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Last update: 2019-04-02 16:44:55
Diana Maciąga, Climate coordinator, Stowarzyszenie Pracownia na rzecz Wszystkich Istot
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About Ostroleka C coal power plant
Ostroleka C power plant is a newly proposed coal power plant project with electric power output expected of up to 1,000 MW. The main investors in the Ostroleka C power plant are the 100% state-owned Energa S.A. and the majority state-owned Enea S.A. The plant will be using ultra-supercritical technology.
The Ostroleka C coal power plant is a greenfield project on the outskirts of the city where two other power plant units Ostroleka A and B have been operating, unit A already decommissioned.
ENERGA S.A. has signed an investment agreement with ENEA S.A. for the construction of Ostrołęka C. It was suggested in media statements that extra funding for this project is needed and that funding from the capacity mechanism is vital for it. Energa has explicitly mentioned another Eurobonds issue following a successful issue of close to EUR 500 million in March 2013, arranged by BNP Paribas, Bank of America and HSBC. To date, it is not known which banks would support Ostrołeka C though involvement of BGK, PKO SA and PKO BP is possible. Neither Polish utility PGE nor Polish Development Fund, which have been rumoured to become the third investor of this project, have joined it.
On 12th July 2018 the GE Power/Alstom consortium signed a contract for construction of Ostrołeka C TPP worth EUR 1.4 billion (USD 1.6). As a response, EuroRating agency downgraded Energa's rating to BBB-.
Analysis of investment profitability by Instrat has shown that Ostrołęka C will never provide investors with return on the investment. Despite having won a 15-year long capacity agreement worth ca. 2.7 bn PLN (0,63 bn EUR), Ostrołęka C requires "adding" PLN 6.2 billion (-1.5 bn EUR) throughout the life cycle of the power plant - more than its construction cost. The power plant does not generate positive NPV even under extremely unrealistic assumption of 100% exploitation in a year. It would be deeply unprofitable and not viable even if the coal was for free. As the analysts from Carbon Tracker conclude in their report - Ostrołęka C will burn more money than coal.
Polish NGOs filed a motion for annulment of the Minister Jan Szyszko’s decision to grant Ostrołeka C extension of its integrated permit. The NGOs point out flagrant breach of law in the decision-making process and major shortcomings of the document such as the lack of obligation to monitor emissions of heavy metals.
Due to its engagement in Ostrołeka C, one of its owners – Enea - has been sued by its shareholder ClientEarth and one of its labour unions – Synergia, and caused serious concerns of Legal & General Investment Management, Britain’s largest asset manager.
Energa had already shelved Ostrołęka C project in 2012 due to its unprofitability. Poland’s Highest Chamber of Control confirmed this decision as justified and denied Ostroleka C being necessary for ensuring state’s energy safety. The plan to build this power plant was re-launched in 2015 as one of the electoral promises of the ruling Law and Justice (PiS) which came to power later that year. Current Minister for Energy Krzysztof Tchórzewski is its major backer, the plant being located in his constituency. The acceleration of the investment process in summer 2018 is directly linked to the local elections in October 2018 - construction of Ostrołeka C was among 5 electoral promises of the ruling party. In December 2018, at COP24, Minister Tchórzewski admitted that building Ostrołęka C is against Poland's economic and environmental interest.
What must happen
All corporate loans and bond issuances should be avoided by all banks while ENERGA is pursuing its plans for the Ostrołęka C coal-fired power plant. Even loans or hybrid bonds that are targeted to grid expansion, modernisation and renewable energy sources (i.e. for Ostroleka Operator) may end up supporting the construction of Ostrołęka C. No insurer should underwrite this project. The fact that currently 57% of electricity generated by ENERGA is coal-based and the construction of the unit would push that value even higher, and that the project has already been shelved in 2012 due to a lack of financing (at that time all permits had been granted), means that the government taking decisions for ENERGA S.A. is serious about its plans to finish the construction of the unit at all costs – even if this is undermining the company's value and puts it at risk of becoming a stranded asset in less than a decade.
