Poland Deters Investors as Energy Policies Send Stocks Tumbling

  • WIG20 index retreats for 4th day to lowest since July 2009
  • Government won't scrap copper tax, urges new coal plants

Polish stocks fell the most in emerging markets as the new government announced plans to uphold a tax on copper production and encourage new investment in coal-fired plants that threatened to curtail dividends at the nation’s third-largest producer.

The WIG20 Index retreated 2.1 percent to 1,884.11 as of 4:58 p.m. in Warsaw. Utilities and copper producer KGHM Polska Miedz SA fell to a 6-1/2 year low after the Finance Ministry said the government won’t scrap a levy that costs the company 1.45 billion zloty ($360 million) a year. Utility company Energa SA lost 3.8 percent after the prime minister said the utility company must invest in a coal-fired plant.

The policies added to concern the new government, which swept into power in October, will adopt measures that will deter foreign investors after campaigning on a platform that included higher taxes on banks. The WIG20 has fallen 19 percent this year, on course for its worst annual performance since 2011, compared with gains in Hungary and the Czech Republic.

“We’ve seen outflows from Poland recently due to the political uncertainty, and I would expect it may continue as investors look for other places to avoid risk,” Christof Koumoudos, a strategist at Wood & Co. in London, said by phone. “Funds are wary that foreign investors won’t be the preferred group of stakeholders in the government’s policies.”

KGHM declined 4.7 percent and Energa fell to a record. Building a new 1,000 megawatt bloc at Ostroleka north of Warsaw may cost Energa about 6 billion zloty. The investment may be “a game-changer for the company” because its dividend policy had attracted buyers and driven up the share price, according to JPMorgan Chase Co.

“We believe a possible push into coal-fired generation may shake Energa’s current distribution-focused business model and undermine its dividends,” Michal Kuzawinski, an equity research associate at JPMorgan Chase, said in an e-mail.

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