Energy 14 August, 2017 9:00 am   
COMMENTS: Mateusz Gibała

PGE bets on lignite (coverage)

“We are happy we continue to increase power production,” Henryk Baranowski PGE’s CEO said during a press conference on the company’s 1H results. “We believe a 20% increase in energy production at the power plant in Bełchatów shows that the modernization investments were successful and it also draws attention to the role of lignite in the Polish energy system. This is still the best energy source,” the CEO argued. 

He stressed PGE wanted to be the market leader with the most efficient generation fleet.

“We started the modernization of units 1 and 3 in Turów. We are hoping that the modern conventional energy sector will have a good and sustainable impact on the environment,” the manager said.

Power consumption in Poland 

He also pointed to the increased energy consumption in Poland, which translated into the company’s results.

In Baranowski’s opinion one of the key events of the first half of 2017 was the agreement to purchase EDF’s Polish assets.

“Currently we are waiting for decisions from the Office of Competition and Consumer Protection (UOKiK) and the Ministry of Energy. We believe the issue will be solved relatively quickly. This is important for PGE because of our plans for the heating sector. We will announce our strategy once the decision is made. It would not make sense to announce the strategy without the decision. We would like this to happen this year,” Baranowski said.

Decision on the open pit mine in Złoczew around 2025

When asked about new open pit lignite mines he said the deposit in Złoczew was currently being researched. “Around 2025 PGE will have to decide whether the open pit mine in Złoczew will have to provide coal to the power plant in Bełchatów,” Baranowski informed.

“In the middle of the next year we will find out how much coal there is in Złoczew and around 2020 in Gubin. It is no secret that the deposits in Bełchatów will end. This may occur between 2032 and 2035. Before this happens, if nothing changes drastically in climate regulations, we will need to ensure fuel for the facilities in Bełchatów. We still have time to make decisions,” Baranowski said. He also added that Złoczew may be used as a reserve for Bełchatów.

“To start exploiting the deposit in Złoczew, we would need to start working on it about four years before the decision that Złoczew will be Bełchatów’s fuel source is made. This means the decision needs to be made in 2024-25. The preparatory stage needs to be performed earlier,” he added.

PGE assumes it will receive the extraction license for Złoczew in mid-2018. A few weeks ago Vice-Minister of Energy Grzegorz Tobiszowski informed the ministry would recommend the construction of the open pit lignite mine in Złoczew.

The development of new lignite deposits is one of PGE’s three strategic options, the other two are onshore wind farms with a capacity at around 1000 MW and Poland’s first nuclear power plant.

PGE Ventures supports start ups

The CEO also reminded about establishing PGE Ventrures, whose goal is to support start ups. The company will devote PLN 25 million a year to that end. Additionally, a newly formed PGE Nowa Energia will be an accelerator for all innovations at their initial stage.

He stressed the company was betting on electromobility in Poland and wanted to invest in, among others, car sharing.

He also commented on PGE’s investment projects.

“At the end of July the works have been completed at 82%. We have concluded the start-up of the installations and of the water treatment plant. We are planning to commission it at the end of August. Out of the expected PLN 11 bn we have spent PLN 7.6 bn by the end of July,” Baranowski said.

“When it comes to the Turów project it has been completed at about 30%. So far we have spent PLN 0.7 bn out of PLN 4 bn. The first parts of the turbine set have been delivered to the construction site. We are currently erecting the cooling tower’s cladding,” he added.

More energy from PGE

Emil Wójtowicz, Vice-President of the Management Board for Finance, also commented on the increase in energy production.

“In comparison to the same period last year, in the first half of 2017 power production increased from 25.42 to 27.88 TWh. We are using more lignite instead of black coal, which decreased the average production cost. The spike in lignite usage results from the fact that the Bełchatów power plant renovation has been completed. In comparison to the second quarter of 2016, in Q2 2017 the capacity utilization rate from the lignite-fired power plant increased from 64.8 to 72.8 percent,” PGE Vice-President said.

When commenting on energy produced by wind mills he said that in comparison to the second quarter of 2016, in the first quarter of 2017 the rate of their usage increased from 19.8 to 27.6 %.

PGE and the Polish atom

When talking about investment expenditures he informed that in 1H 2017 the company spent PLN 2.5 bn, out of which PLN 1.221 bn (47%) was devoted to new conventional energy projects.

When asked by journalists how the amendment to the Renewables act will impact the company, Wojtowicz stated that PGE would comment on the matter only after the bill will be signed. Baranowski made a similar remark regarding this subject.

When asked by about the construction of a nuclear power plant, the CEO stated that preparatory works were still happening.

“The adopted schedule is followed. The Supervisory Board decides about the milestones,” Baranowski said. He added the company was not able to finance such an investment on its own.

However, one should remember that the shareholders of the company responsible for Poland’s first nuclear power plant, apart from PGE, are also Enea, KGHM and Tauron. Each of the companies have 10% of shares in PGE EJ 1, which is responsible for building the power station. This is why all decisions on the project have to be made after consultations with the other partners.

“Today the nuclear power plant is our strategic option. We will see if we will actually pursue this. We are still analyzing the environment, we are verifying the profitability of our installations. Our strategy says we should think about it closer to 2020, not at this moment. Today the project is being implemented, the necessary preparatory works are taking place (…),” Baranowski said during the teleconference.

“(…) choosing this option depends on a number of factors,” he added.

When asked by journalists whether PGE would be able to finance the construction of a nuclear power plant on its own he said it was impossible.

“Even EDF will build a power station under a contract for difference,” he said. Press Agency