Multi-Energy Concern as an Example of the Implementation of Agenda 2030: Poland as a Case Study

Abstract

The motive for the functioning of enterprises in the market economy is the maximization of benefits by achieving positive financial results with the minimum possible involvement of capital. The positive results achieved are perceived very positively by the stakeholders. To achieve this, it is necessary to carry out reorganization processes (mergers and acquisitions) within capital groups, which are perceived as necessary (positive) measures. These phenomena have been observed in the energy sector for many years, and the years 2010–2021 were adopted as the research period. The aim of this article is to attempt to answer the question of whether the multi-energy concern is the result of activities carried out in light of the 2030 Agenda. The effect of merging the entities is capital concentration. This fact has been verified by reviewing changes in the structures of capital groups in the energy sector against the background of the largest mergers and acquisitions in Poland in terms of value. The theoretical part presents the differences in the terminology of mergers and acquisitions and the motives for their creation and operation, with an emphasis on energy groups. Therefore, the authors undertook research aimed at identifying and assessing the main premises and effects of capital concentration through mergers and acquisitions in the energy sector in Poland.

1. Introduction

Poland, along with nearly 190 other countries around the world, joined the Paris Agreement on climate protection in 2015. The purpose of the agreement is to reduce the negative impact of greenhouse gas emissions on the natural environment by implementing specific solutions on a national (national action plans) and international scale (e.g., providing support to countries in reducing the effects of climate change). During the COP26 (Conference of the Parties) climate summit held in November 2021 in Glasgow, Poland committed to a gradual shift away from coal by the 40s of the 21st century, using, inter alia, the resignation from investments in coal, a just transformation of coal sector employees (on 28 May 2021, a social agreement was signed with miners assuming a schedule for the gradual closure of mines), or an increase in spending on the development of clean technologies [1,2,3].

An indispensable element that determines the possibility of Poland gaining a competitive advantage in Europe is the concern to ensure an appropriate level of energy security, understood as a guarantee of resistance to any unfavorable and unpredictable events that may threaten the physical integrity of electricity flows. One such unfavorable phenomena may be the limited availability of energy and the possibility of purchasing it at reasonable and acceptable prices. It is worth emphasizing that for many years, the level of energy demand has been increasing, which should encourage the representatives of the authorities to provide an appropriate system for diversifying electricity sources. Preferably, it should be supplied from as many sources as possible and preferably be renewable, thus ensuring adequate flexibility to meet the collective needs of the state [4,5,6].

The aim of the article is to try to answer the question of whether the multi-energy concern created in Poland is the result of activities carried out in the light of the 2030 Agenda [7,8,9,10,11,12]. The effect of merging the entities is capital concentration. This fact was verified by reviewing changes in the structures of capital groups in the energy sector against the background of the largest mergers and acquisitions in Poland in terms of value. The analysis of investment motives in the merger processes allowed the authors to refer to the goals and effects of capital concentration in the energy sector.

Mergers and acquisitions are phenomena that are also carried out in the energy system. This system, due to its complexity, as well as economic and geopolitical importance, is an essential link for the development of the economies of many countries [13,14,15]. This is especially relevant for the post-industrial countries (including Poland), where electricity ensures the functioning of production processes, communication, and trade in goods [16,17,18,19,20,21,22].

Creating a concern in the energy system constitutes a big challenge. It can be concluded that this is an energy revolution. The direction of the change has been set, but without defining all the goals.

In the article, the authors analyze the process of establishing energy groups and the creation of a multi-energy concern based on oil, gas, petrochemicals, and energy, which is a response to signed agreements determined by political agreements. Building a new concern will allow for the better management and control of the processes which Poland has committed itself to implement. Its development is ensured by further consolidation within the energy sector. These actions are necessary because market forecasts also indicate that, after 2030, oil consumption will drop significantly in favor of alternative fuels. It is an opportunity to reduce the climate crisis.

Synergy in the economy is a phenomenon consisting of the integration of two or more entities and their activities in such a way that as a result, they would bring greater benefit than if these entities functioned separately. This phenomenon is quite well illustrated by the relation in which 2 + 2 > 4. Due to the use of synergy, it is possible to achieve effects greater than the sum of the results of each of the entities before the merger process. The most important positive results of synergy effects include savings, which are achieved by reducing the duplication of processes, organizational optimization, i.e., more effective use of available resources, as well as financial costs, such as the reduction of costs and tax burdens. An important synergy effect is also complexity, which enables more effective coordination of the activities of internal departments in the company. The synergy effect may be achieved in various areas of the business entity’s operation as pure synergy and cost synergy. An example of the latter is the development of a common accounting system (especially management). It is a very important factor in persuading strategic investors to make mergers and acquisitions in 2018–2020 [23].

2. Literature Review

Mergers and acquisitions have been the subject of research by many authors [24,25,26,27,28,29,30,31,32,33,34,35,36,37,38]. Observations and research have unanimously proven that mergers generally bring positive effects.

Investors very carefully evaluate the market value of functioning economic entities; therefore, mergers and acquisitions may not only lead to capital concentration but also make it easier to obtain it [17]. It is worth noting that this phenomenon is currently the main cause of capital changes in the world [24] pp. 395–399.

In the context of the 2030 Agenda for Sustainable Development, adopting the EU

Renewable Energy Directive and the European Green Deal, the European Union aims for the extremely ambitious goal to become climate neutral by 2050 [7,8,9,10,11,12].

There are two basic methods of merging companies in the Commercial Companies Code. One of them is an acquisition, and the other is a merger as a method of creating a new company from two existing ones [19]. It should be remembered, however, that both of these methods are fundamentally different from each other, and their use results from specific economic conditions, as well as stakeholders’ expectations as to the concept of the development of combined enterprises [31].

