Polish Utilities: with coal, through thick and thin (Enea (HOLD), PGE (SELL) and Tauron (HOLD) - transfer of coverage)
Following a change in analyst responsibilities, we transfer coverage, and update our forecasts and outlook, of the Polish utilities, due to the recent (non) development of the coal carve out. In view of: 1) Enea’s recent strategy update, assuming coal generation within the group until 2035E; 2) Tauron’s comments on “being prepared” for no carve out; and 3) with no dedicated funds in the 2025 budget to finance the plan, we do not see a carve out happening soon. While we do not rule it out, the chance of it happening in 2025E seems slim. All three utilities now mention utilising project financing for new investments, invalidating the original argument for the carve out. Taking this view, we have a HOLD on Enea (new price target (PT) of PLN 13.4), as it has the newest and most efficient coal assets, which should, together with Bogdanka, be profitable in the coming years, and it also boasts the strongest balance sheet of the trio. We also rate Tauron a HOLD (new PT of PLN 3.9), thanks to its comparatively small conventional generation exposure, despite its high gearing (3.5x ND/EBITDA). We put PGE on SELL (new PT of PLN 6.5), with 5% downside: it has the largest exposure to conventional generation and the highest expected capex (for RES, but also the gas and heating plants).ENEA is engaged in production of electricity and heat; trade in electricity; and distribution of electricity.
PGE Polska Grupa Energetyczna is an electricity company based in Poland. Co. is engaged in the generation and selling of electricity. Co. is a predominant power producer and supplier in Poland and a major heat and power sector company in Central and Eastern Europe. Co. supplies over 5 million households, businesses and institutions through a combination of its own fuel resources (lignite), power generation and final distribution networks. Co.'s activities focus on the following areas: Conventional Power Generation, Renewable Power Generation, Nuclear Power Generation, Wholesale, Distribution and Retail. Co. has 12.2 GW of installed generation capacity.
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.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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