Poland reportedly set to veto French power asset sales

Poland reportedly set to veto French power asset sales
Poland has placed coal front and centre of its energy strategy
By bne IntelliNews October 26, 2016

Poland is preparing to veto deals by French utilities EDF and Engie to offload local power assets to bidders rivalling state-controlled companies, local media claimed on October 26.

The move only threatens to deepen a rift between Warsaw and Paris that was sparked by the collapse of an agreement for Poland to buy military helicopters from Airbus. Warsaw claims that the rival bidders are not credible enough to guarantee long term operation of assets it deems strategic.

French companies EDF and Engie are in the process of selling their Polish assets as part of a drive seen on the part of many major Western European utilities to reduce exposure to fossil fuels. Warsaw, meanwhile, has announced coal will lead its energy strategy. The statist Law and Justice (PiS) government recent expanded its right to interfere with transactions deemed likely to impact the country's security, and deals in the energy sector are especially under scrutiny.

EDF has opened talks with Czech/Slovak energy holding EPH over its Rybnik power plant, while its heat power installations are the subject of negotiations with Australian investment fund IFM, the French utility said on October 26. Warsaw has pushed a consortium of state-controlled companies to take over the assets, and was even reported earlier this year to have demanded EDF delay the sale until they were ready to take part in talks.

Engie has recently received bids for its power plant in Polaniec, with investment funds fronted by Sunningwell International, and an unknown Chinese bidder, reportedly making the best offers. Polish state-controlled utility Enea reportedly tabled a much lower bid.

Poland would prefer to see the French continue to own the assets, but if not, Warsaw appears determined they will end up controlled by the state.

“The French energy assets should be purchased by an investor that is credible and stable and that will guarantee maintaining operations in Poland in long term perspecitve,” Energy Minister Krzysztof Tchorzewski told Puls Biznesu.

“The power plants in Rybnik and Polaniec play an enormous role in the Polish energy system and they should be bought by Polish capital," an unnamed high-ranked PiS official added. "“Heating assets guarantee easy income and it would be advantageous [for the state] that they’re Polish-owned as well."

The nationalist PiS is also loath to see purely financial investors take over power assets as it prepares to establish a power capacity market. The scheme - which will see owners paid to mothball older capacity as insurance for the power system will be financed via raised electricity prices. “We’re not creating the capacity market to finance investment funds,” another unnamed official told the newspaper. 

While that approach could clearly apply to the potential Engie deal, it would not cover objections to EPH. The Czech-based group has been busy snapping up coal-based assets in Central and Western Europe over the past couple of years, basing its strategy on capacity market schemes.

However, the firm's interest in Rybnik is driven by its desire to provide demand to the mine it owns nearby. Warsaw is busy, meanwhile, with its own efforts to resuscitate the country's massive state controlled mining industry by linking it up with the state-controlled utilities.

Poland’s approach will clearly irk Paris and the French companies. EDF’s talks with EPH are reportedly well advanced. Engie wants out of Poland swiftly, looking to cash in on coal-fired assets that face growing financial pressure from climate change measures.

A veto would do little to mend fences between Warsaw and Paris in the wake of a bitter argument that broke out earlier this month. The pair is at odds over the break down of a multi-billion euro deal to buy helicopters. The spat saw France's President Francois Hollande and other senior officials cancel trips to Poland, and further dented Warsaw's deteriorating image amongst EU peers.

 

 

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