RWE anticipates a power deregulation in Poland. This step taken by Poland is expected to make the German utility's approach for a 67% stake in Polish peer Enea more lucrative.

RWE is on an expansion spree in neighboring markets of Germany. It is in the process of acquiring Dutch peer Essent NV in a €9.3 billion ($13.14 billion) deal, which is expected to be closed in the third quarter. Earlier this week, it made a nonbinding offer for the 67% stake in Enea put up for sale by the Polish government. At current market prices the stake is valued at around six billion zlotys ($2.04 billion).

Enea completes the jigsaw puzzle for RWE, which is attempting to gain a foothold in Poland. Enea operates a distribution network in western Poland, and owns a coal-fired power generator in Kozienice, central Poland, with a capacity of 2,880 megawatts, accounting for 11% of Poland’s installed capacity.

RWE owns a local power distributor that sells electricity in the lucrative Warsaw area but does not have any sizable power-generation assets in Poland. Enea, on the other hand, has more than 880,000 customers, mostly in Warsaw.

Poland has been facing a severe fiscal crisis in the electricity sector. Poland’s Energy Regulatory Office still oversees the country’s power pricing system. Regulator has denied the power companies request for an increase of more than 40% in 2009, following the steep increases in wholesale power in 2008. Only 10% increase was approved on grounds of protecting consumer’s interests. Power companies in Poland are reeling under losses, which are cross-subsidized by steeper tariffs for the corporate sector.

RWE considers Poland to be an attractive market; it being one of the stable economies in the European Union and one of the few EU members whose economy is not expected to contract in 2009.

If the Enea deal is sealed, RWE’s share in Polish power-distribution market will increase to about 20% and the whole power-generation market to around 10%.

But Poland had never been in favor of opening its domestic energy market, so RWE would need a political backing to go ahead.