Energy 8 August, 2023 8:00 am   
COMMENTS: Joanna Słowińska

Polish Briefing: Fitch on NABE I Orlen merger after elections I EBI on PGE’s offshore project

P1020909-min Bełchatów Power Plant

What goes in Poland on 8th of August.

Fitch: NABE will positively affect the financial situation of energy companies

Progress in the planned transfer of coal assets to NABE has a positive impact on the credit profiles of Polish energy companies, Fitch said in a report.

The Fitch rating agency has published a report on the progress of the process of separating coal assets from Polish energy companies. According to the assessment, the progress that has been achieved when it comes to NABE has a positive impact on the credit profile of energy companies. The sale of coal assets will reduce the companies’ business risk, increase their ability to raise debt, and will also have a positive impact on their ESG profile.

“The positive assessment from a recognized international agency about the separation of coal assets from PGE is the best review of the effects of the process entering its final stage. It shows that the transaction is well perceived by financial institutions-providers of capital for investment. This is good news for Poles, because the effective operation of PGE will allow the company to fully realize its potential in implementing the energy transition in Poland, the most important goal of which is to reduce electricity costs, for the benefit of households, companies and the entire economy,” said Wojciech Dąbrowski, CEO of PGE Polska Grupa Energetyczna. In the report, Fitch notes that the asset transfer will improve the business profiles of energy companies by removing the high risk of coal assets.

This risk, stemming from the EU’s decarbonisation policy, translates into significantly increased CO2 costs, deteriorating use and profitability of coal-fired power plants due to increased use of renewable energy sources and reduced access to external financing due to restrictions on key investors, including banks. In addition, the agency notes that thanks to the separation of coal assets, Polish energy companies would make the profile of their activities more similar to their foreign competitors. Fitch said it would review the rating of energy companies when the asset transfer is at a more advanced stage, but expects the updated ratings to reflect the companies’ greater ability to manage debt.

Polska Grupa Energetyczna / Jacek Perzyński

If the Civic Coalition wins elections, it will not reverse the Orlen-Lotos-PGNiG merger

Business Insider conducted an interview with Andrzej Domański from the Civic Institute that drafts the economic program of the Civic Coalition. According to him, in the event of a change of government, there will be no retreat from the merger of Orlen-Lotos-PGNiG.

“We are not going to privatize the energy sector, but we need to introduce an element of competition in the industry. Orlen must lose its privileged position in the gas and fuel markets. We also need to make a very thorough financial analysis of the company, to trace the contracts concluded by it,” Domański told Business Insider.

“We will have to calculate what will be the benefits and costs associated with specific activities. We are not talking about separating previously absorbed entities from Orlen, I mean both Lotos and PGNiG, ” Domański declared. “The exception is Energa, which is connected with the general idea of energy transformation, which will include the separation of distribution companies from corporations, in order to create a competitive field on a neutral grid. Climate policy and its subordinated transformation of almost the entire economy will be the great task of the new government. We need to restore the free market, competition, and use the potential inherent in local governments. This will improve the quality of life of citizens,” he promised.

The Government of the United Right carried out a reform consisting in the acquisition of Grupa Lotos and PGNiG by PKN Orlen, which has now changed its name to Orlen. These changes were criticized by the opposition.  Parliamentary elections in Poland will be held in the autumn of 2023, but the polls so far still give the victory to the Law and Justice party and the Civic Coalition comes in second.

Business Insider/ Wojciech Jakóbik

The EIB issued a preliminary credit decision to PGE on offshore projects

The European Investment Bank (EIB) has issued a preliminary loan decision for the Baltica Offshore Wind Farm project by the PGE Group. The total funding package is EUR 1.4 billion.

This is a significant step towards ensuring an optimal financing structure that will enable the construction of PGE’s first offshore wind farms in the Baltic Sea. The endeavor is to consist in a few stages. For every Baltica stage – Baltica 2 and 3 – a tranche will be opened in the project finance formula. The transfer will amount to EUR 350 million. On top of that each project will get a tranche on the basis of guarantees from financial institutions, banks or export credit agencies.

Accelerating the energy transition is a priority, which is why the EIB and the European Commission have launched the RePowerEU initiative to make the European Union independent of Russian energy resources and to develop the EU’s energy sector towards renewable energy.

The Baltica project fits perfectly into these goals. Obtaining a preliminary loan decision from the European Investment Bank is a significant step towards financing the construction of the largest offshore farm in the Baltic Sea. “The presence of a recognized international bank in the financing of the project is a signal that we are a reliable partner for financial institutions, our projects meet the highest standards, and the interest of the financial sector in cooperation with PGE in the field of offshore wind energy is really high,” said Wojciech Dąbrowski, CEO of PGE. “Diversification of energy sources and independence from fossil fuels are key tasks for Poland and for the European Union, and the Baltica offshore wind farms is a very important project that achieves these goals. Supporting the energy transition is a priority for the EIB, as it accelerates green economic development and creates new jobs,” says EIB Vice-President prof. Teresa Czerwińska.

PGE is building Baltica together with its Danish partner, Ørsted. The project with a total capacity of approx. 2.5 GW consists of two stages-Baltica 2 with a capacity of approx. 1.5 GW, which is planned to be put into operation in 2027, and Baltica 3 with a capacity of approx. 1 GW, which is planned to be put into operation by the end of this decade.

Polska Grupa Energetyczna / Jacek Perzyński