Based on accounting reports, many authors prove the positive impact of mergers on the condition of entities participating in these processes. Only the determination of the benefits allows for you to start the connection [39]. The value resulting from this procedure is defined as a significant increase in profitability and as an increase in the value of the combined enterprise [40].

The common denominator of mergers is undoubtedly the pursuit of capital concentration, due to the benefits resulting from increased efficiency in managing the available resources or the synergy effect. Apart from concentration, external development also involves integration (with suppliers or recipients), but also diversification (related and unrelated) [41] p. 19.

The main purpose of the article is to review the changes in the structures of capital groups in the Polish energy sector. The main research hypothesis was the following: the formation of a multi-energy concern is conducive to mergers and acquisitions.

The authors draw attention to the terminological disorder in theory and practice in the nomenclature of various, often different, processes of economic unit mergers. The article uses research methods such as analysis and criticism of the literature and the analysis of financial documents of the studied entities.

In the conducted empirical research, the following research questions will be verified, which at the same time constitute research problems:

Q1: Were there any mergers and acquisitions in the energy sector in the analyzed period, and what were their causes?

Q2: What is the main cause of capital concentration processes in the energy sector, and does it align with Agenda 2030?

Q3: How have the capital structures in the energy sector changed under the influence of these processes?

In addition, the following research hypotheses were put forward:

Hypothesis 1 (H1).

Mergers and acquisitions strengthen a multi-energy concern.

Hypothesis 2 (H2).

Mergers and acquisitions in the energy sector are processes that increase capital concentration and share in the production and sale of electricity.

Hypothesis 3 (H3).

Mergers and acquisitions transactions changed the shareholding structure in energy groups and thus increased the influence of the State Treasury during the period considered.

The global coronavirus pandemic that prevails to this day has caused a disorder of the economic order, for example, by slowing down the economy, causing stagnation in money markets, or, finally, limiting the wealth of investment portfolios of many international companies, which results in a limited capital (resulting from greater investment risk and the need to accumulate capital in a period of uncertainty) economic) with the need to carry out mergers and acquisitions. This is especially visible in the catering, hotel, tourism, and automotive industries [1,2,3,23]. On the other hand, there is no similar tendency in the energy sector, which prompts the assessment of this phenomenon in this study.

The authors have attempted to evaluate mergers and acquisitions in recent years, paying attention to the acquisition of Energa by Orlen.

3. Theoretical Approaches to Mergers and Acquisitions as a Manifestation of Capital Concentration

The external development of the enterprise as an objective is very important in a dynamic and competitive economy. This development is manifested by business combinations. It is thanks to mergers that companies obtain synergy effects that allow them to implement many new ventures.

A merger is a basic form of merging two separate enterprises into one entity. The distinguishing feature of a merger is that, as a rule, it takes place as a result of the concerted and free action of partners [42].

A merger transaction takes place when the number of companies is reduced as a result of the merger. Such an undertaking can be carried out in two ways. Consolidation (also known as an acquisition sensu stricto) takes place when two entities merge and, in the end, a new economic entity is created. Such a procedure can be presented in the form of the equation [(Subject) A + B = Subject C] [13,14,16]. In general, one could say that “a merger is defined as a voluntary merger of two business units into a new legal entity under similar conditions for both of the merging entities” [43].

The second way is attachment (also known as a takeover sensu largo). This situation occurs when one enterprise is liquidated, losing its legal personality, and the assets are bought back. This can be written as [(Subject) A + B = Subject B]. According to the trade law, balance law, and numerous directives of the European Union, it can be called incarnation or incorporation [13,14,16].

The main difference comes down to the statement that two relatively economically equivalent entities are linked by consolidation, while by incorporation, a larger entity (economically, financially, organizationally) incorporates a smaller entity, although it is not an exclusive rule (there are cases reverse) [44,45,46].

Considering the definitions of an acquisition in a general sense, one can assume, following the dictionary of the Polish language, that it is “taking what previously belonged to someone else”. It may mean that there is still the same number of things in the physical sense, only some invisible bond between them changes. Similar importance can be noted in economics and management. In management sciences, a merger is defined as a combination of two or more entities, as a result of which all but one of the merging entities lose their legal personality, under the name of which the entity resulting from the merger will function. The merger must be approved by the shareholders or stakeholders, and the merger process itself takes place by way of an exchange of stocks or shares [47].

A comparison of both unit combinations based on the Code of Commercial Companies in Poland is shown in Figure 1.

It can be concluded that the process of economic mergers always results from the merger of two or more companies. In addition, the transaction deprives the other entities of legal personality, as only one of the merger participants retains it. Most of the definitions suggest that the effect of the merger is the creation of a completely new economic entity. Taking into account the fact that the merger increases the resources of the new legal entity, as well as the modification of the organizational structure of the resulting entity, it should be assumed that it is a “new” entity that is the successor of the previously existing entity. Thus, the continued operation of an economic unit under the earlier name does not contradict the condition specified in the other definitions. Although, the functioning of a new entity under the name of an already existing entity is not appropriate, according to the authors. By acquisition, the authors understand the transfer of control from the acquired enterprise to the acquiring enterprise. It often occurs as a result of shareholders accepting an offer to buy their shares.

Table 1. Motives for M&A.

No.	Group of Motives	Benefits/Effects
1.	Technical and operational motives	- increasing the efficiency of management, - acquiring more effective management, - firing executives, - operational synergy, - economies of scale, cost reduction.
2.	Market and marketing motives	- increasing market share, - elimination of market competition. - diversification of activities, - entering new areas of activity.
3.	Financial motives	- use of existing surpluses, - increasing debt capacity, - cost of equity reduction, - tax benefits, - underestimation of the value acquired company.
4.	Managerial motives	- increase in management salaries, - increase in prestige and authority, - reduce liability risk, - increasing freedom of activity.

