Michael Keroullé, Chief Commercial Officer from GE Power, tells BiznesAlert.pl about the progress of extension of Ostrołęka Power Station. The company got the green light for preparations. The government has yet to present a model for financing the work.
BiznesAlert.pl: The last coal plant in Poland, Ostrołęka, already has guaranteed support thanks to a won capacity market auction, notice to proceed has also been issued. Are there any obstacles left to start the construction works?
Michael Keroullé, Chief Commercial Officer, Ge Power: With Notice to Proceed, there are no obstacles to begin full implementation of the project. Importantly, there is a great deal of engineering work that needs to happen at the beginning of a project of this magnitude, and this has to progress before you see a fully active construction site in Ostroleka. Right now, the focus is primarily on these engineering activities which is being led by our teams of engineers in Poland and around the world to finalize the design of the plant. We also have a presence at the site where we are doing some preparatory work which is important– soil testing, fencing and some excavation work. This will continue and intensify as the project moves forward. The heavy construction activities will follow, and we expect to have 3,000 workers every day at site during the peak activities.
At the end of December the companies responsible for the project have issued a notice to proceed. What are the consequences of such decision?
The Notice to Proceed allows GE, as general contractor, to fully kick off the project internally and begin to engage suppliers to deliver key services and equipment to the project. As we are progressing with the design of the plant, our Warsaw based sourcing team is working on the supplier selection process which will leverage the 5,000 Polish suppliers GE has in its network of qualified suppliers.
Our factories in Wroclaw and Elblag are also engaged in the design work as they are responsible for manufacturing the core equipment of the plant – we like to say the “heart” of the plant — the steam turbine and generator which will ultimately be connected to the grid to generate the 1,000MW of electricity.
In draft National energy and Climate Plans that member states are obliged to submit, we read that „the last conventional coal power plant built in Poland will probably be Ostrołęka”. Are you not worried about the term „probably”? Some interpret it as a change of government’s attitude. So far it was assured that it will „certainly” be built.
We are not worried. Ostroleka C plays a key role in helping Poland deliver on its energy strategy, and with Notice to Proceed we have the customer’s and ultimately the government’s full commitment and support to begin work. Will this plant (certainly or probably) be the last coal plant built in Poland? Our view is that the government is absolutely taking the right approach in continuously evaluating and assessing the fast-changing energy landscape. Proceeding cautiously makes perfect sense and every country does this. Just look to France where the government is slowing plans to decommission some of its coal plants by 2020 because it’s clear these plants are needed in specific regions to supply reliable, affordable power for its citizens before other sources become available.
Like every country, Poland must continue to evaluate its energy mix to address energy security as well as environmental and economic objectives. Right now, Poland is facing an increasing demand in power across the country, some open to export to neighbors like as Baltic states, some needed to stabilize and secure its grid while introducing more and more intermittent renewable energy. The intermittency of renewables, including its associated costs, has created an emerging need for more flexible, reliable, baseload energy which only new plants like Ostroleka can provide, and with the latest ultra-supercritical coal technology and air quality controls systems we can do this in a way that is aligned with the Polish government’s economic and environmental objectives.
Ostrołęka is still talked about as a project, not as construction. What is now going on at the construction site, or project, as others would prefer?
It’s important to say “project” because construction (or whatever words are used for the work done on site) is just a part of what has to happen to build a plant of this magnitude. So that’s why both GE and the broader power industry refer to the construction of a power plant as a “project”. Let me walk you through a few of the phases of a large-scale project like Ostroleka which is expected to take more than 50 months to build. Large-scale construction does not typically begin in the first year following Notice to Proceed. Right now, as I mentioned, our engineering teams are finalizing the design of the plant and our sourcing and procurement teams are working on the supplier selection. Then, the manufacturing activities in GE factories and in suppliers’ factories will begin. Minimal site activities really just preliminary work has taken place, but this will intensify towards the middle of this year with additional civil works (excavation, foundations, etc.) and then mechanical and electrical erection activities as the manufactured equipment begins to reach the site later this year.
The project, as all signs indicate, is still not financially closed. Is it a threat to the contractor?
As GE, our focus is on building and delivering Ostroleka C on time. With Full Notice to Proceed, we have mobilized our entire team to do just that. Our customers along with the Ministry of Energy have been working on financing solutions since the signature of the contract and we as GE have been doing everything we can to support them. The issuing of Notice to Proceed is a sign of confidence in their plan to reach this key milestone. This is the normal process for a project of this magnitude and on track to reach financial close in coming months.
Ostrołęka is not the only coal block in which GE is engaged. The company finalizes the construction of block 5 and 6 and in Opole power plant. Block 5 has already started delivering energy to the national energy system in frames of synchronization. What does it mean to the contractor?
We reached an important milestone for GE and our consortium partners when we synchronized Opole block 5 on January 15 according to our agreed upon schedule. The plant is now delivering energy to the grid. Projects like these are complex and achieving this milestone is a real credit to the team on the ground, from GE and from our consortium partners Polimex and Mostostal Warsawa, and obviously our customer PGE. It’s a huge celebration for us all. To put it in context, this means an additional 500MW is now being delivered to the Polish grid. When both units are operational, Opole will deliver enough power for 2 million homes. Like Ostroleka C, this power plant is using the latest ultra-supercritical technology making it one of the cleanest and most efficient coal plants in Poland and in Europe, generating more electricity at lower cost and with lower emissions. It also means we have a great team of suppliers who we may also call on to help us with Ostroleka C.
Putting block 6 into service has been postponed. What happened behind this decision? When will it be put into use?
Given the volume of activity that happens at site every day – we are talking about thousands of things that need to happen and in a synchronized way – it’s not unusual to have changes in schedule. Opole is the biggest investment in power sector in decades – this gives you an idea of its magnitude. This is why it is important to have a strong relationship with the consortium partners – which we do – to work through any challenge and ensure we minimize impact on the overall schedule. Block 6 is on schedule for commissioning in September 2019.
Finally, I would like to ask about the future. Over the past few years, GE has been handing over installations for the production of energy from coal to Polish energy companies. Does this mean that GE will no longer compete in electricity company tenders? Will GE be able to provide Polish companies with technologies for gas turbines or offshore wind farms?
GE has been in Poland for 25 years. We have and will continue to help the country as much as we can as it works to meet its energy needs – in fact in Poland, GE technology is helping to deliver half of all the electricity produced today – and our power portfolio which includes coal, gas, nuclear and renewable energy technology can continue to do so as its energy strategy evolves. If we just look at coal, not only are we involved in large scale projects like Opole and now Ostroleka C, but we are also supporting the lifecycle of existing coal plants – those with GE technology as well as other manufacturers’ equipment — to extend the life of the plant and keep the existing fleet running optimally for years to come. We also have built around 50 air quality control units currently in our installed base or being installed across Poland to reduce emissions from those plants. Servicing the installed base and making it cleaner, more efficient and more reliable, every day, remains a key focus for us and for our local teams going forward. GE will continue to participate in bids for future projects to help Poland as it works to meet its growing energy needs and diversify its energy mix.
Interview conducted by Bartłomiej Sawicki