Tauron Leads Utilities Declines as Poland May Skip Dividends

  • State wants utilities to invest rather than focus on profits
  • Government may skip Tauron payout as it's relatively small

Tauron Polska Energia SA led slump in Polish state-controlled power groups on Thursday as the government hinted the industry should focus on investments rather than on profits and dividends.

The country’s second-biggest power utility tumbled as much as 7.4 percent, extending its four-day loss to 15 percent, the biggest such streak since August 2011. PGE SA slumped 3.6 percent, Energa SA 3.1 percent and Enea SA 3.7 percent. Warsaw’s benchmark WIG20 Index fell 1.8 percent, following global stock markets on concern that China’s slowdown will hurt the global recovery.

The government should “seriously consider” allowing utilities not to pay dividends as they are set to help rescue the ailing coal industry, Energy Minister Krzysztof Tchorzewski said on Monday. His comments were echoed a day later, when his deputy, Grzegorz Tobiszowski, said power groups should focus on investments that will ensure Poland’s energy security.

“Any sign of lack of Tauron’s dividend or a significant cut in it will have a very negative impact on its value,” Krzysztof Kubiszewski, an analyst at Trigon Dom Maklerski SA, said by phone. “The government representatives seem to be preparing the market for such an alternative.”

Prime Minister Beata Szydlo’s cabinet, which swept to power in October, will need every zloty of proceeds if it wants to deliver on its campaign pledges of increased social spending amid a record budget deficit. Tauron, 30 percent held by the government, paid 262.9 million zloty as dividend last year. That compares with the 1.46 billion-zloty payout at PGE, in which the state keeps a 58 percent holding.

Treasury Minister Dawid Jackiewicz, who plans to raise 4.5 billion zloty ($1.1 billion) in dividends from 2015 profits of all companies it controls, said on Thursday it would be “hard to skip” payouts from utilities as they account for 36 percent of total dividend revenue. The government will seek to balance the interests of the companies and budget, he said.

Tauron’s payout is “relatively small” for the state budget, so “it’s there where the government could give up on the dividend and investors are slowly coming to terms with it,” Kubiszewski said.

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