PGE Advances as Dividend Cut Concern Wanes: Warsaw Mover

PGE SA (PGE), Poland’s largest utility, rose the most in almost nine months as Citigroup Inc. and Bank Zachodni WBK SA recommended buying its shares, saying investors’ concern about a possible dividend cut was overdone.

The stock rallied as much as 4 percent, the biggest intraday gain since June 2012, and traded 3.4 percent higher at 16.37 zloty as of 12:21 p.m. in Warsaw. PGE shares slumped to a record two days ago on speculation the state-controlled company will cut a dividend after an asset writedown.

Citigroup increased its recommendation to buy from neutral and lifted its share-price estimate to 17.6 zloty from 17.4 zloty, it said in a note today. Zachodni raised its rating to buy from sell, while keeping its price projection at 18.3 zloty.

“We believe the company could be revising its long-term strategy and expect cuts in investment program due to lower electricity prices,” said Piotr Zielonka, a Warsaw-based analyst at Citigroup. “Having in mind the already strong balance sheet, any cuts in capex would result in higher dividends.”

Polish baseload electricity for next year has dropped 16 percent in 2012, the most among any country in the European Union, and lost a further 7.7 percent this year as declining consumption eroded profit margins. The nation’s 2012 power demand declined for the first time in three years, according to the country’s transmission grid.

PGE wrote down the value of its Dolna Odra coal-fired power plant by 1.49 billion zloty ($468 million), the Warsaw-based company said in a regulatory filing on Feb. 19. That will lower its 2012 net income by 1.21 billion zloty and earnings before interest, taxes, depreciation and amortization by 1.52 billion zloty, it said.

The stock’s slump after the writedown announcement was an “overreaction,” Pawel Puchalski, an analyst at Zachodni in Warsaw, said in a note today. PGE “stands out as an ideal overweight versus its European peers and we would advise cashing in 2013 dividend.”

To contact the reporter on this story: Piotr Bujnicki in Warsaw at

To contact the editor responsible for this story: Wojciech Moskwa at

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