katarzyna Klimasinska in Warsaw at kklimasinska@bloomberg.net