State offers to buy coal-fired assets of power firms

The Polish state has offered to buy the coal-fired assets of a number of state-controlled power firms as part of its efforts to de-couple the utilities from these assets.

PGE received an offer to sell a 100-pecent stake in its unit, PGE GiEK, to the state for PLN 849 million (EUR 190 mln), while peer Tauron was offered PLN 1 billion (EUR 220 mln) for its coal-fired assets within its Tauron Wytwarzanie unit.

At the same time the state offered Enea PLN 2.4 billion (EUR 540 mln) for its generation unit Enea Wytwarzanie, while Energa was offered PLN 153 million (EUR 34.3 mln) for 89.64 percent of unit, Energa Elektrownie Ostrołęka.

The offers are a key step in a now drawn-out process to separate power firms from their polluting coal-burning assets, such as power stations.

In early 2021, the State Assets Ministry announced it would take over the hard coal-fired and lignite-fired generation assets, as well as lignite mines, from power groups PGE, Tauron, Enea and Energa (owned by multi-energy concern Orlen), and integrate these assets into a single entity called the National Agency for Energy Security, or NABE for short.

Shifting the coal-fired assets of the state-owned utilities into NABE is thus meant to change the perception of the power firms by investors. This is necessary because. without it, the firms could be financially hamstrung and their plans for a successful green transition scuppered.

To begin with, the utilities have started to face increasing problems with getting new financing from banks - and that financing is vital when it comes to implementing a 'green turn' by building renewable energy facilities such as offshore wind farms and PV farms. Both global and domestic lenders have become reluctant to provide credit to companies that operate coal assets.

This is because, in part, global investors have become extra-sensitive about environmental, social and corporate government (ESG) issues. And when they embrace ESG friendly strategies investors ignore companies with substantial carbon footprints, such as Poland's power firms in their current guise.

So putting the coal-powered stations into NABE will, the logic goes, release the investment potential in PGE, Tauron, Enea and Energa, so that they can use it to carry on with low- and zero-emission projects and develop distribution networks.

But the government has already postponed the deadline for completing the creation of NABE on several occasions, and some local analysts and experts have started to doubt whether the process will be finished before the general election, slated to take place this autumn.

While non-binding purchase offers have finally been made to utilities, one important obstacle still needs to be overcome: getting the approval for entire process from the European Commission (EC).

Talks with the EC are taking place and focus on the legality of Polish state support for the spun-off conventional generation assets until they are replaced with low emission energy sources.