Poland tries to put Oploe plant, energy drive back on track

By bne IntelliNews April 19, 2013

bne -

Barely concealing its ire with the country's biggest utility PGE for dropping the project earlier this month, the Polish government is seeking a route to put the PLN11.6bn Opole power plant expansion back on track, an official said on April 18.

"The decision to cancel the investment isn't good for the Polish energy industry, but we have to take into account that PGE is a public company," Deputy Treasury Minister Pawel Tamborski told parliament, according to Bloomberg. "Among the treasury, the economy ministry and the prime minister's office we're are working on changing the formula of the Opole investment to improve its financial efficiency."

State-controlled PGE cancelled the country's biggest power generation project on April 5, in a move welcomed by analysts who questioned the economic wisdom of building the 1.8-gigawatt (GW) coal-fired plant given dwindling power prices in Europe. They still worry, however, that the company remains at risk of being commissioned to invest in politically-motivated projects.

Reflecting that concern, Warsaw is clearly angry that one of the flagship projects in its drive for greater energy security has been scuppered by a state-controlled company. Opole was even name-checked as one of eight key projects by Prime Minister Donald Tusk in an October policy speech.

However, the pressure on Poland's state companies balance sheets is building, as the government's drive for huge investment in energy security builds. That has seen a series of projects mothballed recently. Energa suspended the Ostroleka power plant project last year and is waiting for partners to help it finance the investment. Tauron insists it will push forward with PLN5.41bn expansion of its Jaworzno plant, but is expected to cancel the 850MW gas-fired power plant project Blachownia, with Erste analysts anticipating the companies investment programme to peak in 2014 at PLN5bn.

In particular, PGE has complained over requirements that it lend its shoulder to the shale gas hunt after international investors lost their enthusiasm last year. That demand has helped delay the already long-winded project to build the country's first nuclear plant, which is led by PGE.

The company announced on April 17 that it has opened talks with new potential partners, after failing to seal an investment agreement on building the 3GW facility with state-controlled utilities Tauron and Enea, as well as copper miner KGHM. The problems on that project saw the PM step in on April 2, when he directly contradicted the treasury by pledging state support, possibly including financing.

However, the treasury, which controls state assets, is clearly not happy. Tamborski said that the ministry expects PGE's Turow lignite-fired project, which was also scrapped after bids to build it were almost twice as high as the budget, will be continued, adding that the country's state-controlled utilities need to take into account "dramatic" changes on the domestic electricity market while making decisions on new investments.

The official added that Polskie Inwestycje Rozwojowe, the government-backed fund set up this year in a bid to boost infrastructure investment, may help finance the Opole project.

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