PGE Drops Most in 3 Months as Premier Backs Opole Plant

PGE SA, Poland’s largest power producer, plunged the most in more than three months after Prime Minister Donald Tusk said the state-controlled utility should continue its 11.6 billion-zloty ($3.6 billion) project to expand the Opole power plant.

The government this week “confirmed readiness” and will “find ways and means” to build new coal-fired units in the southern city of Opole, Tusk told investors in Warsaw today. The project was among the eight power plants Tusk mentioned in his October policy speech as key to the country’s energy security. PGE in April canceled its biggest investment, saying a decline in electricity prices in Poland made it unprofitable.

“That’s definitely bad news for PGE as the Opole project creates no value for its shareholders,” Maciej Hebda, head of equity research at Espirito Santo Investment Bank in Warsaw, said by phone today. “It’s still unknown what PGE’s role will be and it’s also negative for the whole industry as once the project is ready it will push down electricity prices.”

PGE shares slumped as much as 7 percent and closed 4.7 percent lower to 17.54 zloty in Warsaw, the steepest decline since Feb. 20. The number of shares traded was 219 percent of the stock’s three-month daily average volume, data compiled by Bloomberg show.

Contractors Surge

Rafako SA, the power engineering company that was earlier picked to build the Opole plant, surged as much as 22 percent today. Polimex-Mostostal SA, also part of the building group, climbed as much as 8.9 percent.

Poland, which relies on coal for about 90 percent of its electricity generation, needs to upgrade its aging power plants to comply with European Union regulations on carbon dioxide emissions. Power prices in Poland, is the biggest per-capita polluter in the EU, fell to an all-time low last month as economy is slowing down.

‘We’re looking for ways to finance the project and lower its cost,’’ Treasury Minister Wlodzimierz Karpinski told reporters today. “We’re cooperating with PGE on this.”

Malgorzata Koziel, a spokeswoman for PGE, declined to comment.

Tusk, whose Civic Platform is losing support, is also coming under pressure from his own supporters. About 60 ruling-party lawmakers have signed an appeal to save the project, which is “crucial for the region and the coal-mining industry,” Leszek Korzeniowski, head of Civic Platform in Opole, said in an interview on June 4. Tusk’s two-party ruling coalition has 235 deputies in the 460-seat lower house of the parliament.

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