PGE Prices Europe’s Biggest IPO This Year at $2.1 Billion

By Pawel Kozlowski

Oct. 28 (Bloomberg) -- PGE SA, Poland’s largest power group, priced its initial public offering at the top of its range, valuing Europe’s biggest IPO this year at 5.97 billion zloty ($2.1 billion).

State-owned PGE, which is offering 259.5 million shares, or a 15 percent stake, set the final price at 23 zloty a share, the company said on its Web site. That was in line with the 23-zloty median estimate of 13 fund managers surveyed by Bloomberg News on Oct. 21, and compares with a 17.50 zloty to 23 zloty indicative price range.

PGE, also known as Polska Grupa Energetyczna, will sell 15 percent of the shares in its IPO to individual investors, compared with an earlier planned 10 percent. Demand from institutional and individual investors amounted to 45 billion zloty, according to the statement.

Poland had the biggest number of new listings in Europe after NYSE Euronext in the first nine months of 2009, attracting 22 companies, compared with 23 at the world’s largest operator of stock markets, according to PricewaterhouseCoopers LLP statistics cited on the Warsaw bourse’s Web site.

The state-owned company, picked to develop Poland’s first nuclear plant, is seeking cash to make acquisitions and replace aging generation capacity. PGE estimates it will have to spend 38.9 billion zloty on expansion through 2012, including investment to meet European Union environmental requirements.

Profit Doubled

PGE, whose net income almost doubled to 1.79 billion zloty in the first half of 2009, may post a 3.17 billion zloty profit for the full year, according to BRE Bank SA estimates.

The IPO price of 23 zloty values the company at 12.6 times BRE’s estimate of 2009 earnings. That’s more than the valuation of 9.6 times earnings for CEZ AS, the Czech Republic’s biggest utility, and the 9.5 ratio for RWE AG of Germany. Verbund and EVN AG, Austrian utilities, trade at 13.6 and 12.9 times this year’s estimated earnings, according to Bloomberg data.

Companies from Banco Santander SA’s Brazilian unit to Aviva Plc’s Delta Lloyd NV are holding IPOs this year after the MSCI World Index climbed 65 percent from its 2009 low on March 9.

The IPO, managed by Goldman Sachs Group Inc. and UniCredit SpA, will be the largest in Europe since EDP Renovaveis SA, the renewable-energy unit of Portugal’s biggest utility EDP- Energias de Portugal SA, sold 1.57 billion euros ($2.3 billion) of shares in May last year.

Asset Sales

Poland is speeding up sales of state assets to raise 36.7 billion zloty through 2010 to help finance a budget gap the government expects will almost double next year. The government will sell an additional 10 percent stake in PGE next year, according to the prospectus.

The government plans an IPO of its second-largest power group, Tauron Polska Energia SA, in the first half of the next year. The state-owned utility wants to raise as much as 4 billion zloty and the government may decrease its stake to below 50 percent while retaining control of the company.

The stock of state-controlled coal producer Lubelski Wegiel Bogdanka SA has soared 54 percent since its IPO in June, lifting the company’s valuation to 13.3 times estimated earnings from 9.4 times, according to data compiled by Bloomberg.

To contact the reporter on this story: Pawel Kozlowski in Warsaw pkozlowski@bloomberg.net