Poland’s largest listed company Orlen SA tumbled the most in nearly two years on plans to force the state-controlled energy group to contribute more to keeping household energy prices from rising.
Orlen shares declined as much as 9.3%, dragging down Warsaw’s WIG20 index on Wednesday. The surprise legislative proposal by the incoming ruling coalition also affected other state-run firms, with coking coal miner JSW SA retreating 3.4% and power utility PGE SA falling as much as 4.7%.
The move is a “big surprise and may raise questions whether the recent re-rating of Polish stocks was justified,” said Michal Kozak, an analyst at Trigon brokerage. “It may cool sentiment to other state-controlled entities.”
Polish stocks jumped in the wake of last month’s general election, which is set to usher in a pro-European administration which seeks to mend ties with Brussels and gain access to funds withheld by the European Union for the outgoing cabinet’s rule-of-law infringements.
The outgoing government, led by the of Law & Justice party, had a tight oversight over state companies during past eight years, largely ignoring minority shareholders.
Only Orlen
The bill envisages that Orlen will contribute to a special fund to cover the cost of freezing household power and heating prices during the first half of the 2024. The company, whose profit over the 12 months to Sept. 30 amounted to 31.5 billion zloty ($7.96 billion), will be charged on its revenues from natural gas production.
Andrzej Domanski, a lawmaker from the Civic Platform party which will be the biggest group in the incoming cabinet, said the administration wasn’t working on raising taxes on any other firms beyond Orlen.
“By burdening Orlen, we are complying with the European Commission’s windfall tax regulation,” Domanski told Bloomberg News. “We are not working on taxes that would burden other state-controlled companies, or on changes to the bank tax.”
Dividend Risk
According to the Wysokienapiecie.pl website, the mechanism may mean that the company will need to cover most of the 16.5 billion zloty cost of the energy freeze envisaged in the bill.
MBank SA analyst Kamil Kliszcz estimates the legislation may cost Orlen 13.6 billion zloty, or 7 billion zloty more compared to estimated cost of contributions based on the current formula. He said the additional fees may impact the firm’s dividend potential.
Orlen Chief Executive Officer Daniel Obajtek said on X that the proposal means a 15 billion zloty decline in the company’s expenditures on “Poland’s energy transformation and other development investments.”
The legislation needs to be approved by the parliament and signed by the President Andrzej Duda to come into force. The current power freeze mechanism ends at the end of 2023.
--With assistance from Mark Sweetman.
(Updates with CEO comment, share moves from paragraph two.)