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The politics of privatizing power

Those central and eastern European countries that have pushed furthest and fastest with privatization have benefited from healthy government finances, restructuring and modernization of key industries and enhanced economic growth. That’s undeniable. But privatization remains ever politically contentious. Selling their banking systems to foreigners was hard to stomach, and now these countries are selling even more essential services, their energy generators and power distributors. If they can maintain the political will, at least governments will find buyers in these sectors, unlike in telecommunications.

       
Alain Pilloux

Warsaw CHP, one of the largest district heating and electricity generating companies in Europe, has been in the private sector just over a year, since a majority of its shares were sold to Swedish power company Vattenfall for $250 million.


In many ways it was a model privatization. It was completed quickly. In contrast to some earlier sales, which had taken up to three years to finalize, there were less than eight months between pre-qualification and the final agreement. Vattenfall was also able to buy 55% of the shares, giving it actual as well as managerial control.


But it seems that this type of deal is now becoming increasingly difficult to negotiate. Vattenfall's recent purchase of electricity distribution company GZE was limited to 35%. "That reflects a clear change in strategy by the Polish government," says an energy industry executive.



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