Power Sector
One of the PGNiG Group’s strategic priorities until 2015 is to gradually transform the Group into a modern energy conglomerate offering natural gas, electricity and heat. Under PGNiG’s strategy, its generation capacity is to reach 1,300 MWe by 2015.
The acquisition of the assets of Vattenfall Heat Poland (VHP) with a total installed capacity of 980 MWe, together with the project in Stalowa Wola (50% of 400 MWe) carried out jointly with the Tauron Group, will allow PGNiG to almost entirely achieve its plans. The access to the Warsaw heat and electricity market, obtained through the VHP acquisition, offers an opportunity to implement new projects involving gradual replacement of old coal-fired generating units with gas-fired energy sources. Investments in the power generation sector will boost demand for natural gas and will perfectly match PGNiG’s mission which is to develop and increase the company value in line with the principles of sustainable development and with due consideration for the natural environmental.
Key Events in 2011
- March 11th 2011 – PGNiG and Tauron Polska Energia SA executed a package of agreements concerning the construction of a combined-cycle gas turbine in Stalowa Wola, which sets forth a detailed procedure for the project’s implementation and defines the rights and obligations of the parties under the business model agreed by the project partners,
- August 23rd 2011 – PGNiG (through a subsidiary) and Vattenfall AB executed a preliminary share purchase agreement concerning the purchase of 99.8% shares in Vattenfall Heat Poland SA,
- December 7th 2011 – PGNiG was formally notified of the clearance by the President of the Polish Office of Competition and Consumer Protection (UOKiK) of the acquisition of Vattenfall Heat Poland SA by PGNiG,
- Q4 2011 – The last phase of the procedure for selecting the General Contractor for a combined-cycle gas turbine at EC Stalowa Wola SA started.
Acquisition of Vattenfall Heat Poland SA and Effects of the Transaction for the PGNiG Group
The acquisition of VHP provides PGNiG with access to a large heat market and thus ensures a smooth entry into the gas co-generation sector. Initial analyses suggest that the planned investments in 400 MWe generating units in the Warsaw area may be based on the gas technology. The implementation of gas-fired power projects will have significant consequences as it will create a market for natural gas and increase demand for the gas fuel. It will also enhance the security of operations of the entire PGNiG Group by adding electricity and heat sales to the Group’s product portfolio. Moreover, maintaining some of coal-fired generation assets will provide an energy-mix, which will enable PGNiG to offer electricity at more competitive prices.
VHP’s operations are concentrated in the Warsaw area, which is the key area for PGNiG, and a complementary addition to its business mix.
The acquisition of VHP offers PGNiG enormous opportunities to optimise the operations of both companies at least in the following areas:
- process optimisation at the PGNiG Group;
- use of qualified engineering staff to implement other energy projects carried out by PGNiG;
- the acquisition of VHP considerably strengthened the position and image of PGNiG as a major operator in the Polish multi-energy market and allowed PGNiG to become a major player in the energy generation market.
On December 7th 2011, the Management Board of PGNiG was formally notified that the UOKiK cleared a business combination involving the purchase by PGNiG SPV 1 Sp. z o.o., a special purpose vehicle, of 24,591,544 shares in Vattenfall Heat Poland SA of Warsaw, representing over 99.8% of the share capital and conferring the right to over 99.8% of the total vote at the VHP General Meeting.
In January 2012, the purchase of 99.8% shares in Vattenfall Heat Poland SA was finalised and the company’s name was changed to PGNiG Termika SA.
Combined-Cycle Gas Turbine in Stalowa Wola
In March 2011, PGNiG and Tauron Polska Energia SA commenced the construction of the largest gas-fired CHP plant in Poland. The project, whose value is estimated at approx. PLN 1.9 bn, will be completed by the end of 2014. By constructing a combined-cycle gas turbine (CCGT) in Stalowa Wola, PGNiG will win a new large customer for gas and further its development in the power sector. The project involves construction of a CCGT unit capable of generating 400 MW of electricity in high-efficiency co-generation and 240 MW of heat in the form of heating water for municipal needs and process steam for the local industry. Under the electricity sales agreement and the gas fuel supply agreement, the partners in the project will receive electricity in quantities proportional to their interests in Elektrociepłownia Stalowa Wola SA (the parties hold a 50-percent interest each). The annual gas supplies to the CCGT in Stalowa Wola will be ca. 540 m m³. Given the emission limits on greenhouse gases and the obligation to purchase CO2 emission credits introduced under the EU energy and climate policy, gas-fired power plants turn out to be not only environmentally-friendly but also more economically viable than traditional projects relying on other fuels.
On March 23rd 2011, an agreement was signed with ILF Consulting Engineers Polska Sp. z o.o. for the provision of Contract Engineer services to EC Stalowa Wola SA, while on July 25th 2011, the Stalowa Wola Governor issued a permit for the construction of the CCGT unit in Stalowa Wola.
Simultaneously, from the second half of 2009, negotiations were held with the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB) to secure external financing for the project. It was agreed that external funding would account for 75% of the total expenditure.
In Q4 2011, ECSW focused its activities mainly on the procedure to select the General Contractor for the construction of the 400 MWe CCGT with a heating unit at EC Stalowa Wola SA. The signing of an agreement with the contractor will also help conclude the process of securing financing for the project.
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