The main social issues associated with the project are health-related and economic. First of all, the construction of this power plant means that the region will be locked into an outdated mode of energy production for the next 40-50 years, and thus will not be able to transition into a renewable-based society. This will have long lasting economic and health impacts. Should it become tied to this form of energy production, the local population will be exposed to high rates of pollution. In particular, this will produce health-related problems from coal ash and air pollution caused by burning coal. At the same time, the water pollution (especially mercury runoff) which results from coal burning only adds to the list of coal-related dangers.
According to independent experts, over its entire 40-year lifespan the Ostrołęka C power plant would cause between 900 and 2000 premature deaths, over 3000 cases of bronchitis, and between 50 000 and 100 000 cases of asthma attacks in children. The number of lost work days amounts to approx. 420 000. Health costs of Ostrołęka C were estimated at up to Euro 690 million.
The Ostrołęka C Power Plant is going to block RSE sources investment possibilities in the region as well as the related energy services. It may become a burden to the Polish energy system. The region is rich in agriculture which makes it particularly suitable for developing renewable energy. According to independent experts developing RES offers 45% more workplaces than Ostrołęka C. In the likely case when the coal is imported from abroad (most probably from Russia) – the Ostrołęka C Power Plant would employ only 250 people as the majority of workplaces would be transferred outside the Polish territory. Consequently, the employment rate related to renewable energy will be 1200% higher.
The investment in the renewable energy, which seems to be a good alternative for Ostrołęka C, creates an investment market in the energy sector for Prosumer Energy Independent Investors reaching from 10 to 17 billion PLN for the country, and for the Ostrołęcki micro-region (RES sources covering the local energy needs) between 670 and 870 million PLN.
The burning of coal is one of the most polluting forms of energy production. It causes significant changes to air quality through emissions of GHGs (approx. 6 mln tons of CO2 annualy over a 40-year lifespan), has impacts on the climate of the region and the planet and causes water pollution. In the case of Ostroleka C, the zone of the planned power plant covers two Natura 2000 regions: Dolina Dolnej Narwi (Lower Narew Valley) PLC200003 and Doliny Omulwi i Plodownicy (Omulwia and Plodownica Valley) PLB140005, and will also have an indirect impact on Puszcza Biala (Biala Forest) PLB140007. Mercury produced in the process of coal burning has serious effects on water quality and the emissions from the plant affect both the fauna and the flora of the protected areas. Furthermore, there has been neither a climate impact assessment or a comparison with alternative fuel sources carried out, thus the choice of coal is made based on the investors' preference, limiting public participation in the fuel selection process.
Tempus challenges European Commission’s approval of Polish energy subsidy scheme
Ostrołęka C's capacity contract might be at risk as UK's Tempus challenges European Commission’s approval of Polish energy subsidy scheme, claiming it shuts cleaner, cheaper technologies out of the market and deprives European consumers of a better future. Polish state-run utility companies Enea and Energa said that the subsidies from capacity market would help to finance the new coal-fired unit in the northeast of Poland.
New controversies yet still no financing model
According to the report published by Energa, the financing model for Ostrołęka C project was to be completed by January 28th 2019. The deadline wasn't met yet there has been no announcement from any of the two investors regarding financing. Interestingly, new information has been revealed by the Polish press.
According to Newsweek.pl the head of the department responsible for investment risk assessment in PZU – the largest Polish insurer which could provide insurance for Ostrołęka C – is no other than Konrad Tchórzewski, son of the minister for energy. The newspaper also undermines the Ministry for Energy's position that this power plant will be beneficial for Poland: the Americans and the French will earn money on the construction, while Russia will provide coal. What the Poles will get are fines for tons of CO2 emissions and expensive electricity.
Dziennik Gazeta Prawna speculates that construction costs may increase from 6 to 8 bln PLN (1.4 to 1.86 bln EUR). In order to reduce them GE Power/Alstom Power, the consortium chosen to be the general contractor, could well hire a subcontractor from China. According to the newspaper's source it could be China Energy Construction Group.
