Bulgarian Stock Exchange shares fall on IPO

Shares in the Bulgarian Stock Exchange fell on the bourse’s first day as a publicly listed company with the country’s finance minister saying talks would start soon on selling its strategic stake.

The Bulgarian bourse is one of the smallest in central and eastern Europe but could get caught up in the region’s gradual moves to consolidate exchanges in the past 12 months. In October, the Warsaw Stock Exchange started trading as a public company.

This time last year, the Wiener Börse finalised a new holding structure for Vienna and its three counterpart exchanges in Hungary, Slovenia and the Czech Republic – called CEE Stock Exchange Group, or CEESEG.

Simeon Djankov, Bulgaria’s finance minister, said at a briefing on Thursday the government would “hold negotiations for selling a majority stake in the bourse to a strategic investor from this point on”.

“This process will take some time. It won’t happen within a week or a month. The first step was to make the stock exchange public, ensure its transparency and get a price estimate.”

According to Bloomberg, the exchange’s shares closed at 2.43 lev at 1:45pm with 65,070 sold, valuing the exchange at 16m lev ($10.7m). The government retains a 50.05 per cent stake.

Alex Bebov, who runs BAC Securities, an investment firm that is a member of the Bulgarian and Romanian exchanges, said Nasdaq OMX, Deutsche Börse, Warsaw and Wiener Börse had all expressed interest in the exchange in the past.

“The most likely outcome is someone looking to consolidate some of the exchanges in the region. That points to Vienna and Warsaw,” he said.

NYSE-Warsaw Bourse: The Secret Engagement

(WSJ.com) A confluence of events suggests that Poland’s Treasury Ministry is working toward making NYSE Euronext a strategic investor in the Warsaw Stock Exchange some day. NYSE is clearly courting the WSE and, for now, the WSE and its owner — the Polish state — are enjoying it.

In mid-June, Polish Treasury Minister Aleksander Grad told Dow Jones Newswires that the Warsaw Stock Exchange was in talks with a strategic partner that could in future, after the company’s initial pubic offering in November, buy a minority stake in the business.

“If the strategic partnership works, it can’t be ruled out that the Treasury will sell its minority stake in Warsaw Stock Exchange to that entity,” Mr. Grad said at the time.

Reuters

Polish Treasury Minister Aleksander Grad at the Warsaw Stock Exchange.

Less than a month later, NYSE Euronext and the Warsaw Stock Exchange announced they had a strategic, long-term cooperation partnership that involves the Polish bourse’s cash and derivative markets migrating to a universal trading platform supplied by NYSE Technologies.

This Friday, NYSE Chief Executive Duncan Niederauer was in Warsaw for a working visit with WSE Chief Ludwik Sobolewski. The former declined to say whether NYSE would take a stake in the Warsaw Stock Exchange’s IPO, saying: “Let’s leave that for another time, giving the timing.”

But the presence of journalists from across the region, including from Bulgaria, Romania, Ukraine and Austria, suggests both exchanges share and want to communicate the vision of making Warsaw a regional financial hub — a one stop show for the asset called “Central Europe.”

The Warsaw Stock Exchange’s strategy fits with the Treasury Ministry’s wider strategy of making the city of Warsaw into a financial capital that counts. Even as its parcels out privatization advising deals to the world’s top investment banks, it’s keeping the pressure on, checking whether they are keeping their individual promises to have a real, physical presence in Poland’s capital. Investment bankers in Warsaw don’t like to go into details on the record about their office leasing situations or staffing levels at the moment.

A BROKEN ENGAGEMENT

This isn’t the WSE’s first time at the ball. It has danced with others before. Late last year, the Treasury failed to sell a majority stake in the exchange to Deutsche Boerse AG, the only bidder left after the London Stock Exchange, Nasdaq and NYSE walked away. The Treasury set some tough conditions, which the German company found impossible to meet.

A person familiar with the situation told Dow Jones Newswires the Treasury wanted Deutsche Boerse to guarantee the total market capitalization of the Warsaw market would not fall below a certain number. But stock prices fall. Bourse operators have no control over that.

Now Poland plans to offer around 63% of shares in the Warsaw Stock Exchange and plans to hold on to 25% to 30% in the business after the IPO. It now has more experience with privatization negotiations, which means the likelihood the WSE will have a strategic investor someday is rising.

