Polish utilities Energa and Enea have agreed to suspend financing of the 1 GW Ostroleka C hard coal plant project pending new analysis of its viability, they said in a joint statement late Thursday.
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Energa gave contractors GE Power and Alstom Power Systems notice to proceed on the unit in December 2018, but the company, together with Poznan-based Enea, have been unable to attract financing in a European market increasingly hostile to new coal generation.
"Recently a number of circumstances have occurred which, in the Sponsors' opinion, may impact the project," they said.
These included the European Investment Bank's new lending policy focused exclusively on low or zero carbon technology, the European Commission's Green Deal, aiming to reach a climate-neutral Europe by 2050, and refiner PKN Orlen's offer for 100% of Energa's shares, "the progress and result of which may considerably affect the aspects of the Project financing model," the utilities said.
PKN Orlen, Poland's largest refiner, has said it is not in favour of new coal plant and would consider converting Ostroleka C's design to natural gas-firing.
"This would require a redesign, as well as applications for new permits and gas connection to the site, which would effectively mean that the project would be finished a couple of years later than originally planned (2023)," said investment bank Societe Generale in a note Friday.
PKN is the largest electricity generator in Poland's gas-fired cogeneration sector, with annual output of 8 TWh, compared to Energa's 3.6 TWh.
The refiner is 27.52% state-owned, while pension funds Nationale-Nederlanden and Aviva Santander own 7.61% and 5.85% respectively.
Ostroleka C is reported to be around 5% into construction, with the book value of the investment to date put at Zloty 0.9 billion ($230 million).
The project has a capacity market contract worth an estimated Zloty 173 million/yr, running from 2023 to 2037.
"Some of the obligations could be sold on the secondary market but we are not sure who could secure capacities until 2037 now," Societe Generale said.
All new Polish thermal power stations have similar 15-year capacity contracts, and older capacity is likely to have been decommissioned by then, it said.
It also noted the likelihood of cancellation fees payable to GE Power and Alstom Power Systems.