SCOR will neither insure nor reinsure Ostrołęka C
French SCOR - one of the largest European reinsures - clearly dissociated itself from any involvement in the Ostrołęka C power plant construction project: While SCOR's general position is not to discuss specific customer relationships, our Group can confirm that SCOR, through its Large Risk Underwriting unit (Business Solutions), is neither involved nor intends to be involved in the procurement of any kind of re/insurance services to the proposed Ostroleka C 1000 MWe coalfired plant in Poland. However, SCOR is not in a position to confirm that it will not have any unknown exposure through its treaty underwriting with insurers where, by nature, there is no disclosure of individual risk name - wrote Claire Le Gall-Robinson, Secretary General of SCOR in response to a letter from the Foundation "Development YES – Open-pit mines NO" and UnFriend Coal dated 28 January 2019.
Coal could be falling from sky, and Ostrołęka C still would not be viable - new study shows
Shortly after the results of Polish capacity market auctions were released, an updated version of the viability study of Ostrołęka C once again showed that burning coal is economic nonsense. Despite a vast subsidy of 2.7 bn PLN (0.6 bn EUR) and 15-year long contract, the unit would still bring no profit at all for the investors. The project would bring investors a negative net present value (NPV) of ca. -6.2 bn PLN (-1.5 bn EUR), compared to -2,3 bn PLN as the previous report showed. This exceeds the investment budget of ca. 6 bn PLN (1.4 bn EUR).
An updated version of the report “Capacity market and the failed rescue. Updated report: Ostrołęka C - next steps for Europe’s last coal power plant” by Michał Hetmański from Instrat Foundation embeds latest events and data into the model: capacity market auctions results, reform of the ETS framework and the recently published Polish Energy Policy 2040. Results of the study clearly show deep unviability of the Ostrołęka C project.
Full Report available in Polish, with executive summary in English.
Polish utility PGE to join the Ostrołęka C project?
Energa informed that on January 7th, 2019, Energa and ENEA S.A. , commenced talks with PGE Polska Grupa Energetyczna SA. (PGE) which may result in PGE's involvement in the construction project of the Ostrołęka C Power Plant.
Environmental groups point out that it contradicts PGE’s previous statement of October 2018 when PGE declared that the company's priority is not coal investments but wind and gas energy. On 9.10.2018 during the MLE debate "Everything you would like to know about energy prices, but you were afraid to ask” Monika Morawiecka, head of PGE's strategy department, said that the company was not considering involvement in new hard coal projects. PGE's flagship and most important project at that time was to be offshore wind investments and those based on gas.
In response to the information announced on January 7, 2019 that the company was considering joining the Ostrołęka C coal construction project, PGE share prices dropped and analysts warned that involvement in this investment is risky.
A similar situation arose in September 2018 following the news that the FIZAN found (which belongs to PGE) was planning to pay PLN 1bn for Ostrołęka C was enough for 4,4% decline in the value of the company's shares despite PGE’s immediate statement that the money accumulated in the fund did not belong to the utility and that the contract was at an early stage of negotiations.
Management Board of Elektrownia Ostrołęka Sp. z o.o. on the issue a notice to proceed related to the construction of Ostrołęka Power Plant C
On 29 December 2018 the Management Board of ENERGA SA received information that on 28 December 2018 the Extraordinary General Meeting of Shareholders of Elektrownia Ostrołęka Sp. z o.o. had granted its consent to the issue a notice to proceed ("NTP") related to the construction of Ostrołęka Power Plant C with a capacity of 1,000 MW.
On 28 December 2018 the Management Board of Elektrownia Ostrołęka Sp. z o.o. had issued notice to proceed related to the construction of Ostrołęka Power Plant C for the general contractor, a Consortium of GE Power Sp. z o.o. as the leader and ALSTOM Power Systems S.A.S.
Financing model for Ostrołęka C to be announced on January 28, 2019
According to report published by Energa an agreement was signed, the intention of which is to conclude a new investment agreement specifying the terms of cooperation between the Issuer and ENEA S.A. and financing the Ostrołęka C Power Plant ("Project") in the Construction Phase. ENERGA S.A. and ENEA S.A. declared a financial commitment to the amount of: ENEA PLN 1 billion, ENERGA not less than PLN 1 billion and other investors - in the remaining scope necessary to cover the Project's financial outlays
The schedule and terms of financial involvement of individual entities will be agreed by January 28, 2019. Energa will inform the conclusion of an agreement or agreements regarding the financing of the Project in a separate current report.