Poland Buys Euros to Weaken Zloty, 1st Time in Decade

(Bloomberg) -- Poland’s central bank bought foreign currency to weaken the zloty for the first time since 1998 and said it may do so again, putting investors on notice it will seek to prevent exchange rate gains harming economic growth.

The zloty dropped as much as 1.2 percent against the euro, the biggest decline in two months, and traded 0.8 percent lower at 4:39 p.m. in Warsaw after the central bank said in an e-mail it had bought a “certain amount” of foreign currency around noon. The central bank probably bought between 50 million euros ($67 million) and 70 million euros, said Robert Narkowicz, a trader at PKO Bank Polski in Warsaw.

Policy makers are seeking to restrain the zloty after its biggest quarterly rally in six years drove the currency 6.4 percent higher against the euro in the first three months of 2010 as the only European Union economy to avoid a recession attracted investors. The central bank “can’t exclude intervening again,” Deputy Governor Witold Kozinski said by phone. The government may also buy foreign currency, Deputy Finance Minister Dominik Radziwill told PAP newswire.

“The best days of the zloty appreciation are probably behind us,” said Paul McNamara, who oversees $3 billion of emerging-market bonds and currencies at Augustus Asset Managers in London, a unit of Zurich-based money manager GAM Holding Ltd. “This is a very clear signal.”

Talking Down

Central bankers have been trying to talk down the zloty for more than a month on concern its strength may slow the economy’s expansion. Kozinski said yesterday there was a “positive climate for intervention.” Another deputy governor, Piotr Wiesiolek, said in a statement on March 11 that the central bank is operationally prepared to act.

Even after such talk, the move came as “quite a surprise” to investors, said Marcin Mazurek, an economist at BRE Bank SA in Warsaw. “I don’t know to what extent this is just the central bank demonstrating that it can act, answering many people who said it wouldn’t intervene, and to what degree it results from a fundamental belief that intervention is needed.” The zloty has soared 27 percent from its five-year low on Feb. 17, 2009, to post the second-biggest increase among emerging-market currencies tracked by Bloomberg for the period. Poland’s economy expanded 1.7 percent in 2009, compared with a 5 percent contraction in neighboring Germany, Europe’s largest economy. The Polish government forecasts 3 percent growth this year, driven in part by recovering exports.

‘Squeeze Out’

“It’s an attempt to slow the pace of appreciation to support the cyclical recovery,” said Koon Chow, an emerging- market currency strategist at Barclays Capital in London. “This should squeeze out some zloty longs but won’t change the medium- term trend, which is driven by inflows from privatization.”

Augustus’s McNamara said further gains in the zloty may be “pretty modest.”

The last time Narodowy Bank Polski bought or sold zloty on the market was in 1998, two years before the currency was allowed to trade freely, Kozinski said. Poland’s government, which had foreign currency equivalent to 6.79 billion euros on deposit in February, had been a more active market participant, selling euros in February 2009 to help stop the zloty’s plunge to a five-year low of 4.9307.

“A one-off intervention like this can succeed, although it’s too early to tell if it will,” Anna Zielinska-Glebocka of the rate-setting Monetary Policy Council said by phone. She added that Polish law requires the central bank to consult with the government in advance of such transactions.

‘Game Changer’

Poland’s decision to abandon its hands-off approach to the currency for the first time since the 1990s may prompt other central banks in the region to reconsider “their previous free- float driven models in favor of a more Asian-style interventionist approach,” said Martin Blum, co-head of asset management at Ithuba Capital in Vienna.

Any such shift may provide at least a short-term boost to central and east European government debt, since currency-buying would augment central-bank reserves and help exports, Blum said. He added that it would also drive up long-term interest rates as weaker currencies raise the prospect of faster inflation.

“It shouldn’t be ruled out that today’s actions by the Narodowy Bank Polski are a game changer,” said Blum, who recommended selling zloty and Czech koruna and buying Turkish lira.

The zloty has fallen from a 16-month intraday high of 3.8234 per euro this week, trading at 3.8765.

PKO’s Narkowicz said the central bank sold zloty today at rates from 3.8480 to 3.8650 per euro.

Poland is at the top of the list for shale potential

Houston companies planning to explore for natural gas

Dec. 9 (Bloomberg) -- Two Houston-based companies, ConocoPhillips and Marathon Oil, are betting that Poland, which gets half of its natural gas from Russia, can yield a development boom in shale formations like those that drove a jump in U.S. output of the heating fuel.

