WOOD Flash – Polish utilities: 2Q23E – strong results, despite weak volumes and windfall tax (due in September)
On our estimates, the Polish utilities should post very good results, despite falling distribution and generation volumes, and the ongoing impact of the windfall taxation (WFT) on generation and supply. Our estimates look broadly in line with the consensus (PAP and Bloomberg), but we believe these strong numbers, in the case of Tauron and PGE, should be another positive trigger, supporting the recent trend. At Enea, we believe the company is likely to book a one-off write-down connected to Bogdanka, but we note that this might not affect the share price this time, given this week’s offer by the State to take over the unit. We note that solid FCF generation might lead to the coal subsidiaries repaying some of the coal debt sooner, before the NABE takes over (expected in 4Q23E). Even with many regulations imposed on the companies, we still expect them to post record-high EBITDAs this year. Please see our latest report, in which we reiterated our BUY call on all three names. Tauron remains our top pick, followed by Enea, due mainly to its cheap valuation, and PGE, being the best proxy on the upcoming power transition in Poland, in our view.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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