Even with the capacity contract Ostrołęka C will not be able to cope with market realities
The auction of the capacity market for 2023 was closed with a price of PLN 202.99 per kilowatt (kW). According to preliminary results, the new Ostrołęka Power Plant unit will receive a 15-year contract. According to Carbon Tracker economists, Ostrołęka C would need subsidies from the capacity market amounting to as much as PLN 400 for each kW offered, for a period of 15 years.
According to the published preliminary results of Friday's capacity auction, Ostrołęka C power plant will receive a contract, which is a source of additional financing for the investment. However, this does not remove doubts as to the economic rationality of the project. Management of the company is not gambling and therefore the investment of Enea and Energa in the new Ostrołęka C coal unit should not be continued - says ClientEarth.
Ostrołęka C with 15-year capacity contract
On 22nd of December 2018 Polskie Sieci Elektroenergetyczne S.A. published initial result of the capacity market main auction for 2023, including the closing price for the capacity auction which is 202.99 PLN/kW/annum. Elektrownia Ostrołęka Sp. z o.o., in which Energa S.A. holds 50% of shares, concluded capacity agreement for 15 years with a capacity obligation of 853 MW, under which the revenues may amount to PLN 173 million per one year, starting form year 2023 (revenues over a period of 15 years, may amount to PLN 2 596 million), whereas the price of the capacity obligation for long-term capacity contracts will be subject to an annual indexation of the average annual consumer price index.
The auction closing price provided does not constitute the final capacity auction result. The final results of the capacity auction shall be announced by the President of the Energy Regulatory Office in the Public Information Bulletin on his website, on the first working day following the 21st day after the end of the capacity auction. Until then, all contracts of sale of capacity obligations are conditional.
NTP for Ostrołęka C depends on the result of the capacity auction
Energa S.A. announced that it will vote in favor of adopting a resolution on expressing consent to issue an NTP for
the general contractor of Ostrołeka C. The resolution is going to be taken under provided that during a power capacity auction with the delivery period beginning in 2023, the price obtained by ‘Ostrołęka C’ Project for the power stated
in the conditional certificate, i.e. 852,603 MW, for a period of 15 years is not lower than defined in the auction strategy.
Minister of Energy admits that Ostrołęka C is unnecessary and economically harmful
At COP24 in Katowice Minister of Energy Krzysztof Tchórzewski confirmed construction of Ostrołęka C power plant to be against Poland's economic and environmental interest. Now the minister justifies it with the necessity of cooperation with the European Union and the Baltic States and by the need to "meet deadlines". Stop Ostrołęka C coalition comments: no international documents support it. The Ministry of Energy have not presented any strategic document which would confirm that the Ostrołęka C power plant is an important element in the synchronization of the Baltic States' power systems with Continental Europe - neither documents of the European Commission, nor the Polish Power Grid or the Lithuanian operator LitGrid mention it.
To the best of our knowledge, a document stating that Ostrołęka C is necessary for synchronisation with the Baltic states simply does not exist. When other arguments have failed, Minister Tchórzewski reaches for a new, irrational justification for this coal project. Claiming that building a coal power plant is required by European solidarity and, at the same time, lack of any solidarity in protecting the climate by moving away from coal is the height of hypocrisy - comments Diana Maciąga, Climate Coordinator at the Association Workshop for All Beings.
Ostroleka C's owner sued by it's own trade union
Trade union Synergia filed a lawsuit against Enea for revoking the directional consent for the construction of Ostrołęka C power plant. Trade unionists had been criticising the project for several months as unprofitable and politically driven, and they had presented their concerns directly to Minister Tchórzewski.
World-first climate risk case launched over Ostroleka C
ClientEarth, a shareholder in Enea, has filed a challenge against the company’s decision to greenlight the €1.2bn, 1GW Ostrołęka C coal power plant. The resolution authorising the contested plant passed at a shareholder meeting on September 24 2018, despite sharp minority shareholder dissent. The court action hinges on the “indefensible” financial risk the project poses to investors due to rising carbon prices, increased competition from cheaper renewables and the impact of EU energy reforms on state subsidies for coal power under the capacity market.
