CVC Fund Buys Polish Railway’s Power Unit for $375 Million

CVC Capital Partners Ltd signed a preliminary agreement to acquire the power unit of Polish state railway company Polskie Koleje Panstwowe SA, setting up the country’s largest privatization deal this year.

The private equity firm placed the highest offer, at 1.41 billion zloty ($375 million), for full ownership of PKP Energetyka SA, PKP said Thursday. The deal needs approval from the competition watchdog and the Infrastructure Ministry.

PKP Energetyka, founded to service the railway’s electric traction units, later expanded to electricity and gas distribution. The company, which generated 48.7 million zloty of net income last year from 4.32 billion zloty of sales, plans to sell more than 10 terawatt hours of power in 2015. CVC, which outbid state-controlled utilities Energa SA and Tauron Polska Energia SA, is investing in Poland for the first time.

“We sought the investor that will strengthen the market position of the company” and allow it to “grow dynamically,” PKP Chief Executive Officer Jakub Karnowski told reporters. The state railway company will use the proceeds to invest in new trains, boost employment and repay liabilities. PKP’s net debt amounts to about 700 million zloty.

The deal follows other asset sales by railway operator. In 2013, PKP sold a minority stake in PKP Cargo SA, the rail freight operator, in a public offering for 1.42 billion zloty. The railway sold also ski-lift operator Polskie Koleje Linowe SA and telecommunications unit TK Telekom Sp. z o.o. The company plans next to sell its fast-train unit PKP Intercity SA in 2018 at the earliest.

Source : Bloomberg