WARSAW, Aug 27 (Reuters) - Poland's plans to list its last remaining state utility on the stock market may be derailed by government indecision over future renewable energy subsidies, which analysts say makes the company extremely hard to value.
The initial public offer for Energa, Poland's biggest seller of energy produced from renewable sources such wind farms and hydro-electric plants, could still raise up to 2 billion zlotys ($630.59 million) based on analysts' assessments of the sector, making it one of this year's largest on the Warsaw bourse.
The offer could be further undermined by moves to shrink the role of pension funds, traditionally the most likely buyers of domestic issues, a person close to the privatisation said.
"I do not understand how they plan to float Energa this year with no law on renewables," said one analyst who asked not to be named. "It is impossible to value the company without this and no one believes the new regulations will be adopted this year."
The sale of a minority stake in Energa was expected to make a significant contribution to the government's privatisation plan, which had a target of 5 billion zlotys ($1.58 billion), but to date has booked only 1.9 billion.
Economy Minister Janusz Piechocinski said last week he expected the new law to be signed by the president this year, but market players and analysts are sceptical.
Local media said this week that after months of work on the new energy law, the economy ministry has come up with a completely new set of ideas concerning the system of subsidies.
"The package of new energy laws is extremely important from the point of view of shaping Poland's energy policy," the ministry said, adding that a new draft bill should be published "within weeks".
Given the uncertainty over subsidies, Energa, the smallest of Poland's power companies, could be worth about a third less than it was three years ago, when its bigger state-controlled sibling PGE offered to pay 7.5 billion zlotys for an 84 percent stake, analysts say.
The Polish government, which owns 84 percent in Energa, could sell as much as 34 percent and retain majority control, which would value the flotation at some 2 billion zlotys.
"The seller will have to accept a relatively low price, implicated by the current valuation of its peers and low power prices," Pawel Puchalski, head of equity research at BZ WBK brokerage said.
The capitalisation of PGE, Poland's biggest electric utility, is 29 billion zlotys as the company's shares have fallen by almost 15 percent since the start of the year, underperforming the blue chip index WIG20.
The country's second largest power company Tauron, valued at 7.6 billion zlotys, has lost almost 9 percent of its market capitalisation. Tauron and PGE are trade at a 2012 P/E (price earnings ratio) of 5.7 times and 8.4 times respectively.
Power prices on average have fallen by some 8 percent so far this year compared to 2012.
The other issue overshadowing the plans is a reform of the state pension system by a government under pressure to plug its budget deficit, which could include moving assets from private funds into a state vehicle.
Previous privatisations have been helped by pension funds, which currently manage some 272 billion zlotys worth of assets, thanks to a law requiring them to invest most of their cash in Warsaw-listed companies and Polish bonds.
In the last large listing, pension funds signed up for more than half the shares of real estate holding PHN offered by the state in February.
Some market players believe that if the funds are shrunk too severely, they will invest less in domestic markets.
The government is set to make a final decision on the shape of the pension system in early September.
The treasury plans to submit Energa's prospectus to the financial watchdog by mid-September, and it has already picked advisers for the listing.
"The market seems favourable at the moment, but the main problem is the pension funds," a person close to the privatisation process, told Reuters. ($1 = 3.1716 Polish zlotys) (Additional reporting Pawel Bernat; Editing Chris Borowski and David Evans)