(Bloomberg) -- Poland’s largest energy company Orlen SA plans to increase dividends and invest as much as $91 billion in cleaner energy sources over the next decade to win back investors’ confidence after its shares tumbled last year.
State-controlled Orlen plans to spend from 350 billion zloty ($84 billion) to 380 billion zloty through 2035, including on gas production, offshore wind and small nuclear reactors, it said on Thursday as the new management picked after the 2023 parliamentary election is drawing its first plans.
The eastern and central Europe’s biggest energy firm pledged to raise this year’s base dividend to 4.5 zloty a share from 4.3 zloty and kept the plan to increase payouts by 0.15 zloty each year. Orlen said it has an option to return more to its shareholders.
“We want for the management to have a possibility to recommend higher dividends each year,” Chief Executive Officer Ireneusz Fafara said at a strategy presentation. “It will have a real financial dimension.”
The stock erased earlier gains and dropped 0.7% after the announcement with analysts at Wood & Co. and Erste Group Bank AG saying the planned expenditures remain high.
The company’s current management is hoping for the new strategy to attract investors back after its shares plummeted 28% last year amid lack of clear path forward for capital expenditure and dividends.
The new CEO Fafara has pledged to steer away from the controversial policies of its predecessor Daniel Obajtek, currently representing the former ruling party as a member of the European Parliament, by focusing on core operations.
In the strategy published almost two years ago, Orlen had planned to spend 320 billion zloty by 2030. Under the newly-published plan, the company seeks to have four offshore wind farms by 2035, 1.4 gigawatts in energy storage and 4.3 gigawatts in gas-fired units. Thanks to its increased gas production and purchase contracts Orlen is set to boost annual natural gas deliveries to Poland to 27 billion cubic meters in a decade.
Flexible Capex
During the presentation, Orlen stressed its push toward cleaner energy as it plans to cut carbon dioxide emissions by 25% in 2035 and become climate neutral by 2050. It will cut all coal from its electricity and heat production by the end of this decade, with renewable generation capacity jumping to 12.8 gigawatts in 2035 from 2 gigawatts this year.
Orlen’s investments will peak in 2027, with capex amounting to as much as 48 billion zloty that year, and will gradually decline to an average of 21 billion zloty to 23 billion zloty in the first five years of the next decade. The company wants to be “disciplined” when it comes to spending. It said that the majority of the capex plan is flexible and could be changed depending on needs and conditions.
At the same time earnings before interest, taxes, depreciation and amortization are set to rise to as much as 58 billion zloty in the strategy horizon from an estimated 33 billion zloty last year.
--With assistance from Konrad Krasuski.
(Updates with comments from CEO, further strategy details starting in 4th paragraph.)
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