Polish oil giant will only agree to northern power plant if it uses gas

Polish oil giant Orlen, will agree to the joint venture of its new subsidiary Energa to build a new power plant in the northern town of Ostrołęka, on the condition that the plant is gas-fired and not coal-fired.

Takeover of Energa is largest project in 30 years: Orlen CEO

Daniel Obajtek, the CEO of Polish oil giant PKN Orlen said in an interview with “Nasz Dziennik” daily that the takeover of Energa Group by Orlen is...

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Orlen’s final decision regarding the investment in Ostrołęka "will be preceded by talks with power companies Enea and Energa - project owners - regarding technology, financing method and schedule," according to the country’s largest petrochemical producer and petrol retailer.

The plans to build the plant, which is much needed in order to meet Poland’s rising energy demand, go back several years. However the two state-dominated power companies have been stymied in their project by the withdrawal of many international financial institutions, such as the European Investment Bank (EIB) from financing the building of coal-powered electricity generation.

Orlen secured a takeover of Energa at the end of April, as part of its bid to diversify its business, attracted by the northern-Polish electricity supplier’s portfolio of green energy interests.

"The gas solution is supported by the greater flexibility of gas blocks, which would make it possible to balance gas-powered electricity with power from renewable sources,” the Orlen chairman said. “This means that the unit cost of electricity generation is clearly lower for a steam-gas block than a coal block," Mr Obajtek said.

Orlen has said that along with Energa they would start new projects such as offshore wind farms. "In this context, balancing the renewable energy sources portfolio with the use of conventional assets, will be key" - PKN Orlen chairman said..

In terms of finance, while the EIB announced it is phasing out a withdrawal from hydrocarbon financing from 2021, according to FT reports, it will support projects with emissions of less than 250g of CO2 (carbon dioxide) per kilowatt/hour and “up to 75 percent of financing of projects” in countries like Poland, which is attempting to reduce its dependence on coal-fired plants, many of which were built prior to the country’s transformation in 1989.

Orlen’s share price has fallen from 85 PLN per share at the beginning of the year to 64 PLN on Wednesday morning, having recovered from the lows of 43 PLN per mid-February after COVID-19 hit pandemic levels.

Energa announced this morning that it had made a correction of PLN 400 mln in its net profit after the company building the Ostrołęka block had written off PLN 1 bn from its valuation of