(Bloomberg) -- A plan by Poland’s incoming government to impose a windfall tax on Orlen SA is unlikely to pose a contagion risk for other state-controlled companies, according East Capital Asset Management SA.
Earlier this week, Poland’s largest listed company tumbled the most in nearly two years on plans to force the energy group to contribute more to keeping household energy prices from rising. The surprise legislative proposal also affected sentiment to other state-run peers.
The proposal could have been anticipated, given the refiner’s “vast” profits, said Egle Fredriksson, a portfolio manager at the Swedish fund that focuses on East Europe and has invested in Orlen shares. Furthermore, the company’s “robust financial position” with no debt should enable it to offer an attractive dividend despite the extra levy, she said in emailed comments to Bloomberg News.
“As market participants, it’s not great to witness the new government, which is perceived as market-friendly, initiating an additional retroactive tax on Orlen,” Fredriksson said. “We perceive this development as a one-time occurrence and do not foresee any spillover risks to other sectors.”
Polish stocks jumped in the wake of Oct. 15 general election, which is set to usher in a pro-European administration later this month. The cabinet seeks to mend ties with Brussels as well as gain access to funds withheld by the European Union. The outgoing government had a tight oversight over state companies, largely ignoring minority shareholders.
Since the ballot, Orlen shares have declined 2.8%, while Warsaw’s WIG20 stock index has surged 15% — the third-best performance among more than 90 global primary equity gauges tracked by Bloomberg.
The Swedish fund will now focus on plans of the incoming administration of Donald Tusk, such as whether Orlen will start optimizing its investments following years of heavy acquisitions including purchases of state-run gas utility PGNiG SA and fellow refiner Grupa Lotos SA.
She will monitor whether earlier announced management changes at state-run companies, including Orlen, will help “maximize shareholder value.” She said he’s hoping for an improvement of Orlen’s perception in financial markets through better capital allocation as well as the “enhanced” corporate governance standards.
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