Source: author’s study based on: [7,10].

presents the most frequently mentioned buyer motives in connection processes.

During the analysis of the above classification, attention should be paid to the financial motives. An interesting example of the implementation of these premises is the separation of a tax group for tax purposes. Such a process is also a merger of several companies. An example is the tax capital group operating in Tauron Polska Energia. In 2011, Tauron completed the registration process of the Tax Capital Group (PGK), which included 11 companies from the capital group. On 14 December 2020, another tax agreement of the capital group for the years 2021–2023 was registered [48].

As already noted, the basic difference between a merger and an acquisition is that the former occurs as a result of mutual consent and cooperation between companies.

On the other hand, according to the dictionary of the Polish language, seizure means taking what previously belonged to someone else or detaining someone or something that is on the way illegally. Therefore, takeovers are often considered to be hostile, i.e., those in which the basis is the desire of one of the parties to buy out a controlling stake, without the prior determination of this fact, with the acquired party [13,14,16].

However, due to the closeness of the two terms, merger and acquisition are often used interchangeably, hence distinguishing them in the language of economists is often conventional. Examples of authors who use only one term—“merger”—are Eugene F. Brigham and Louis C. Gapenski in “Financial Management”. They explain their choice to use only the term “merger” by the fact that they are solely interested in the process and focus on the fundamental economic and financial aspects of mergers, not the legal ones [49].

The initial years of the regime change in Poland were dominated by the privatization of state-owned enterprises when these entities were massively transformed into limited liability companies [50]. Currently, after thirty years of transformations, interesting changes in the concentration of capital in the mergers and acquisitions market in the energy sector can be observed.

4. The Energy Sector in the Context of Mergers and Acquisitions in Poland

To conduct observations and research, the financial statements of entities participating in mergers and acquisitions from 2010–2020, as well as information from databases, industry reports FORDATA and Navigator Capital and KPMG, the Warsaw Institute of Entrepreneurship, and available studies by the Ministry of State Assets, Internet articles, and press releases were obtained. The first part of this section focuses on capital groups in the energy sector.

The power sector is defined as a part of the fuel and energy sector related to the production, transmission, and distribution of, as well as trading in, electricity and heat. Electricity is the so-called “Base sector”, and thus has a significant impact on the development and competitiveness of other areas of the economy in a particular industry [51] p. 53. This has its practical justification because the strong energy demand has been a phenomenon that has been noticeable for many years, not only in Europe but also all over the world. Data transmission via power lines is a pillar of the development of enterprises whose production systems, production automation, or teleinformation services are based on the existence of stable power networks. The power industry currently needs new sources of energy supply. This phenomenon gains additional significance at a time of drastically diminishing natural resources (conventional sources) and the need to search for new, but alternative (unconventional), energy sources.

The assessment was also influenced by the epidemiological situation related to the spread of the SARS-CoV-2 virus on a global scale [52,53,54]. This event influenced the development of many branches of economies, which, on the one hand, contributed to the improvement of the effectiveness of new distribution and sales channels, and, on the other hand, contributed to the paralysis of those industries that were not able to cope with the new reality. With all these issues in mind, for a more complete understanding of the problem, the authors assessed the situation in the mergers and acquisitions market in 2021 [55,56,57].

Changes in the energy system are closely related to ensuring energy security, understood as a guarantee of energy supplies and defined as the system’s resistance to exceptional and unpredictable events that may threaten the physical integrity of the energy flow or lead to an unstoppable increase in its price, regardless of economic grounds. Therefore, it is part of the national security system because reliable and constant access to energy sources, at costs that can be borne by society, is an essential element of any modern economy. More generally, energy security is such a state of the economy that ensures that the current and future customer demand for fuels and energy is covered in a technically and economically justified manner, with a minimal negative impact of the energy sector on the environment and living conditions of the society.

For many years, a strong multi-energy concern has been created in Poland to meet the challenges related to the energy transformation of Poland. Effective integration within the group through mergers and acquisitions is key to this process. Of course, apart from the basic factors stimulating the achievement of an appropriate level of energy security in Poland, the availability of infrastructure, transport, and, finally, the concentration of suppliers is also important.

The answers to the questions and the verification of the research hypotheses were made based on numerous tables and charts.

The list of mergers and acquisitions in Poland from 2010 to 2019 is presented in

Table 2. Merger and acquisitions in Poland from 2010–2019.

Year	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019
The number of transactions	581	516	331	363	245	223	279	288	323	258
Total value (bln euros)	21	17.5	9	12	8.7	6.3	11.2	10.6	6.5	10.9
The value of the largest transaction (bln zł)	3.0	18.6	4.4	6.2	6.2	2.4	12.7	4.3	4.2	5.0

Source: Raporty M&A Index Polska za Lata 2009–2020, Raporty Branżowe. https://fordata.pl/category/blog/raporty-branzowe, (accessed on 2 July 2021) [58]; M&A Index Poland. Fuzje i przejęcia w 2018 Roku. Raport Przygotowany Przez Firmy Navigator Capital oraz FORDATA Grudzień 2018 Roku. http://www.navigatorcapital.pl/wp-content/uploads/2018/12/Raport_MnAIndexPoland_rok2018_PL.pdf (accessed on 22 November 2021) [58,59].

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As can be seen in Table 2, over the years 2010–2019, the number of mergers and acquisitions has decreased significantly. An important justification for the decreasing number of connections is investment caution resulting from the uncertainty of economic events, and thus difficulties in assessing the long-term prospects of the functioning of enterprises. This problem is more visible in the era of the coronavirus pandemic, which prompts companies to concentrate their accumulated capital rather than make costly business decisions, which undoubtedly include mergers and acquisitions.