Investor LGIM-lack of funds for Poland's planned Ostroleka coal plant a concern
Legal & General Investment Management, Britain’s largest asset manager, said it has serious concerns over Poland’s planned development of the Ostroleka C due to unsecured financing for the project. LGIM is invested in both Enea and Energa.
“We have serious concerns about the development of a new coal plant in Poland, Ostroleka C given that they have not yet secured capacity market payments or confirmed third-party financing, (...) We don’t believe the companies should proceed with this project until they can provide us with reassuring evidence of its financial viability and the role it will play in meeting the energy security and the carbon targets in Poland and Europe,” said Meryam Omi, the head of sustainability and responsible investment strategy at LGIM.
Energa EGM votes for an NTP for Ostroleka C
On September 3, the Extraordinary General Meeting of Energa voted for issueing a Notice to Proceed (NTP) for the Ostrołęka C power plant. Shareholders holding 23,5 million shares voted against, 4.6 million abstained. Neither the members of the Supervisory Board nor the Management Board of the company were present, disregarding the good investor relations practices. Issuing NTP before the capacity auction (duo on December 21 2018) breaks the obligation towards Energa’s bondholders: in the Eurobonds prospectus from February 2017, Energa AB stated that an NTP would not be issued before the auction. Following the EGM decision, both Enea and Energa suffered drop in share prices.
In order for the construction works to start the same consent must be expressed by the EGM of ENEA, which is on September 24, 2018.
New report smashes Ostrołęka C - the power plant shows deep unprofitability
The latest report by Michał Hetmański,Instrat Foundation, "Ostrołęka C - what's next with the last coal-fired power plant in Europe?" shows complete lack of profitability of the largest new coal-fired power plant in the EU and serious legal doubts connected with it. Ostrołęka C can get only 15% of its revenues from the capacity market. Even under optimistic assumptions it will never provide investors with return on the investment. Ostrołęka C requires "adding" at least PLN 2.3 billion throughout its life cycle, i.e. an additional approx. 50% of the construction cost. In the optimistic scenario of a very slow increase in the prices of CO2 emission allowances and a rapid rise in electricity prices - the power plant still turns out to be unprofitable. The power plant can generate electricity (LCOE) at a price of 488 PLN / MWh or even 505 PLN / MWh. This is much more than in the case of just recently developing polish wind farms (300), offshore farms (420) and even photovoltaic (440).
Energa's rating downgraded due to Ostrołeka C
On July 16 EuroRating downgraded Energa’s rating from BBB to BBB- in response to Energa signing the contract with GE Power/Alstom to build Ostrołeka C power plant.EuroRating assessed the current structure of Energa financing as relatively weak and pointed out that another large expenditure for the construction of the Ostrołęka C power plant (mainly financed by the increase in debt) will cause its further deterioration. The agency also noted that this power plant would need to use imported coal and thus harm Poland’s energy safety and advised withdrawal from this project on its early stage.
NGOs file for annulment of the Ostrołęka C integrated permit
12 July 2018, the Association Workshop for All Beings, with the support from Frank Bold lawyers and the Society for Earth, filed a motion for annulment of the former Minister for Environment Jan Szyszko’s decision regarding the extension of the integrated permit for the Ostrołęka C coal power plant referring to the flagrant breach of law. Additionally, the current integrated permit has a number of shortcomings. It does not specify two basic parameters, such as the gross electric power and the net electric power, making the calculation of the electrical efficiency, which co-decides whether the installation meets the requirements of the BAT standards, impossible. Estimation of the pollutants amount is also not possible because this document does not include the power plant’s operating time. Last but not least, the integrated permit does not specify the obligation to monitor the emission of heavy metals such as mercury, arsenic, cadmium, chromium, copper, nickel, lead or zinc.
