Energy Polish Briefing 31 March, 2023 9:00 am   
COMMENTS: Joanna Słowińska

Polish Briefing: Tauron reveals 2022 results I Poland worried about Saudi Arabia I New PL-UA oil pipe?

img_3600-1536×864 Source: Tauron

Tauron’s 2022 results

In December 2022 Tauron completed the separation of Tauron Wydobycie which had bituminous coal mines and transferred it to the State Treasury. The next step is to isolate coal-fired power plants under its control. “At the same time our coal assets were being separated. In December 2022 we have completed the process of selling shares of Tauron Wydobycie to the State Treasury. Work is also progressing on the allocation of Tauron Group’s coal-based generation assets to the National Energy Security Agency. The spin – off of coal assets will radically change the Group’s business profile and enable us to accelerate our transformation towards climate neutrality,” says Paweł Szczeszek, CEO of Tauron.

“The financial results achieved by the Tauron Group in 2022 were influenced by an unprecedented and extremely dynamic situation on the energy and fuel markets, especially in terms of the availability of coal and rising prices for this fuel. This translated into increases in wholesale electricity prices and negatively affected the profitability of the generation segment. On the one hand, this resulted in an increase in sales revenues and, on the other, in operating costs. We also had to face additional costs resulting from the downtime of the 910 MW Block in Jaworzno. Nevertheless, we achieved EBITDA at a level similar to 2021, i.e. 4 billion. The financial situation of the TAURON Group is stable, as confirmed by Fitch Ratings, maintaining the long-term rating of the TAURON Group at the level of “BBB –” with a stable outlook,” said Krzysztof Surma, Vice President of the Management Board of TAURON Polska Energia for Finance. He referred in this way to the dispute between Tauron and Rafako over the defects of the new unit of the Jaworzno Power Plant, which is to be completed in the spring of 2023. Negotiations are ongoing.

“At the end of 2022, the Tauron group had 659 MW in renewable energy sources, including: 417 MW of installed capacity in wind power, 133 MW of installed capacity in hydropower, 19 MW of installed capacity in PV and 90 MW of installed capacity in biomass units,” Tauron has reported. “Commercial coal production in 2022 was 5 million tons and was 3 percent lower compared to 2021, and coal sales volume was 10 percent lower and amounted to 4.9 million tons. The decline in coal production was caused by geological and mining difficulties at the Sobieski mining plant (ZG). At the same time, coal production in ZG Janina and ZG Brzeszce increased, which was due to a more favorable arrangement of wall fronts than in 2021,” the report said.

Tauron / Wojciech Jakóbik

Saudis join the anti-NATO causing concern in Poland

Saudi Arabia has joined the Shanghai Cooperation Organization (SCO), which already includes China, Russia and Iran, raising concerns about the security of oil supplies, including to Poland.

The Saudis signed a memorandum on the status of a dialogue partner in the SCO. The organization was founded in 2001 with the participation of China, Russia and former Soviet republics. It was expanded to include India and Pakistan, and in 2022 Iran. It is supposed to be a counterweight to the Western order, which is protected, among others, by the North Atlantic Treaty Organization. The biggest challenge the SCO is facing are the differences of interests, for example between China and India and India and Pakistan.

Saudi Arabia’s entry into the SCO could be another step toward rapprochement after Chinese mediation led to the reopening of Saudi embassies in Iran and Iranian embassies in the kingdom. According to Reuters sources, full membership of Riyadh comes into play in the medium term of several years.

The future of Saudi Arabia’s foreign policy is also important for Poland, which has abandoned oil from Russia, replacing it to the greatest extent with supplies from Saudi Aramco. After the merger of Orlen with Lotos and the entry of the Saudis as a shareholder of the Gdańsk refinery (30 percent of the shares of the new company), oil supplies from Arabia are expected to reach 400,000 tons per month. Oil deliveries from Russia to Poland dried up completely after Tatneft stopped the supply at the end of February. It was the last PKN Orlen supplier with a contract until the end of 2024.

Reuters / Wojciech Jakóbik

Odessa-Brody-Gdańsk, or how to finance the oil union of Poland and Ukraine?

The Odessa-Brody-Gdańsk oil pipeline project may return to the drawing board in a new edition if it manages to raise funds by proving that it serves the energy transition.

“PERN has areas in Poland where it is already possible to start investing in fuel storage facilities to secure the Ukrainian market and fulfill the obligation to accumulate fuel stocks for 90 days of no supply imposed by the International Energy Agency,” said Leszek Wiwała, president of the Polish Organization of Petroleum Industry and Trade (POPiHN), during a conference organized by this entity. talked to people involved in oil and fuel cooperation between Poland and Ukraine and they argued that it was possible to add a third fuel thread to the Odessa-Brody-Gdansk oil pipeline. However, this depends on the investment plans over the Dnieper. Ukraine, which has experienced Russian attacks on its oil infrastructure, is deprived of refineries and it is not known whether it will decide to rebuild them. If not, it will need more fuel supplies through Poland.

According to the president of POPiHN, an attractive source of financing is the International Monetary Fund or the European Bank for Reconstruction and Development, to which Ukraine could apply. Poles cannot get EU funds, because they will not receive funding for a project related to fossil fuels. At the same time, the Pekao SA bank claims that it would be easier to raise funds for an undertaking that complies with the principles of ESG on the carbon footprint.

Poland is Ukraine’s window to the world in terms of oil and fuel supplies in the era of the Russian invasion. POPiHN published a report on the fuel market in Poland in 2022. “An important factor affecting the balance of fuels in Poland, and, consequently, their prices on the domestic market, will be the development of the situation in Ukraine, whose market is largely supplied with fuel from Poland,” reads the introduction to the 2022 annual report.

“Poland is in a particularly advantageous position thanks to the  oil terminal in Gdańsk (Naftoport) built in 1975. Work on the diversification of oil supplies in Poland has been carried out since the late 1980s. This included the expansion of the port in Gdańsk, as a result of which the Naftoport is able to collect 36 million tons of oil per year,” POPiHN reported. “Currently, all the raw materials for refineries in Gdańsk and Płock are imported by sea. Any surplus can also be sent to refineries in the east of Germany (Schwedt and Leuna). The Naftoport is also equipped with infrastructure for unloading tankers with fuels with a total unloading capacity of up to 4 million tons of products. In addition, we have 5 more fuel terminals in Poland (1 in Gdynia connected to the fuel base in Dębogorz, 1 in Świnoujście and 3 in Szczecin),” the report said.

“It is worth noting that Poland has a fairly extensive network of oil transmission pipelines and finished products with a total length of nearly 2,500 km. However, the expansion of storage capacities in recent years has proved crucial for the safety of the fuel sector. Special attention should be paid to the “PERN Megainvestments” program that has been going on for four years, concerning storage facilities with a capacity of up to 830 thousand cubic meters. If Poland is to act as a fuel hub and continue to actively support Ukraine, then further expansion of storage capacities for ready – made fuels and investments in rail connections will be needed,” the report claimed.

POPiHN/Wojciech Jakóbik