PRIVATISATION IN POLAND

25 Years of Experiences.

Act of 30 August 1996 on Commercialisation and Privatisation

Ownership transformation in Poland – legal basis

Act of 25 September 1981 on State-owned Enterprises

Act of 29 July 2005 on Public Offering, Conditions for Introducing Financial Instruments to an Organised Trading System, and on Public Companies

Act of 29 July 2005 on Trading in Financial Instruments

Regulation of the Council of Ministers of 30 May 2011 on detailed procedure for selling State Treasury shares

Regulation of the Council of Ministers of 30 May 2011 on the company analysis carried out before the shares held by the Treasury are offered for sale

Commercial Companies Code

Basic legislation related to the regulation of privatisation processes:

Objectives of privatisation

Privatisation objectives are multidimensional and multifaceted

• improvement of management effectiveness in business entities

• reduction of public sector involvement in the economy - development of effective and flexible private sector

• increase of possibilities for companies to raise capital using capital market instruments, capital market development

• increase of market competitiveness

• assurance of state budget revenues and provision of funds for separate earmarked funds

• creation of an atmosphere of encouragement, as well as conditions for the development of employee share ownership plan

• attraction of new investment, support of new ventures

Indirect privatisation

involves sale of shares held by the Treasury

Assumes earlier commercialisation, i.e. the transformation of a state-owned

enterprise into a company wholly owned by the Treasury

(sole shareholder)

Directprivatisation

involves disposal of all assets of a state-owned enterprise

The direct nature of the privatisation results from implementation of the

process without the commercialisation stage

(used mainly in period 1990-2000)

Types of privatisation

publicly announced auction

public tender

negotiations undertaken on the basis of a public invitation

public offering

Indirect privatisation - the most common modes

Selection of the disposal mode of shares held by the Treasury is made by the minister of Treasury

Main criteria for mode selection

• size; economic and financial standing of the entity

• situation on the financial market

• significance of the entity to the national economy

• optimisation of cost and duration of privatisation processes

• adjustment to the investment needs

• recommendation of privatisation advisor

Indirect privatisation - mode selection

Indirect privatisation - provision of shares

The Treasury may dispose of up to 85% of state-owned shares

Entitled employees of commercialised state-owned enterprises and companies established in result of commercialisation may acquire free of

charge up to 15% of shares held by the Treasury

Persons entitled to acquire shares:

1. individuals who were employees of the commercialised state-owned enterprise on the date when it was struck from the Register of Entrepreneurs or on the date of when the agreement was concluded to dispose of the enterprise by way of its contribution to the company

2. individuals who were party to a management agreement on the date when the commercialised state-owned enterprise was struck from the Register of Entrepreneurs or on the date of when the agreement was concluded to dispose of the enterprise by way of its contribution to the company

3. employees with at least a 10-year work experience in the commercialised state-owned enterprise or in a company that was privatised by being contributed to the company

4. individuals who, having worked 10 years in the state-owned enterprise subjected to privatisation, have been taken over by other work enterprise

5. farmers or fishermen - individuals engaged in farming or fishing

IPO of a leading energy group

($830m), despite

challenging market

conditions

IPO of the largest Polish energy

group ($2.1bn). Ranked as the largest IPO in

Europe for 2009

ABB of the leading global copper

product: 10% of MoT shares

($723m). It was the largest ever

ABB in CEE region

Second stage of privatisation. Sale

of 16.05% MoT shares on the WSE through

Fully Marketed Offer ($379m)

A 63.8% stake sold by the

government into the market for

$422m

IPO of Poland’s leading insurance

company ($2.7bn). The largest IPO in

Europe since 2007. Largest ever IPO in

CEE region

11.9% stake offered by the

Government in a $449m ABO

12.1% stake offered by the

Government in a $112m IPO.

34.3% stake sold by the MoT in a

$1.9bn IPO. Largest CEEMEA IPO since April

2010, 5th largest CEEMEA equity

offering ever

7.0% stake offered by the Government in a $799m ABO

10% stake sold by the

Government in $1.2bn ABO

10.8% stake offered by the Government in

a $1.3 bnABO

The remaining stake in TP S.A., telecom company was sold on the

WSE on 5 August 2010 ($292m)

A 51.6% stake of the second largest utility company in Poland was

floated on the WSE on 30

June ($1.3bn)

ABB of a 42% stake sold by the MoT and

state bank BGK ($119m)

Completion of privatisation

through sale of 46.7% shares through ABB

($395m)

Sale of 10% of shares of

leading oil & gas company

through ABB on WSE ($142m)

Rights issue of PKO BP , the largest Polish

bank by assets ($1.6bn).

Opening of rights issue market for

financial institutions in

Poland

IPO of the leading thermal

coal miner ($166m).

Reopening of IPO market in

Europe

7.0% stake offered by the Government in a $940m ABO

50% stake sold by the Government in a $220m IPO on the WSE

11.75% stake offered by the Government and BGK in a $1.6bn ABO

IPO of Polski Holding Nieruchomości, one of the leading real estate company in Poland(PLN239m)

Nov '08 Jun '09

Nov '09 Jan '10

Feb '10

Mar '10 Apr '10

May '10 Jun '10

Aug '10 Oct '10

Mar '11

May '11 Jun '11

Feb '12 Jul '12

Nov '12 Jan '13

Feb '13

Indirect privatisations - key transactions to date

1. sale of an enterprise

2. contribution of an enterprise to a company

3. transferring an enterprise for use against payment

Direct privatisation allows to make quick ownership changes in small and medium-sized state-owned enterprises

Both individuals or legal persons may participate in the privatisation process

Direct privatisation is carried out by the founder body of state-owned enterprises on behalf of the Treasury, with the consent of the Minister of Treasury

Direct privatisation

6 267,6 mln zł(48,0%)

3 490,8 mln zł(38,1%)

1 662,4 mln zł(37,8%)

351,4 mln zł(37,8%)

2011

2012

2013

2014

6 791,1 mln zł(52,0%)

5 667,4 mln zł(61,9%)

2 734,0 mln zł(62,2%)

652,3 mln zł(65,0%)

Funds

Budgetary net revenues

40% Demographic Reserve Fund15% Fund for Entrepreneurs' Restructuring 5% Restitution Fund 2% Treasury Fund2% Fund for Polish Science and Technology

Revenues from privatisation 2011 – 2014 - disposals

8 453 state owned enterprises

815 companies

718 companies

639 companies

568 companies

1990

2011

2012

2013

2014

Ownership transformation

Ownership transformation

568 Entities in

supervision

6 of march 2015

103 In liquidation

56 not active

72In bankrupcy procedures

97 Employees shares

only

Other active entieties

187

Significant

importance31

22 Str

ategic

The Minister of Treasury's duties - in the area of supervision of joint stock companies and limited liability companies - resulting from the ownership governance powers and exercising rights from shares in companies with Treasury shareholding include, among others, analysis of the management board requests for consideration and approval of:

financial statements,

management board reports on company activity,

distribution of profit or net loss coverage,

giving a vote of approval to members of management board and supervisory board for the performance of their duties.

Supervision of financial and economic activities of companies with Treasury shareholding

THANK YOU FOR YOUR ATTENTION!

Ministry of Treasury

Republic of Poland

www.msp.gov.pl