GE Power and Alstom Power System sign contract with Ostrołeka C
On July 12 the American-French consortium of GE Power and Alstom Power System signed a contract to build the Ostrołęla C Power Plant. The consortium had won the tender with the amount of PLN 6.02 billion. The Ostrołęka S.A. power plant, co-owned by Energa and Enea, had allocated only PLN 4.8 billion to the order. This confirmed the earlier concerns of experts that the project is significantly underestimated. GE Power had already signed a letter of intent for cooperation in the construction of Ostrołęka C Power Plant with Polimex-Mostostal S.A., a Polish company which had lost the tender but has close links to project owners: Energa and Enea, who are among its shareholders.
Polish NGOs caution Prime Minister Morawiecki to stop plans for new coal power plant
On July 12th, 27 major Polish NGOs working on climate protection published an open letter to Poland’s Prime Minister Mateusz Morawiecki. They are asking him to stop the Ostrołęka C coal-fired power plant project. According to experts, this TPP will be uneconomic and harmful to the environment and public health. It will jeopardize Poland’s energy safety while blocking the development of clean energy on regional and national level.
GE Power and Polimex-Mostostal to build Ostrołęka C
On 22.06.2018 GE Power and Polish company Polimex-Mostostal signed a letter of intent with respect to the construction of the Ostrołęka C power plant. GE Power Sp. will subcontract Polimex-Mostostal S.A for one or more of the following scopes: construction work, delivery of steel structures and assembly of steel structures. The two companies may also partner in the area of project work and other services and deliveries required for the implementation of the Ostrołęka Project. Polimex-Mostostal has struggled with financial problems until in 2017 65,93% of its shares were purchased by state-owned energy companies, including PGE, Enea and Energa.
Ostrołęka C secretly granted extension of the IPPC
Ostrołęka C received an integrated permit (IPPC) in 2011. The date from which the entity was obliged to start operating was set for June 2016. As the investment process was prolonged, this requirement could not be met. The investor applied to the Marshal of the mazovian voivodship for extension of this term till 2022. In accordance with the law the Marshal refused, justifying his decision with the fact that the application was submitted in July 2016 (one month after the deadline established in the integrated permit). As a result the Ostrołęka C’s IPPC would become invalid on 30 June 2018. In September 2016 the investor appealed directly to the Minister for the Environment and received a prolongation of its integrated permit. According to the Minister for the Environment, extending the IPPC was a matter of public interest. The amendment to the IPPC was not publicly announced.
In winter 2017/18 the NGO’s from the Strop Ostrołęka C coalition submitted a request for public information on the environment to the Ministry regarding the project’s development, including its IPPC. In response they were provided with a set of documents but it was lacking any trace of the amendment. It was only in May 2018 that the coalition learnt about the amendment via journalists. It is highly unlikely that the vital document was excluded from the documentation unintentionally.
GE Power, Alstom to build Poland's last coal-fired power plant
Energa and Enea have announced that the consortium of GE Power and Alstom has won the tender to build Ostroleka C with a bid of PLN 6.23 billion. The 1000 megawatt powerplant is expected to open in 2023 and to power roughly 300,000 homes. GE power will design the plant using ultra-supercritical technology. The plant is expected to be the last coal-fired power plant to be build in Poland as energy minister Krzysztof Tchorzewski has said. Energa and Enea plan to make use of a back-up power capacity scheme approved by the EU in February. It allows them to be paid for keeping the plant online to produce when electricity is needed.
Energa to announce result of power plant tender
The results of the tender for the construction of Ostrołęka C is expected within days according to Energa’s acting Chief Executive Alicja Klimiuk. She declined to comment on whether the tender could be cancelled because all three bids overshot the budget. She did add that the project will participate in a power capacity auction later this year.
Energa closes bidding process for Ostrołęka C
The bidding process for the construction of Ostrołęka C was closed on December 28th. Three groups have submitted offers to build the project. China Power Engineering Consulting Group has offered to build the unit for PLN 4.85 billion (USD 1.38 billion). A consortium of GE Power and Alstom Power Systems has proposed a PLN 6.23 billion contract. A group of Polimex-Mostostal and Rafako proposed a contract of PLN 9.59 billion. Energa has stated they will consider more than just cost for the final decision. Energa and Enea have planned to spend PLN 4.8 billion , however, they have not ruled out attracting investors to help finance the project.