Continuing the analysis, it can be noted that the number of transactions does not always translate into a correspondingly higher or lower total value of mergers and acquisitions. This regularity can be seen taking into account the years 2010 and 2019. In 2010, with the number of transactions at 581, a total value of mergers and acquisitions was recorded at the level of EUR 21 billion, while in 2019, with only 258 transactions, the total value of transactions was recorded at the level of EUR 10.9 million. These figures illustrate a situation where more costly transactions were made despite a reduced number of transactions in general. In other words, these are, financially, more spectacular operations than single transactions carried out in other years.

From the observations carried out, it can be concluded that the transactions in 2010–2019 were characterized by a much higher value than those from the end of the second decade of the 21st century.

The most valuable connections in Poland from 2010 to 2019 are presented in

Table 3. List of the largest mergers and acquisitions in Poland from 2010–2019, in Bln zł.

Years	Transactional Purpose	Buyer	The Value of the Transaction (in Bln zł)
2010	BZ WBK	Bank Santander	3.0
2011	Spartan Capital Holdings	Polkomtel	18.6
2012	Kredyt Bank	BZ WBK (Bank Santander)	4.4
2013	Polkomtel	Cyfrowy Polsat	6.0
2014	Metelem Holding Company Limited	Cyfrowy Polsat	6.2
2015	TVN	Scripps Networks	2.4
2016	Allegro	Cinven, Permira&Mid Europa	12.7
2017	Żabka	CVC Capital Partners	4.3
2018	Unipetrol	PKN Orlen	4.2
2019	DCT Gdańsk	PFR, PSA International & IFM Investors	5.0

Source: Raporty M&A Index Polska za Lata 2009–2020, Raporty Branżowe. https://fordata.pl/category/blog/raporty-branzowe/, (accessed on 2 July 2021) [58]; M&A Index Poland. Fuzje i przejęcia w 2018 Roku. Raport Przygotowany Przez Firmy Navigator Capital oraz FORDATA Grudzień 2018 Roku. http://www.navigatorcapital.pl/wp-content/uploads/2018/12/Raport_MnAIndexPoland_rok2018_PL.pdf (accessed on 22 November 2021) [58,59].

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The largest transaction (from the financial point of view) in the analyzed period was the merger process in 2011, as a result of which Polkomtel acquired Spartan Capital Groups. Its value was estimated at PLN 18.6 billion. In turn, the “cheapest” transaction was carried out in 2015. As a result, the American concern Scripps Network Interactive acquired shares in TVN.

The median of the set of all mergers and acquisitions in 2010–2019 is PLN 4.7 billion. On the other hand, the arithmetic mean is PLN 6.68 billion, and the fashion can be estimated (only with the assumption of rounding to the full value in PLN billion) at PLN 4 billion, with an average deviation of PLN 3.59 billion, and a standard deviation from the population of PLN 4.80 billion. The standard deviation from the sample is PLN 5.06 billion, the range of all values is PLN 16.2 billion, and the statistical error is PLN 1.60 billion. These data also indicate that, in the analyzed years, the value of transactions exceeded PLN 10 billion only in two periods, i.e., in 2011 and 2016. The other transactions individually did not exceed the arithmetic mean of all transactions, amounting to PLN 6.68 billion.

The above results are presented in

Table 4. Statistical indicators of measures of the largest mergers and acquisitions from 2010–2019.

Statistical Indicator	The Value of the Indicator
Median	4.7 mld zł
Arithmetic average	6.68 mld zł
Modal value	4 mld zł
Average deviation	3.59 mld zł
Standard deviation of the sample	5.06 mld zł
Standard deviation of the population	4.80 mld zł
Value range	16.2 mld zł
Standard error	1.60 mld zł

Source: author’s study based on Table 2.

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It is certainly important that in the period under review the companies were made intra-group acquisitions. Among others, Polkomtel became part of Cyfrowy Polsat. The former was taken over by Spartan Holdings Capital, and, therefore, the entire venture is owned by Cyfrowy Polsat, which is at the forefront of the telecommunications services market in Poland.

In 2020, a total of 229 mergers and acquisitions were made, so there is still a continuing downward trend in terms of their number. The largest transaction was worth PLN 9.6 billion and concerned the takeover of Play Communications by Iliad S.A. (Fordata, Poznań, Poland, 2020) [59].

A similar phenomenon can be observed in the energy sector. It is one of the most important areas for the development of the economy of many countries. The concern of ensuring an appropriate level of energy security has become the reason for many mergers and acquisitions. The Polish energy economy is based primarily on fossil fuels. According to 2011 data from the Ministry of Economy, the share of coal in the primary energy demand structure is the highest and amounts to 56%. It is followed by crude oil (25%), natural gas (13%), and biomass and waste (6%), respectively.

Figure 2 shows the structure of primary energy demand by source.

This state of affairs is largely due to the geographical location of Poland. It has large stores of fossil fuels, mainly hard coal and lignite. According to data from Agencja Rynku Energii S.A. in August 2020 [61], the total share of hard coal and lignite in the structure of consumption of basic fuels in the commercial power industry in the period of January–August 2020 (a decrease by about 2 percentage points compared to the corresponding period in 2019) amounted to nearly 87.8%, while the share of gaseous fuels was only 6.87% (an increase by 1 percentage point compared to the corresponding period in 2019). Admittedly, the share of biogas/biomass also increased from 3.92% in 2019 to 5.10% in 2020.

The analysis of the above values leads to a thesis that, currently, Poland is not a sufficiently independent recipient of energy sources because the production of electricity is still largely based on coal (hard and lignite).

