Here's Why PGE Polska Grupa Energetyczna (WSE:PGE) Has A Meaningful Debt Burden

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. Importantly, PGE Polska Grupa Energetyczna S.A. (WSE:PGE) does carry debt. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

What Is PGE Polska Grupa Energetyczna's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2025 PGE Polska Grupa Energetyczna had zł12.3b of debt, an increase on zł9.55b, over one year. But it also has zł13.9b in cash to offset that, meaning it has zł1.62b net cash.

A Look At PGE Polska Grupa Energetyczna's Liabilities

We can see from the most recent balance sheet that PGE Polska Grupa Energetyczna had liabilities of zł26.7b falling due within a year, and liabilities of zł29.7b due beyond that. Offsetting this, it had zł13.9b in cash and zł7.58b in receivables that were due within 12 months. So it has liabilities totalling zł34.9b more than its cash and near-term receivables, combined.

The deficiency here weighs heavily on the zł20.4b company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we'd watch its balance sheet closely, without a doubt. After all, PGE Polska Grupa Energetyczna would likely require a major re-capitalisation if it had to pay its creditors today. PGE Polska Grupa Energetyczna boasts net cash, so it's fair to say it does not have a heavy debt load, even if it does have very significant liabilities, in total.

Check out our latest analysis for PGE Polska Grupa Energetyczna

On top of that, PGE Polska Grupa Energetyczna grew its EBIT by 93% over the last twelve months, and that growth will make it easier to handle its debt. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine PGE Polska Grupa Energetyczna's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. PGE Polska Grupa Energetyczna may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. In the last three years, PGE Polska Grupa Energetyczna created free cash flow amounting to 3.8% of its EBIT, an uninspiring performance. That limp level of cash conversion undermines its ability to manage and pay down debt.

Summing Up

While PGE Polska Grupa Energetyczna does have more liabilities than liquid assets, it also has net cash of zł1.62b. And we liked the look of last year's 93% year-on-year EBIT growth. So although we see some areas for improvement, we're not too worried about PGE Polska Grupa Energetyczna's balance sheet. While PGE Polska Grupa Energetyczna didn't make a statutory profit in the last year, its positive EBIT suggests that profitability might not be far away. Click here to see if its earnings are heading in the right direction, over the medium term.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.