“One gigawatt generated from offshore wind in the Baltic will cost PLN 10 billion. We believe that one, strong entity will be able to achieve economies of scale. At this point we only have one license, but we will apply for more,” said Daniel Obajtek, the CEO of PKN Orlen. “SMR is not a technology from outer space. Our partner has an agreement with GE Hitachi, the supplier of the BWRX-300 technology, and we have been working with them from the start, and will continue to work with them. We will be first in line and acquire the know-how over the years,” he added.
BiznesAlert.pl: How much progress has your company made on the path to achieving climate neutrality in 2050?
Daniel Obajtek: When a year ago we announced the Orlen strategy, which aims to achieve carbon neutrality in 2050, we had already been working on limiting emissions for many years. The expansion of petrochemicals or the implementation of efficiency projects in refineries, support low-carbon technologies and bring us closer to reducing emissions by 20 percent within a decade. The same is true in the energy sector, where the strategy provides for a reduction of emissions by 33 percent per 1 MWh by 2030. In the meantime, we are acquiring more onshore wind farms, developing photovoltaics, and we have also taken over Energa with a large portfolio of renewable assets. And above all, we are investing in offshore. The year 2023 is a realistic deadline, and that’s when we will start building the first wind farm as a leader of this sector.
Will you cooperate with Polska Grupa Energetyczna (PGE)?
We will carry out investments in offshore independently. The economy will benefit from this more, because we can achieve economies of scale. Of course, the standard for these types of projects is to obtain an industry or a financial partner. But we’ve already chosen them. We have also recently signed an agreement with GE to cooperate on the development of offshore technologies. If we invest in GE turbines and technologies, we will encourage our partner to build factories in Poland. This won’t happen if we split the new licenses. I believe that offshore must be developed by strong companies, unencumbered by coal assets. No company builds offshore farms on their own – they must be financed from external sources, and banks are increasingly paying attention to how much emissions their borrowers are generating. The licenses on the Baltic will need investments to the tune of PLN 150 billion. Therefore, only those companies that are able to finance projects in a modern way, for example, through project finance or by issuing green bonds, will be able to handle this challenge.
In case of offshore investments, economies of scale also matter. This is why I would like to have as many licenses as possible, but whether this will work depends on the offers of competitors. I believe that Orlen is capable of creating a Polish value chain and have a decisive impact on the technology used for the construction of offshore farms. Without economies of scale, we will be dependent on technology partners, who will decide on the conditions for developing wind farms in the Baltic. In such a case, it won’t be possible for Polish capital to participate in those investments at the 50 percent we all aspire to. If Orlen gets the right package of licenses, then developing logistics for offshore investments and creating a service company will simply be more beneficial. I repeat – the key to profitability is access to as many licenses as possible. Different types of partnerships require more work than one, strong and efficient entity. At this point we only have one license, but we will seek more. We need to look ahead.
What are the next steps?
PKN Orlen will definitely apply for more licenses. But the final decisions are not up to us. We’ve already done what we could on our part. We have acquired an industry partner – Northland Power from Canada, which has excellent experience and carries out investments in the project finance formula, which means that it has already won the trust of the financial world. We already have a financing model in place, and we can work together to implement the technology. With new concessions, we will argue for using technologies produced in Poland. That’s why I signed the letter of cooperation with GE, because I believe that an investment partner is one thing, and a technology partner is another. If we had one partner for investing and technology, it would be enough for them to profit from the technology, not the investment. They would have no incentive to implement the project quickly. For our first farm that will have a capacity of 1200 MW, we have an investment partner with extensive experience and a separate technological partner. These roles are clearly separated.
Orlen wants to be climate neutral and ready for Fit for 55. What role can small nuclear reactors play?
In Europe, there is no turning back from the energy transition, and the Fit for 55 package will help to make it happen. I want us in Poland not so much to catch up, but to be ahead of the future. In our country, we sometimes have a problem with lack of faith in our own abilities and the success of major projects. For twenty years we have been talking about the necessity of the merger of Orlen and LOTOS, and finally it is happening. Orlen has never grown as fast as it has in the last four years. Just look how many new investments we are currently implementing. And when investing in zero-emission energy, we must reach for low-carbon sources that balance renewable energy. We have gas-fired power plants, and we are going to build more in Ostrołęka, Gdańsk and Grudziądz – these are the latest projects. However, gas is a transition fuel, and we are looking ahead and adopting a strategic perspective. This is an opportunity for nuclear power, including SMR. We realize that GE Hitachi Nuclear Energy has not yet built the first small reactor, but the pre-certification process is already underway. However, the first SMRs are being built in China and Russia. This technology is not from the “outer space”. Our partner has an agreement with GE Hitachi, the supplier of the BWRX – 300 reactor, and we have been working with them since the start, and will continue to work with them. We will be the first in line and acquire know-how over the years. If we joined the cooperation at the very end, we could pay more and not gain the necessary experience. As far as nuclear specialists are concerned, we only have a few. Therefore, we will start with scientific and technological cooperation, which will then translate into the investment process after certification. Appropriate legislation on SMRs is also necessary, because the new reality needs to be reflected from scratch in the law. Criticizing everything is a Polish “secular tradition”, the constant complaining that things are either going too fast or too slow. And we don’t complain – we just work to reach for what others think is impossible.
Has a partner that will acquire shares in the Gdańsk Refinery after the merger with LOTOS been found?
News on the partner – which, by the way, will also be assessed by the European Commission – will be revealed in the fall. After that, the only things left to take care of will be the formal matters and the closure of the transaction. We’ve been hearing for three years that we won’t get an approval. After obtaining it, we now hear that the conditions are bad. The transaction was changed from a takeover to a merger, but there is no end to the criticism. The actual assessment should take place after the partner has been announced. We’re talking to a few entities. This is a matter of access to technology and valuations, and perhaps some exchange of assets. We need to evaluate the proposals of our interlocutors. A number of specialists and investment banks are working on this.
Is the general succession of PGNiG’s licenses a barrier to Orlen taking over the company?
The merger with PGNiG is under way and we will bring it to completion. We are currently carrying out a number of analyses, we are creating a target organisational model, but we are also diagnosing the challenges we face, which include the licenses you mentioned. We already know how to solve this. The restlessness on the market has been caused by the fact that some people do not understand this process and create artificial obstacles. In the case of LOTOS, we had hundreds of challenges of this kind: warehousekeepers, IT systems, other companies participating in programs like EFRA run by LOTOS Asfalt. When it comes to PGNiG, there will be dozens of problems that we will simply need to address and solve, but there are no barriers. I’m in business to solve problems, not to create them. Thanks to this attitude, the process of taking over of LOTOS and PGNiG can be counted no longer in years, but in months.
Interview by Wojciech Jakóbik