Today’s “Parkiet’ runs a front page story saying that KGHM would buy a minority stake in power generating plant PAK from Elektrim. The deal would be conducted in consortium with Poludniowy Koncern Energetyczny (South Energy Concern), as the State Treasury wants PAK to have a sector investor. However, the company has not officially confirmed the news, stating that it only asked for materials for analysing the PAK project. Meanwhile, State Treasury deputy minister Mr. Dabrowski reassured that he would not force any of the state owned companies into unwanted investments. However, he added that he would demand a high dividend payouts from companies, which would not present any convincing capex plans.
Our view: We have not seen any specific timeline for the potential KGHM's investment into PAK, but we doubt it would place this year, considering the unclear position of Elektrim, present owner of 50% stake in PAK, and ever-changing moods of ST regarding the question, who the new owner is to be (KGHM, South Energy Concern?). We still see the likelihood of a 80% dividend payout ratio from 2006 earnings in KGHM as high. The company would have no problem in paying out that amount, considering its substantial net cash position and cash generation potential. We reiterate our Buy rating for the stock.