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) Direct privatisation 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 ) 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 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 bn ABO The remaining stake in TP S.A., telecom company was sold on the WSE on 5 August 2010 ($292m) A51.6%stake of the second largest utility company in Poland was floated on the WSE on30 June($1.3bn) ABB of a42% stake sold by the MoT and state bank BGK ($119m) Completion of privatisation through sale of 46.7%shares through ABB ($395m) Sale of10%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 '08Jun '09Nov '09Jan '10Feb '10Mar '10Apr '10May '10Jun '10Aug '10Oct '10Mar '11May '11Jun '11Feb '12Jul '12Nov '12Jan '13Feb '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%) ,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 Fund 15% Fund for Entrepreneurs' Restructuring 5% Restitution Fund 2% Treasury Fund 2% Fund for Polish Science and Technology Revenues from privatisation 2011 – disposals

Ownership transformation

6 of march In liquidation 56 not active 72 In bankrupcy procedures 97 Employees shares only Other active entieties 187 Significant importance Strategic

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