According to the analysis of the National Energy and Climate Plans (NECP), Poland is among the 7 EU countries that are the most delayed in the implementation of the coal transition program [62,63]—and by 2030 it is to be the most coal-dependent country in the community. From a long-term perspective, this approach requires a fundamental change [64,65]. This is dictated not only by the growing awareness of the need to protect the natural environment (in the context of limited non-renewable energy resources), but also by the current legislative trends in the European Union. Poland’s independence from fossil fuels will not only positively contribute to the improvement of the quality of the natural environment (including polluted air), but should also allow for the building of an appropriate level of energy security.

Renewable energy sources are at the forefront of solutions aimed at reducing the unfavorable share of fossil fuels in the structure of electricity demand in Poland. The gradual growing share of renewable sources in this structure should be considered a positive effect of the current legal and social trends, the final result of which is the need to become independent from non-renewable sources. For comparison, at the end of August 2021, the capacity of installed renewable energy sources increased, compared to the same period from 2020, by 33.9%, amounting to 14.9 GW. Therefore, taking into account the total capacity of all installed electricity sources in Poland (approximately 53.4 GW), the share of renewable sources is nearly 28%. The largest share of the available renewable sources in Poland is wind farms at around 6790 MW and photovoltaics at 5970.8 MW.

Table 5. Types of energy sources in Poland as of 30 August 2021.

Type of Renewable Source	Installed Capacity in MW
Wind power plants	6790.7
Photovoltaics	5970.8
Hydroelectric power stations	976.4
Biomass power plant	907.5
Biogas power plants	256.4
Total value	14,901.9

Source: The types of energy sources in Poland as of 30 August 2021. Source: author’s study based on report “Raport sektorowy—energetyka”, by Jan Sekuła posted 31 October 2021, https://profit-journal.pl/raport-sektorowy-energetyka/, access date: 2 February 2022 [60]; bankier.pl (accessed on 23 November 2021).

presents a detailed summary of the given types of electricity sources, with an installed capacity in MW, in August 2021 [66].

Aside from the above considerations, it is worth noting that another solution proposed by the experts is the transition to nuclear energy, which will accelerate the process of decarbonizing Poland’s energy structure and thus contribute to the improvement of the country’s energy security [67,68,69].

Although many different entities in Poland have a license to trade in electricity, the entire energy market is divided into 4 entities, which end suppliers choose depending on their geographic location. When characterizing this sector, it should be mentioned that under the government program, four capital groups (the so-called big energy four) were created: PGE, Tauron, Enea, and Energa, which generate about 70% of the country’s energy. In addition, Innogy Polska, which manages the capital’s electricity network, runs its business in Warsaw.

The goal of the government program, which is to consolidate the Polish energy market, is implemented by linking economically strong enterprises. As a result of this consolidation, these entities will be able to incur investment costs, compete, and balance the energy market.

In the first stage, the Transmission System Operator was separated from the structures of PSE (PSE Operator) and Distribution System Operators (including energy companies, e.g., ZKE Dystrybucja, RWE Stoen Operator, etc.) as independent legal entities [70]. The Transmission System Operator, along with the transmission network, has been handed over to the State Treasury. In turn, PSE was merged with the Polish Energy Group, which is one of the four energy groups operating on the market.

Polska Grupa Energetyczna (PGE) was established on the basis of the BOT Górnictwo i Energetyka SA holding, Zespół Elektrowni Dolna Odra SA, with the assets remaining after the separation of the Transmission System Operator from PSE SA, along with its assets and 8 distribution companies from central and eastern Poland without RWE Stoen.

An important entity forming the energy sector is Tauron Polska Energia SA. It is the second-largest enterprise in Poland after Polska Grupa Energetyczna. It is a joint-stock company listed on the Warsaw Stock Exchange since 2010. The Tauron Group is one of the largest economic entities in Poland and is one of the largest energy holdings in Central and Eastern Europe. It operates in all areas of the energy market, from coal mining, to the generation, distribution, and sale of electricity and heat, as well as customer service. On a smaller scale, the holding also conducts the wholesale of fuels and derivative products (trading in coal and biomass). In 2014, Tauron entered the gas fuel trading market. Currently, it is active in the field of renewable energy sources.

Another energy group is Enea. According to the government program, this group included companies under privatization or consolidation. Enea S.A. is a parent company that operates in the full value chain of the energy market: hard coal mining, electricity generation, electricity distribution, and energy trading. The Group also operates in the area of heat generation, distribution, and sale, as well as in the field of lighting services. It is the vice-leader in electricity production in Poland. In 2018, it generated 26.5 TWh. It was created from the merger of five power plants (Poznań, Bydgoszcz, Szczecin, Zielona Góra, and Gorzów Wielkopolski), as well as from subsequent acquisitions (including the Kozienice Power Plant and Połaniec Power Plant).

Energa SA is a group that produces and sells thermal and electric energy as well as gas. Currently, after the acquisition by PKN ORLEN S.A., which holds 80.01% of its share capital, the main activities of the group include the generation, distribution, and trade in electricity and heat. The Gdańsk entity has the largest share of RES in energy production among all Polish energy groups (over 40%). The production capacities include a system power plant in Ostrołęka, two combined heat and power plants, forty-seven hydropower plants, a pumped-storage power plant, five wind farms, and two photovoltaic farms. The Group’s distribution network covers an area of approximately 1/4 of the country [71].

The creation of a multi-energy concern favors mergers and acquisitions. There are also other companies in Poland operating within the energy sector, the market values of which are shown in

Table 6. Energy groups in the energy sector in Poland.