The third- and fourth-biggest U.S. oil companies obtained exploration licenses this year covering hundreds of thousands of acres in Poland. The country, which imports 72 percent of its gas, could become an exporter of the fuel, said Maciej Wozniak, chief adviser on energy security to Prime Minister Donald Tusk.

“Everything leads to a conclusion that in four or five years, and this is how much time we have to prepare for this, Poland will become a place with quite a lot of gas,” Wozniak said in a telephone interview.

Shale developments, where rock formations are fractured and injected with water and sand to release trapped fuel, account for about 15 percent of U.S. gas output, according to Oklahoma City-based Chesapeake Energy Corp. After successes in the U.S., producers such as Houston-based Marathon seek to exploit similar geological formations around the world.

“We looked at a number of countries in Europe and through Asia,” Marathon Executive Vice President David Roberts told investors in a Nov. 19 presentation after the company obtained its license. “Poland bubbled up to the top of our list.”

Russia Reliance

Shale projects contributed to a drop in U.S. gas prices from a 2008 high of $13.69 per million British thermal units to a 2009 average of about $4.06.

Successful drilling wouldn’t end Poland’s reliance on Moscow-based OAO Gazprom, which disrupted gas supplies to 20 European nations in January on a price dispute with Ukraine. Poland’s gas-distribution monopoly, Polskie Gornictwo Naftowe i Gazownictwo SA, agreed Nov. 3 to contract with Gazprom for almost three-fourths of its gas until 2037. The deal is pending approval by governments of both countries.

“It would have no choice but to pay the price agreed to in the contract even if the price on the cash market falls due to additional supplies from the shale formations,” said Vince Kaminski, an adjunct professor at Rice University in Houston and former risk-management director at Enron Corp.

Gas discoveries could enhance energy security for Poland and neighboring countries such as the Czech Republic and Slovakia. Polskie Gornictwo, based in Warsaw, cut sales to the nation’s largest refiner, PKN Orlen SA, and the biggest fertilizer maker, Zaklady Azotowe Pulawy SA, after the Russian- Ukrainian conflict left Poland with limited supplies.

Energy Security

“Increasing natural-gas production in Poland, especially in such a sustainable way, is very important for us,” Wozniak said. “Given our situation and the problems we had over the last years with securing stable supply on the gas market in the country, this initiative is particularly valuable.”

Polish shale gas is “a long way off” from having a “serious” impact, Gazprom said in a statement. Long-term contracts are needed for gas users to secure supplies and for producers to finance infrastructure projects, the company said.

Polskie Gornictwo, which produces about 4.1 billion cubic meters of gas a year in Poland, plans to drill in shale formations with Marathon and Chevron Corp., said Piotr Gliniak, the company’s exploration director. It may turn out that Polish shale formations have too much water to tap using techniques currently employed in the U.S., he said.

“It seems to me that at the moment, the foreign companies are a bit too optimistic about what may be found in Poland,” Gliniak said.

Silurian Shale

Representatives of Marathon and ConocoPhillips of Houston declined to comment for this article.

If the 430 million-year-old Silurian shale that stretches through Poland proves to be “an economic resource,” 48 trillion cubic feet (1.4 trillion cubic meters) of gas could be recovered over decades, according to Rhodri Thomas, a project adviser at Wood Mackenzie Ltd. in Edinburgh. That much gas would sell for more than $240 billion at current futures prices.

ConocoPhillips has an option to develop as many as 1 million acres in the Silurian shale under an exploration agreement with Warsaw-based Lane Energy, the U.S. company said in a Sept. 9 presentation to investors. The companies plan to drill the first well near the northern Polish town of Lebork, said Kamlesh Parmar, country manager at Lane Energy.

Parmar said the concession area has all the geological attributes, including a thick and organically rich rock formation, to become a successful shale-gas development.

Unsafe roads annually cost $34 billion to Russia – World Bank

WASHINGTON, November 29 (Itar-Tass) -- Unsafe road traffic conditions in the countries of Europe and Central Asia have tremendous adverse implications for their economic and social well-being, the World Bank said.

