PGE Brightens Dividend Outlook With Above-Estimate 2014 Profit

The dividend outlook of PGE SA remains secure after Poland’s largest power utility said earnings last year probably exceeded analysts’ estimates.

PGE’s net income reached 3.6 billion zloty ($971 million) in 2014 as earnings before interest, taxes, depreciation and amortization topped 8.1 billion zloty, according to estimates released yesterday by the Warsaw-based company in a regulatory filing. That compares with analysts’ estimates of 3.48 billion zloty and 7.58 billion zloty, respectively. PGE also changed accounting rules for costs of re-cultivating lignite mines, reducing their impact on future profits.

The state-controlled utility’s policy is to pay shareholders from 40 percent to 50 percent of consolidated net income. Analysts had earlier anticipated a payout of 0.92 zloty per share compared, down from a 2013 dividend of 1.1 zloty. Government plans to consolidate Poland’s four state-controlled power producers into two groups and have them buy shares in loss-making Kompania Weglowa SA coal mine had raised concern that PGE might cut its dividend.

“This accounting change and its positive impact on future dividends should be appreciated by the market,” Bartlomiej Kubicki, Warsaw-based analyst at Societe Generale SA, said today by e-mail. “But that doesn’t mean government-driven consolidation and possible involvement in coal-mining won’t remain major themes.”

Accounting Boost

PGE’s accounting tweaks added about 450 million zloty to 2014 earnings, which could possibly boost the 2014 dividend to 0.96 zloty per share, said Bram Buring, a Prague-based analyst at Wood & Co.

“The key for most investors is that there’s no negative surprise,” Buring said.

PGE’s shares gained 0.6 percent to 19.41 zloty at 1:56 p.m. in Warsaw, valuing company at 36.3 billion zloty.

The utility said last year’s net income was boosted by 1.54 billion zloty in compensation for termination of long-term power-sales contracts. The release of provision for carbon dioxide emission rights added an additional 751 million zloty. Last year’s earnings were trimmed by 404 million zloty of provisions for cost of voluntary-job reduction program.

PGE had 2.88 billion zloty of net income in nine months of 2014. Its 2013 net income amounted to 4.12 billion zloty.

The company will publish its annual report on Feb. 17.

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