Company Name	Market Capitalization in zł	Company Name	Market Capitalization in zł
CEZ	4,034,923,192,500	POLENERGIA	189,045,155,520
PGE	820,825,003,931	AB INTER RAO	29,200,000,000
TAURON	299,685,946,374	KOGENERACJA	45,594,000,000
ENEA	198,649,160,100	ZEPAK	46,757,663,240
ENERGA	343,882,738,177	ML SYSTEM	39,683,593,780

Source: author’s study based on: https://profit-journal.pl/raport-sektorowy-energetyka/ (access date: 15 August 2021) [60]; bankier.pl (accessed on 23 November 2021).

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It is worth mentioning that the ownership structure of other holdings is different from the above-mentioned four Polish energy groups. The owner of the ČEZ group, whose capitalization is the highest and exceeds PLN 40 billion, is the Czech Republic, which holds 69.78% of the property rights [72]. The volume share of the produced energy for each company is presented in Figure 3.

Polska Grupa Energetyczna (PGE S.A.), as confirmed by the chart above, supplies over 40% of the energy for the entire country. This means that the share of this group in the structure of diversification of electricity supplies in Poland is significant, and may, in the long term, contribute to a significant concentration of energy capital in the hands of the State Treasury. Due to their strategic nature for the development of the economy, the largest Polish energy companies have a majority share of the State Treasury in their shareholding structure. The state’s share in PGE is 57.39%, is 54.49% in Tauron Polska Energia, and is 51.5% in Enea [73].

The exception among large Polish companies is Energa in Gdańsk, for which the majority shareholder is PKN Orlen. It is worth noting that PKN Orlen itself holds over 27% of the State Treasury’s share in the shareholding structure.

5. Multi-Energy Concern—A Case Study from Poland (PKN Orlen and Energa)

The largest acquisition of the Polish fuel and energy market is the purchase of 80% of shares in Energa Group by PKN ORLEN. This means that the concern owns the Gdansk-based company. The purchase process was completed in just 4 months. PKN ORLEN announced a tender offer for 100% of Energa Group shares on 5 December 2019. Due to, among other things, the situation caused by the COVID-19 outbreak, the time for accepting subscriptions for shares in the Pomeranian group has been extended until 22 April 2020. The concern received approval from the European Commission for the transaction on 31 March 2020 [74]. The transaction was finalized on 30 April 2020, with the acquisition of Energa shares representing approximately 80% of the company’s share capital and approximately 85% of the total number of votes at the general meeting. The price of all shares acquired amounted to approximately PLN 2.77 billion and was covered by the company with cash from its resources and an available syndicated loan [75]. The financial results of Energa before the merger with PKN ORLEN are presented in Figure 4.

As can be seen from the chart, even though the EBITDA [76] value of the Gdansk-based Group did not change in recent years before the merger transaction, the market value of the Group dropped significantly. In 2015, the market value of Energa is almost PLN 11.5 billion. The following years brought a significant reduction in the market capitalization of the acquired company. First and foremost, misguided investment activities contributed to this valuation, which resulted in a liquidity crunch for the acquired company.

When analyzing Energa Group’s financial results for 2019, it is worth noting the significant reduction in operating profit, which amounted to PLN 459 million compared to PLN 1.18 billion in the previous year. EBITDA was PLN 2.04 billion compared to PLN 1.88 billion a year earlier. The Energa Group suffered a net loss of PLN 1 billion in 2019, compared to PLN 744 million profit for 2018, and the reason for the company’s declining market capitalization is visible. The group’s parent company’s net loss for 2019 is PLN 952 million. It is worth mentioning that the company ended 2018 with a profit of PLN 739 million [77]. A decrease in the market value of Energa before the merger with PKN ORLEN is shown in Figure 5.

Negative financial results of the Energa group were significantly influenced by the impairment test conducted by Ostrołęka power plant and recognition of impairment loss for PLN 1.03 billion, as well as an impairment loss on PGG shares and recognition of a provision for future tax liabilities. It was the investment related to the construction of a new coal unit in the Ostrołęka Power Plant that so significantly reduced the value of the acquired group [78]. That is why PKN Orlen offered a maximum of PLN 2.9 billion for the buyout. Orlen’s current capitalization is PLN 37.5 billion.

The next charts show the energy market share of Polish energy companies after the merger of PKN ORLEN and Energa Group and their impact on sales to end-users. The analysis of the graphs clearly shows that the transaction has strengthened the energy concern and changed its structure, as presented in Figure 6.

From this analysis, we can see the increasing share of merged entities in the energy market. This supports research hypothesis no. 2.

The market objective of the concentration in the multi-energy sector is to gain an appropriate competitive advantage through the diversification of revenue sources, which not only allows for the building of additional value for customers, but primarily serves to create an appropriate level of resistance of the company to market fluctuations. Finally, it should be noted that Energa Group owns a wide range of assets for acquiring renewable energy sources, including, among others, wind farms and hydroelectric power plants. On the other hand, by using PKN Orlen’s production surpluses, it is possible to reduce operating costs, and the combined customer base will generate additional sales potential. Figure 7 clearly shows the increased energy market share (sales to end users) of the two combined entities. This supports research hypothesis no. 2.

The multi-energy concern that is being created will likely more easily meet the challenges of Poland’s energy transformation. The effective concentration of capital within the Group is critical to this process. Therefore, PKN ORLEN initially wanted to purchase 100% of Energa group shares. Such capital control always means tangible benefits both organizationally and operationally. Although control has not been fully acquired, the participation of the remaining shareholders does not jeopardize the strategic objectives set by the acquirer [79].

According to the authors, this merger is another important stage in the creation of a strong, multi-energy concern that will strengthen the competitive and financial position of the participating entities, as well as the country’s energy security and, consequently, the Polish economy (Hypothesis 1). These conclusions are also confirmed by other analysts (Polish Multi-energy concern, March 2021).

