UK-based hedge fund Helikon Investments Ltd. bought into Polish utilities on a bet the heavily discounted industry from the European Union’s most coal-dependent country was ripe for a re-rating.

Its purchases, which started in late 2024, ended up beating many local investors to one of this year’s most unexpected stock rallies. Warsaw’s WIG-Energy sub-index is up 80% in 2025, nearly three times as much as the WIG20 benchmark and four times more than European peers.

For years, investors shunned the coal-fired power producers burdened by heavy-handed oversight, a lack of dividends and vast investments needed to meet EU emissions goals. Even after surging to a decade high, WIG-Energy trades at five times next year’s earnings, versus 14 times for the Stoxx Europe 600 Utilities index.

“We are a fundamental investor with a long-term investment horizon,” Nicola Dalla Torre, an investment analyst at Helikon, told Bloomberg News. He declined to comment on any individual portfolio positions.

The rally began after Tauron Polska Energia SA, in which Helikon has amassed a 12% stake worth 1.8 billion zloty ($503 million), said in its strategy in December that it planned to restore dividends for the first time since 2015. Later, Enea SA also proposed returning to payouts.

Furthermore, Polish utilities started to tap their first loans from EU recovery funds, with annual interest capped at an ultra-low 0.5%. Together with improving earnings, the developments helped investors finally embrace the country’s green revolution.

“Several positive factors emerging this year made Polish utilities investable again, and it’s possible that some foreign investors saw this first,” said Marcin Kozak, an analyst at Trigon Dom Maklerski SA. “The valuation gap has narrowed, but there is still space for more gains, providing the favorable regulatory environment stays for longer.”

Tauron stock is up 130% this year, while Enea — another Helikon investment — has jumped 60%. The trades helped Helikon Long Short Equity Fund Master ICAV gain 36% in 2025, beating 99% of its competitors, data compiled by Bloomberg show.

While the industry’s green push is seen costing over €220 billion ($258 billion) to achieve the EU’s 2050 climate goals, according to the Finance Ministry, investors warmed up to the plans as utilities promised to make money on the transformation, which will reduce their hefty payments for carbon emissions. Market leader PGE SA promised this month to triple its profits over the next 10 years as it gears up to switch off its coal plants.

Investors expect the utilities’ strategies will “eventually boost their profits amid support from regulators,” according to Bartlomiej Kubicki, a Frankfurt-based senior analyst at Bernstein Societe Generale Group.

“This clearly improved sentiment” even as “financial targets are ambitious while risk related to coal assets remains,” he said. “So far, we’ve had a half a year of initial optimism.”

— With assistance from Piotr Bujnicki and Maciej Martewicz