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Poland plans to merge its four biggest power utilities, the treasury minister announced late on January 8. The plan is just the latest to spook minority shareholders in the state-controlled companies.

The ministry has been hinting at the possible consolidation of the sector for over a year, but such an ambitious plan was not expected. The manager of state-held assets said in an emailed statement that it wants to merge PGE, Tauron, Enea and Energa in a bid to build a state champion capable of competing on the European stage.

Poland is currently "wrapping up" an analysis and will present detailed plans by the end of January, Wlodzimierz Karpinski said, according to PAP. "Today Poland's power firms are small compared to the largest European players. Only strong firms with proper capital and financing means will be able to secure the energy security of our country."

The goal of energy security has long led Warsaw to search for a viable strategy for the state-controlled sector. The government has placed huge demands on the utilities to invest in new coal-fired and nuclear capacity, as well as its drive to develop the country's shale gas deposits. 

That effort that now looks to have been largely in vain. However, state gas utility PGNiG, which was leading the shale gas charge, has not been included in the consolidation plan. Karpinski had said in late 2013 that consolidation was being mulled, but stressed that first, the government needs to update its policy for the sector.

This confused energy strategy has hit investor sentiment. The utilities have also been hit by low power prices across Europe.

Still, Polish power firms are marked down to make investments of PLN100bn (€23.2bn) over the next five years to build new generation capacity and improve the grid, Karpinski noted. "Consolidation in power is primarily a chance to increase the investment capacity of firms, also in commodities, for building value chain and increasing asset values."

That hints at another controversial plan for the sector. Warsaw unveiled a rescue plan for its struggling coal industry on January 7 that confirms the utilities will be forced to help out. The share prices of the power companies suffered in late 2014 on such fears.

Investors are unlikely to be any happier with the news of the merger plans when trading opens, especially since it has already dragged two of the companies through a drawn out, and ultimately doomed, consolidation effort. A PLN 7.5 bln bid by PGE to buy Energa in late 2010 was eventually shot down by the nation's anti-monopoly watchdog. That said , the head of the competition office was sacked last year.