PGE Plans to Cut Dividend 53% as Utility Profit Slumps

PGE SA (PGE), Poland’s biggest power utility, proposed to cut its dividend 53 percent as earnings slumped amid the country’s economic slowdown.

PGE recommended paying a dividend of 1.61 billion zloty ($504 million), or 0.86 zloty a share, the Warsaw-based producer said in a regulatory statement today. That compares with a dividend of 1.83 zloty that the state-controlled company paid last year and 1.37 zloty forecast by Bloomberg. Last year management’s dividend proposal was increased by the government, which holds a 62 percent stake.

The company posted a 420 million-zloty net loss in the fourth quarter after writing down the value of assets, compared with a 1.81 billion zloty profit a year earlier. Its full-year net income fell to 3.21 billion zloty from 4.89 billion zloty. In 2011 its net income was boosted by a profit on the sale of a stake in mobile-phone company Polkomtel Sp. z o.o.

“The dividend proposal is the only important information in today’s set of reports and now we need to wait and see how much the Treasury Ministry will want,” Pawel Puchalski, an analyst at Bank Zachodni WBK SA, said by phone from Warsaw.

Slowing Economy

Last month PGE wrote down 1.49 billion zloty from the value of its Dolna Odra coal-fired power plant, saying it needed to adjust for declining power prices. The slowing economy pushed Polish prices down by 16 percent last year, the most among any country in the EU, while power demand declined for the first time in three years, according to the country’s transmission grid.

The utility, which is to announce a strategy update this month, said in a website presentation today that its investment projects are under review to adapt to “shifting market conditions.” The new strategy will set “right objectives” and a “feasible execution plan.”

The company’s current strategy, announced a year ago, called for investment spending of 9 billion zloty a year by 2020. Projects include the 1,800-megawatt, hard coal-fired Opole power plant, a 450-megawatt lignite-fired facility in Turow and the country’s first nuclear plant of 3 gigawatts.

PGE said today its lignite-fired plants are “best positioned” to “maintain high profitability.”

Prime Minister Donald Tusk said two days ago before meeting PGE Chief Executive Officer Krzysztof Kilian that Poland will press the European Union for “more understanding” of lignite’s importance in meeting domestic energy needs.

To contact the reporter on this story: Maciej Martewicz in Warsaw at mmartewicz@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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