PKN ORLEN has announced a tender offer for a minority stake in Energa S.A. This will further facilitate the effective integration of the assets of ORLEN and Energa Groups. It will also bring tangible benefits to ORLEN Group shareholders and investors, who will be able to fully benefit from the synergies of the merger. It is worth remembering that the purchase alone does not complete the effective integration of the two entities, which sometimes takes several years, especially since the transaction itself was completed in a very short time.

The company plans to develop the areas in which Orlen and Energa are already active, such as renewable energy and electromobility, but also to enter new projects, such as offshore wind farms. The completion of this transaction should result in a more efficient use of the companies’ combined potential. The group owns more than 50 assets that produce energy from renewable sources, primarily including hydroelectric power plants, onshore wind farms, and photovoltaic farms. More than 30% of the electricity produced by the Energa Group comes from renewable sources and this is the highest share among its main competitors. For PKN ORLEN, it is an interesting RES portfolio that balances the company’s conventional assets, such as the steam-gas units in Płock and Włocławek. Additionally, the diversification of revenue sources increases the company’s resilience to market fluctuations and changes in the macroeconomic environment. In this way, additional value is built for customers and shareholders.

The authors believe that the merger of these entities will not only benefit both companies, but the entire Polish economy. The beneficiaries of the capital takeover of the Gdansk group are also Pomerania and its inhabitants. Thanks to the planned investments, the number and scale of orders will increase. From a fiscal point of view, Energa will remain fully separate, which means more income for the local government budget and influence over the development of the Pomeranian area. Shares of companies in the WIG-ENERGIA index after the merger are illustrated in Figure 8.

According to Figure 8, the largest share in the companies’ structure in the WIG-Energia index on 30 October 2020 was in PGE S.A. and amounted to 40.93%. Tauron is in second place with a result of approximately 20.88%. The next two largest shares include Enea at 11.29% and Energa at 7.74%. These data only confirm the thesis that among many entities in the energy market, only the 4 largest entities forming the concern play a key role in ensuring an appropriate level of energy security. This supports research hypothesis no. 3.

6. Top Motives for Acquisitions and Mergers by Investors in the Energy Sector

The motives behind mergers and acquisitions are varied. Many authors point out that investment motives vary depending on the type of entity that conducts the transactions. Strategic investors who acquire companies want to integrate the entity with the rest of the group and have a real impact on its management. Financial investors, in turn, involve capital in an entity, expecting economic benefits from its future sale.

In a survey conducted by KPMG, both strategic and financial investors took part. In response to investment motives, strategic investors most often indicated the willingness to expand geographically and take over the portfolio of products and services (79% of responses) as the main or the most frequently considered reason for the investment.

Figure 9 illustrates the main M and A motives listed by investors.

Cost synergies of industry consolidation and acquisition of customers and distribution channels are also important to them. Almost 80% of strategic investors (Figure 9), when making an equity investment, do not consider the subsequent resale of the object of the transaction to make a profit on such a transaction. However, the vast majority of financial investors (82%) say that the main or usually considered factor when making a transaction is the desire to profit from the future resale of the entity. The vast majority of financial investors (82%) say that the primary or usually considered factor in making a transaction is the desire to profit from the future resale of the entity. In addition, more than two-thirds are making acquisitions to consolidate the industry.

Table 7. Distance between investment motives in mergers and acquisitions undertaken by financial and strategic investors.

Factor—Category	The Importance of the Category for the Financial Investor	The Importance of the Category for the Strategic Investor	The Importance of Category for both Groups of Investors (Arithmetic Mean)
Access to resources	0.3	0.3	0.3
Assumed profit on future resale	0.8	0.3	0.55
Opportunistic approach (applies when a potential acquisition target suddenly becomes available)	0.8	0.3	0.55
Acquisition of significant intangible assets (licenses, brand, R&D, etc.)	0.3	0.3	0.3
Business diversification	0.6	0.6	0.6
Acquisition of customer portfolio or distribution channels	0.6	0.6	0.6
Industry consolidation	0.7	0.7	0.7
Cost synergies	0.6	0.7	0.65
Geographic development	0.7	0.8	0.75

Source: author’s study based on Figure 9.

presents the distance between investment motives in M and A.

As can be seen by analyzing Table 7, both strategic and financial investors are driven by similar motives in M and A transactions. However, because of their expectations, their importance is different. A strategic investor looking to integrate an entity expects to realize the benefits of capital and personnel ties. When a financial investor involves capital in an entity, they expect quick economic benefits from its future sale. In many aspects, a certain degree of agreement between the two investor groups can be observed, e.g., on the issue of access to raw materials, acquisition of significant intangible assets, business diversification, acquisition of customer portfolio or distribution channels, and industry consolidation. However, the biggest differences between investors are in the issues of expected return on investment or the success of the acquisition target. A very important motive for both groups of investors (having an arithmetic mean of 0.7) is the consolidation of the industry, which is confirmed by the process of strengthening the multi-energy concern (Hypothesis 1).

7. Discussion

Analyzing the program of creating a multi-energy concern in Poland, one can confirm that its transformational goals are ambitious. PGE has announced that it will achieve climate neutrality by 2050 by acquiring 20 gigawatts (GW) of power from renewable energy sources. Currently, the company’s total installed capacity is 17 GW and it is received mainly from coal assets. The three directions of development for the next decade—offshore, onshore, and photovoltaic—are expected to contribute to achieving this goal. Particularly interesting news for the energy industry was coming out in the second quarter of 2021. Namely, the Ministry of State Assets plans to consolidate the incumbent on energy companies mining assets and create a new entity. We are talking about the planned spin-off of coal assets from the Treasury’s energy companies.