Ostrołęka C to be the last coal unit built in Poland?
According to an article published on September 6th (in Polish), during the Economic Forum in Krynica, Poland, Minister for Energy Krzysztof Tchórzewski said that ‘he would like Ostrołęka C to be the last new coal unit built in Poland’. He sees the future of energy in nuclear power and coal gasification. The author of the article stresses that construction of Ostrołeka C is not yet certain and that ‘several energy experts unofficially claim that this unit will not be built’. It must be noted, however, that another article published on the same day quotes Minister Tchórzewski’s claim that Poland does not abandon investments in coal and will built new coal units.
Energa to build Ostroleka C even without capacity market
According to Reuters Energa will go ahead with plans to build the Ostroleka C power plant, irrespective of whether Poland introduces a power capacity scheme – the so-called capacity market. Energa Chief Executive Officer Daniel Obajtek said in August 2017: ‘When it comes to Ostroleka, generally we are not waiting for the law to be introduced. This process will be conducted irrespectively of this’. This statement clearly contradicts Energa’s previous position that the capacity market is essential for the Ostroleka C project to be profitable. The latter was found in the project’s base prospectus of February 2017 and in the company’s answer to the Shareholders questions asked during Energa’s AGM, issued in July.
Energa and Enea signed the investment agreement on Ostroleka C Power Plant
On 8 December 2016, Energa and Enea entered into an investment agreement aimed at the joint preparation, construction and operation of a new coal-fired power unit with a gross capacity of 1,000 MWe in Ostrołęka. Enea will purchase a 50-percent stake with a value of PLN 101 million currently held by Energa in the share capital of the special purpose vehicle established for the execution of the project (source 4-traders.com). The project's joint venture received approval by the Poland's Office of Competition and Consumer Protection (UOkiK) on the 18th of January 2017.
Poland's Energa suspends plan to build 1 GW coal-fired unit
It was announced on September 17, 2012 that Poland's Energa has suspended plans to build a 1000-megawatt coal-fired unit in the country's north-east due to problems securing financing and will instead invest in the power grid, gas-fired generation and renewables.
Ostroleka C in talks to secure financing
Ostroleka C Power Plant is currently past administrative procedures and permits stage and is currently trying to secure financing for the planned investment. It is in talks with Societe Generale on project finance and in talks with strategic investors and financing institutions. The power plant estimated costs are PLN 6 bln (EUR 1,5 bln). ENERGA S.A. is undergoing a process of privatisation.
BNP Paribas, Bank of America and HSBC all have ties to the company given their arranger roles for a March 2013 Eurobond issue from ENERGA. The EIB, the EBRD and the Nordic Investment Bank have provided loans since 2009 for distribution and the company's development of renewables. Polish banks: PKO BP, Pekao S.A. and Bank Gospodarstwa Krajowego (BGK) have all provided loans to ENERGA in the last three years.
BNP Paribas and JPMorgan Chase also arranged a new bond issuance in February 2017. Despite Energa acting CEO stating that the company could issue eurobonds to finance the Ostroleka C project at that time, it stated a few days later that the use of proceeds of this eurobond would not be used for new coal power generation projects. But there is no way to verify this statement, and a Reuters article a few weeks later confirmed that such a bond issuance helps the company to find money for coal projects.
In March 2018 Polish Development Fund (PFR) declared it may join the Ostrołeka C project. However, as of January 2019 the Fund has not agreed to become the third investor of this power plant. Neither has Poland's largest utility PGE, though talks have been underway between them, Enea and Energa (which resulted in drop of PGE share prices, Ostrołęka C being dubbed a virous spreading on the Warsaw Stock Market).
On October 23th 2018 the Ministry of Energy announced that Ostrołęka C obtained a stand-by arrangement with a consortium of banks but no further information was revelaed. It is rumored that BGK, PKO SA and/or PKO BP might be among them. The model of financing should have been known by January 28, 2019.
UNIQA and Vienna Insurance Group (VIG) are bidding for underwriting of Ostrołęka C construction. Polish insurer PZU has faced public criticism for its readiness to get involved with the Ostroleka C project.