Tauron – Realistic chances for a low-coal generation fleet
Tauron embodies all the actual and imaginary risks of the Polish energy industry. Given the current sentiment, it is not a surprise that the stock is the industry’s worst performer (YTD –30% v. WIG-Energy –15%). In our opinion, concerns about future profitability and debt are exaggerated, and the weak 1Q’19 cash flows cannot be extrapolated to future periods (impact of one-off and seasonal effects). Furthermore, in our opinion, the Company could take advantage of the current evolution in the Government’s approach to RES and take steps to develop a genuine low-coal portfolio, as already announced in the May strategy update. Note that the Company has secured PLN 0.6bn per year under long-term capacity contracts. Compensation for the energy price freeze should become a positive short-term driver. We maintain our recommendation to Buy and downgrade the target price due to a conservative estimation of IFRS 16 leases at PLN 0.6bn (mainly perpetual usufruct with practically no effect on EBITDA) in Net Debt.
Tauron Polska Energia is engaged in the generation, transmission, distribution, and sale of electricity and heat in Poland. Co. generates electricity from various conventional and renewable energy sources, including hard coal, lignite, natural gas, biomass, wind, solar, and hydro power. It is also involved in quarrying, crushing, and breaking of limestone; quarrying of stone for the construction industry; mining of hard coal; trading in electricity; and production of technical gases. In addition, Co. engages in the repair and maintenance of machinery and electrical equipment; electrical installations; and construction of power lines.
Set up in 1986, mBank (originally BRE – Export Development Bank) is Poland’s 4th largest universal banking group in terms of total assets and 5th by net loans and deposits at the end of June 2019. mBank has one of the oldest brokerages in Poland – we have been providing brokerage services since 1991 - and the biggest, serving about 300 ths clients.
We provide all brokerage services available in the Polish capital market (i.e. Warsaw Stock Exchange, non-public markets and forex) in a way that meets the expectations of all groups of investors, both individual and institutional. Participating in the dynamic growth of the Polish capital market since its inception, we have acquired competences and experience needed to provide the highest quality of service and we have won the trust and satisfaction of our Clients.
Over the past decade, mBank's Equity Research Team has been consistently ranked among the top research teams in Parkiet's annual institutional investor surveys (Parkiet is Poland's leading daily business newspaper). mBank analysts provide coverage on an extensive list of companies, mainly in Poland but also elsewhere in the CEE region: Austria, Czechia, Portugal, Ukraine and Hungary.
Clients get access to a comprehensive selection of research products including daily market insights, monthly roundups, macroeconomic views, industry- and company- specific analyses, investing strategies, earnings comments, etc.
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- Get direct access to senior management teams at listed companies (over 30 meetings in 2018),
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