The separation of selected assets also has a practical justification. Other companies that have suffered as a result of the financial crisis caused by the COVID-19 pandemic are also using such strategies. They take defensive and offensive tools that optimize the internal investment portfolio.

Among the most important defensive activities of M and A operations are the possibility of selling some part of ineffective assets. Another solution is the ability to look for strategic partnerships and alliances with other market players as part of mergers and acquisitions [80].

This strategy is in line with trends in the global energy industry, where asset stripping can be seen due to shrinking synergies between areas of the value chain. Sellers conclude that disposing of less desirable assets is more profitable than the gains from owning them.

An example of such an activity is the sale of the REN power grid operator as part of Portugal’s Stabilization and Growth Program. There is a closing of investment cycles by financial investors. Thus, Private Equity investors who made investments in the electricity market in previous years are choosing to realize profits and sell selected assets from their portfolios. The sale of AES Red Oak LLC, an electricity generator, by U.S. fund PE Energy Capital Partners LLC is one of many such deals [81].

The proposed actions of the Ministry of State Assets in Poland will improve the profitability of these companies and allow for new sources of financing for RES investments. They will be able to obtain bank loans more easily.

The news about removing mines from power companies will probably be well valued by the market, which can be seen from the charts of all the power companies, especially Tauron, whose subsidiary Tauron Wydobycie generated almost PLN 84 million in losses on PLN 236 million revenue in Q1 2021 alone. According to PGE’s CEO, the optimal date for spinning off coal assets from current energy groups is the end of 2021. According to the authors, the fact of this announcement should positively influence the improvement of the financial results of these companies [82].

It is worth emphasizing that the accelerated monopolization of the energy sector by state-owned corporations will probably result in a significant increase in energy prices in the future, with simultaneous attempts to interfere in the system of rates and charges, e.g., by offering compensations or the possibility of postponing the increase in gas prices for households. This result is compounded simultaneously by several important factors. First, in 2021, a power fee was introduced, charged to final energy consumers for financing new or the modernization of existing units by power companies. Second, the effects resulting from the prevailing global coronavirus pandemic have been severe on the economy as a whole—demand for energy and gas has increased after the lockdown period. Additionally, there is a shift developing in Europe from traditional fuels to renewable sources. Finally, the effect of Russia’s unpredictable gas policy, which seeks to maintain its influence in EU states, if only by exerting pressure on the start-up of the Nord Stream 2 pipeline [83].

8. Conclusions

Continuing the discussion, it is worth mentioning the next steps in strengthening the multi-energy concern. Currently, there are plans to merge three state-owned holding companies [84]. On 12 May 2021, a cooperation agreement was signed between PKN Orlen and Lotos Group, PGNiG, and the State Treasury concerning the acquisition of control by the Płock concern over its competitor from Gdańsk and PGNiG. As a result of this transaction, all assets of the acquired companies will be transferred to PKN Orlen. The State Treasury and PKN Orlen will work together to develop analyses aimed at the final confirmation of this scenario as optimal from the point of view of the State Treasury [85].

The agreement executed between the parties of the transaction postulates that, as a result of the merger, shareholders of the Lotos Group and PGNiG will receive new shares issued by Orlen in exchange for their shares. This will occur when it assumes the rights and obligations of the Lotos Group and PGNiG, respectively, under universal succession. The State Treasury will increase its shareholding in the entity created as a result of the acquisition of Lotos and PGNiG by PKN Orlen to 50%, which will protect it against hostile takeovers. The acquisition by Orlen will be non-cash and the State Treasury’s stake in PKN Orlen will be increased. They are currently below 30% [79]. These are further facts that will support the accepted theses in this paper.

In July 2021, the Ministry of State Assets announced the planned merger of three energy companies—PGE, Tauron, and Enea—in the coming years. The strategy related to the divestment of coal mines from the assets of energy companies is very important due to the inevitable transition towards green energy and the resulting preferential conditions for raising capital from banks and EU programs [86]. This type of financing is essential for the implementation of the long-term energy transition process, which aims for a 55% reduction in Poland’s emissions at an estimated cost of €136 billion [68]. This fact fully confirms that the strengthened multi-energy concern can contribute to the implementation of activities carried out in light of the 2030 Agenda. Thus, it can be considered that the scale of M and A transactions in the sector, which take place in the energy sector are due to signed agreements and are the result of actions carried out in light of the 2030 Agenda [7,8,9,10,11,12].

Summarizing the considerations, it can be concluded that the transferred transactions of capital concentration significantly increase the participation of the Treasury in energy companies and contribute to ensuring national energy security. These processes strengthen the multi-energy concern and reduce the number of capital groups that are operators of energy services in the country. A strengthened concern arguably has more investment potential. In turn, entering an integrated holding company is a major development opportunity for any entity. The creation of multi-energy concerns is in line with megatrends and actions implemented by other, international oil companies. An example of such a state-controlled multi-sector conglomerate is Italy’s ENI. Today it is the largest company in Italy and one of the world’s leading integrated oil and gas producers. Its Polish counterpart would be the planned concern combining ORLEN, LOTOS, and ENERGA [87].

The merger of PKN Orlen with PGNiG and Grupa Lotos is a complex project, but, because of it, an entity will be created that will match the potential of the euro with its competitors. As assessed by the participants of the 6th edition of Congress 590, after consolidation, it will have a much greater investment potential and will be able to increase its involvement in low- and zero-emission energy investments [88].

PKN Orlen contributes to the strengthening of the development of capital concentration, which will not burden the natural environment. However, supporting the development of renewable energy sources in the energy sector or alternative fuels in transport requires large investment outlays. This is possible only thanks to building a strong multi-energy concern. Thus, a multi-energy concern has a chance to make a green transformation.

The new entity is a response to the revolutionary challenges faced by the energy market today [89].