“Road traffic injuries are already among the top ten causes of death and disability in Europe and Central Asia and the trend is worsening,” said Abdo Yazbeck, World Bank Health Sector Manager for the Europe and Central Asia. “Human impact of traffic crashes is enormous. Families are being driven into poverty because of the death of their breadwinner or the mounting costs of medical care and rehabilitation for accident victims. But the growing magnitude of the problem is also bringing a national dimension to it, contributing to the demographic crisis and imposing additional burdens on country economies which lose billions of dollars every year as a result of traffic injuries and fatalities”.

In Europe and Central Asia, the highest estimated annual costs to governments are in the large economies that also have sizeable populations: Russia ($34 billion per year), Turkey ($14 billion), Poland ($10 billion), and Ukraine ($5 billion). A combination of weak road safety management capacity, deteriorated roads, unsafe vehicles, poor driver behavior, and patchy enforcement of road safety laws, alongside exponential growth in the number of vehicles, are the key factors contributing to road traffic injuries and fatalities multiplying at a rapid pace, the World Bank said.

Poland’s $10 Billion State Sales Draining Stock Funds

Oct. 14 (Bloomberg) -- Poland’s record $10 billion of state share sales through next year risk draining funds from the stock exchange, causing the market to underperform, according to ING PTE SA, manager of the country’s second-largest pension fund.

Warsaw’s benchmark WIG20 Index has climbed 24 percent in 2009, lagging behind the MSCI Emerging Markets Index’s 67 percent gain and the Hungarian BUX Index’s 70 percent surge. While Poland is the only European Union economy to avoid a recession this year, investors have been setting aside money for initial public offerings, Ewa Radkowska- Swieton, ING PTE’s board member in charge of investment, said in an interview in Warsaw.

“These big offerings will probably drain some funds from the market and prompt some asset reallocations,” said Radkowska, who helps manage the equivalent of $14.3 billion of assets. “It won’t be easy for the Warsaw bourse to catch up with the gains on other markets.”

Poland is offering stakes in power, oil, copper, phone and insurance companies to help plug a budget deficit that the government says will almost double next year. Shares of state- controlled coal producer Lubelski Wegiel Bogdanka SA soared 58 percent since its IPO in June, lifting the company’s valuation to 13.6 times estimated earnings from 9.4 times, according to data compiled by Bloomberg.

PGE SA, Poland’s biggest power producer, said on Oct. 12 it’s seeking to raise about 5 billion zloty ($1.7 billion) in the next two weeks for Europe’s largest IPO this year. State- controlled PKO Bank Polski SA, the country’s No. 1 lender, is selling 5.1 billion zloty of new shares this month to finance expansion. The total 30 billion zloty of share sales planned through 2010 is equivalent to almost 10 percent of the Warsaw Stock Exchange’s traded value, according to Bloomberg data.

PZU, Polkomtel

The sales may cause “temporary shocks on the investors’ side,” said Radkowska.

The government will be under pressure to offer the shares on the stock market at prices that will ensure demand, according to Radkowska. Investors expect a discount of 10 to 20 percent relative to the industry group, she said.

“The government has its back to the wall because it needs to sell assets to keep the public debt in check,” said Radkowska. “These are big, flagship companies and they can’t afford to fail.”

PZU SA, Poland’s biggest insurer, may offer a stake to the public next year after the government struck a deal over control of the company with Dutch-based Eureko BV. Mobile phone operator Polkomtel SA, controlled by state-owned companies, also is considering an IPO as two shareholders seek to sell a total stake of 46 percent.

Power Companies

Poland is targeting a total 36.7 billion zloty from selling assets through 2010, including stake disposals to strategic investors, to help finance a deficit the government estimates will reach 52.2 billion zloty next year.

Power-company shares may be a “good opportunity” for local pension funds to diversify portfolios and a “chance to earn money,” said Radkowska. Of Poland’s four power groups, only Enea SA is traded on the Warsaw Stock Exchange. Its shares have jumped 39 percent since its IPO in November.

RWE AG, which was picked for exclusive talks to take over Enea, won’t place a final bid, Polish Deputy Treasury Minister Jan Bury said in a phone interview today. The German utility probably wasn’t prepared to offer a premium for taking control of the company, Bury said. Poland will restart the sale by early December.

Enea shares advanced 0.2 percent to 21.4 zloty in Warsaw today, while the WIG20 Index jumped 3.4 percent to 2,302.54.

ING PTE, a Polish unit of ING Groep NV, the largest Dutch financial-services company, holds 27 percent of its assets in stocks, according to data on the financial-market regulator’s Web site.

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