Polish Utilities Rise as Regulator Boosts Coal Plant Support

  • Utilities will get biggest support for coal-powered plants
  • Enea, Tauron are biggest utility advancers on stock exchange

Polish utilities advanced as the country’s energy regulator increased its budget to support coal-fired power plants.

State-controlled Enea SA was the biggest gainer, rising as much as 5.2 percent, while ZE PAK SA, owned by billionaire Zygmunt Solorz-Zak, climbed as much as 2.2 percent and Tauron Polska Energia SA added as much as 4.8 percent. The benchmark WIG20 Index rose 3.2 percent by 2:39 p.m. Warsaw time, heading for the biggest increase in more than two years. Emerging-market stocks rose after the Federal Reserve said Wednesday that further interest-rate increases will be gradual.

Poland’s energy market regulator Thursday increased the spending for power supply security by over 200 million zloty ($50 million). That includes earmarking almost 500 million zloty for the so-called operational reserve, according to two people familiar with the decision process who asked not to be identified because the information isn’t public. It also allocates about 150 million zloty for a cold reserve, another mechanism to pay power plants to be on standby. That compares with a total of about 400 million zloty budgeted this year.

“Tauron, whose generation fleet is the oldest and the least effective, should gain the most from the reserve,” Robert Maj, an analyst at Haitong Bank SA, said by phone on Thursday. “Even as the market has been expecting the decision on higher capacity payments, it should impact power prices.” 

Polish utility stocks follow power prices, while power prices fall and rise along with operational reserve budget
Polish utility stocks follow power prices, while power prices fall and rise along with operational reserve budget

Tauron, Poland’s second-biggest utility, is headed for its highest close since Nov. 23. PGE SA climbed as much as 4.9 percent, while Energa SA gained 2.2 percent.

Tauron should get about 350 million zloty from both budgets, Bartlomiej Kubicki, an analyst at Societe Generale SA in Warsaw, said by e-mail.

Polish power producers suffered from lower electricity prices in 2015 after the regulator cut this year’s budget to support plants from about 500 million zloty in 2014. With wind energy capacity set to double this year from 2012 levels, more and more conventional power plants face being priced out by renewable energy sources.

Polish utilities may need to close from 9,000 to 10,000 megawatts of the least-effective coal-fired power units by 2022 due to low power prices, the rising cost of emission permits and the need to adjust to new environmental standards, Stanislaw Tokarski, the head of utility lobby group Towarzystwo Gospodarcze Polskie Elektrownie, said in September. A third of all coal-fired plants are unprofitable, he said, calling on the regulator to increase the support budget.

Polish power for delivery in 2016 has gained 5.2 percent to 166 zloty a megawatt-hour since Sept. 8, when Henryk Majchrzak, the head of the nation’s power grid, said that the operational reserve payments won’t fall next year, according to broker data compiled by Bloomberg.

In August, Poland saw its biggest power curbs since the 1980s after high temperatures, which occurred during the maintenance season for utilities, triggered cooling restrictions and transmission problems, leading to forced reductions in electricity supplies to as many as 8,000 industrial users.

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