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Poland's PGE posts 17% profit rise, sees financing challenges ahead

GDANSK (Reuters) - PGE, Poland's biggest utility, posted a 17% jump in third-quarter net profit to 654 million zlotys ($143.42 million), in line with the company's estimates.

The company's quarterly EBITDA fell 9% to 1.93 billion zlotys amid lower operating profit in power generation, while heat generation fell to an operating loss on surging costs of coal, gas and carbon emissions.

"There are no windfall profits in the utilities sector. Given regulatory changes in the energy market, financing of energy transformation in coming quarters will be an even bigger challenge," CEO Wojciech Dabrowski said.

The government wants state-controlled energy companies to have minimal profits in 2023 and to shoulder the burden of keeping household bills low.

Poland this year lowered taxes on electricity and motor fuels but next year the mechanism will be replaced by a cap on the margins of power utilities.

"There are no windfall profits in 2022 and there won't be windfall profits next year for utilities," Michal Kozak, Trigon DM analyst, told Reuters.

Kozak said investors are now awaiting for the valuation of coal assets in a spin-off planned by the government and expected to be finalised in the first quarter of 2023.

Poland plans to take over coal assets excluding hard coal mines owned by its utilities and transfer them to a new state-owned company.

The new model aims to help utilities fund green projects as banks avoid backing coal-dependant companies.

($1=4.5600 zlotys)

(Reporting by Anna Banacka and Marek Strzelecki; Editing by Clarence Fernandez and Uttaresh.V)