The acquisition from private equity group CVC Capital Partners is part of a drive by Poland's ruling nationalist Law and Justice (PiS) party to increase state control over certain parts of the economy, including the energy, banking and media sectors.

State-owned PGE said it would buy PKP Energetyka's sole shareholder, PKPE Holding.

PKP Energetyka, which supplies electricity to the national railway, was bought by CVC Capital Partners from the state-owned railway company in 2015 for 1.97 billion zlotys, including debt.

"PKP Energetyka is a company of strategic importance for the entire nervous system of the Polish railways and is coming back under Poland's wing," Maciej Malecki, the deputy state assets minister, told a news conference.

"Today the PiS government is restoring this logic and the long-term security of Polish railways."

PGE's revenue will increase by about 3 billion zlotys a year after the transaction, said Chief Executive Wojciech Dabrowski.

The transaction is expected to close on April 3, subject to approval by Poland's competition watchdog and the Minister of State Assets. It also depends on conclusion of a court case brought by rail operator PKP PLK in 2016 to dispute PKP Energetyka's original privatisation.

PGE shares were up 3.5% at 1410 GMT.

($1 = 4.4108 zlotys)

(Reporting by Adrianna Ebert and Patrycja Zaras in Gdansk; Editing by Kirsten Donovan and David Goodman)