Enea Rebounds From Record Low as Risk of Coal Investment Wanes

  • Polish utility to have supporting role in coal miner’s revamp
  • Enea shares may gain more but other risks loom, SocGen says

Poland’s fourth-biggest power utility rebounded from a record low on Thursday after the government hinted the company’s role in rescuing a troubled coal miner may be smaller than anticipated.

State-controlled Enea SA rose as much as 2.6 percent, and traded 2.2 percent higher at 9.5 zloty as of 12:58 p.m. in Warsaw. Its shares tumbled 7.2 percent on Wednesday, to the lowest since its initial public offering in 2008, as Polish stocks declined following a revision in the MSCI benchmark index. With a 16 percent drop so far this year, Enea is the second worst-performer on Warsaw’s WIG20 Index.

Enea will probably have a “supporting” rather than a leading role in a restructuring of KHW SA, also a state-owned company that requires 500 million zloty ($127 million) to avert bankruptcy, Deputy Energy Minister Grzegorz Tobiszowski said late on Thursday. Coal-dependent Poland has been depleting the cash of its profitable power producers since 2015 to help bolster the country’s miners that are walking on a tight rope as global fuel prices have plummeted amid elevated production costs.

“It looks like Enea may be taking a minority stake in KHW, which is positive,” Bartlomiej Kubicki, an analyst at Societe Generale SA in Warsaw, said by phone. “In such a scenario the company will spend less and won’t need to consolidate earnings of the indebted miner, which would materially worsen its credit ratios.”

Catching Up

Enea’s state-controlled competitors have already come to the miners’ rescue. Tauron Polska Energia SA, the nation’s second-biggest power utility, bought an ailing Brzeszcze coal mine from a state fund last year, while PGE SA and Energa SA in April agreed to invest 500 million zloty each in the country’s biggest mining group PGG.

The final decision, expected by Tobiszowski to be made next week, may be a catalyst for a further increase in Enea’s stock price, according to SocGen’s Kubicki. However, the utility’s potential involvement in a construction of a coal-fired power plant in Ostroleka and its “unclear” dividend outlook still weigh on the company, he said.

Enea’s spokesman Slawomir Krenczyk didn’t respond to a call to his mobile phone seeking comment.

Before it's here, it's on the Bloomberg Terminal.