PGE Leads Utilities Up on Investment Plans Review: Warsaw Mover

PGE SA (PGE) led gains among utilities in Warsaw trading on speculation Poland’s biggest electricity producer will scrap its 11.6 billion-zloty ($3.6 billion) hard coal-fired project to focus on more profitable investments.

PGE added 1.8 percent to 18.03 zloty at 11:54 a.m. in Warsaw, extending yesterday’s 4.2 percent gain. Tauron Polska Energia SA (TPE), the second-largest producer, rose 1.1 percent, Enea SA (ENA) increased 0.6 percent and PAK SA, controlled by billionaire Zygmunt Solorz-Zak, gained 1 percent on speculation that canceling PGE’s expansion of the Opole plant, the industry’s biggest project, will help power prices rebound from a record.

PGE, whose Opole project was delayed on protests from a environmental group, is reviewing investment projects to adjust to changing market conditions and “better use of capital, the Warsaw-based company said yesterday after posting a 34 percent drop in 2012 profit. Lignite-fired power plants are ‘‘best positioned’’ to keep higher profitability, the state-controlled company said in a presentation on its website.

‘‘There’s a much bigger chance now that there won’t be overcapacity in 2018,” when the Opole plant was set to start, and “electricity prices will rebound,” Maciej Hebda, head of research at Espirito Santo Investment Bank in Warsaw, said by phone today.

Lignite Plants

PGE Chief Executive Officer Krzysztof Kilian yesterday declined to comment on whether the company will proceed with its plan to expand its Opole plant to add 1,800-megawatt of capacity. It signed an agreement with building companies Rafako SA, Polimex-Mostostal SA and Mostostal Warszawa SA for the plant a year ago.

Prime Minister Donald Tusk said this week Poland will press the European Union for “more understanding” of lignite’s importance in meeting domestic energy needs.

“The prime minister’s comments suggest a new approach to power investments. This looks like a more market-focused approach,” Hebda said.

The slowing economy pushed Polish prices down 16 percent last year, the most among any country in the EU, while power demand fell for the first time in three years, according to the country’s transmission grid. Polish output from more expensive hard coal-fired plants declined 7 percent in 2012, while lignite-fired units produced 3.7 percent of energy more, according to the national grid operator.

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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