18 February 2020
Major Polish energy firms Enea and Energa have announced they will suspend funding to, and construction of, the country’s last planned new coal plant, Ostroleka C, over economic concerns. This significant development confirms that in the midst of the climate crisis, coal’s days are numbered.
In the run-up to this landmark decision, our lawyers had been taking action against the plant’s co-sponsor Enea. In August, we won a novel shareholder lawsuit, brought on the basis that the investment posed major financial risks to the company and its shareholders. The courts ruled that the decision to proceed with the projects had never been valid. In July 2020, the Court of Appeal upheld the landmark judgment setting an important precedent for the power of corporate law in fighting coal and climate change.
ClientEarth’s Head of Central and Eastern Europe Marcin Stoczkiewicz said: “It was clear from the start that this plant was a stranded asset in the making and would destroy value for shareholders. This was the basis of our court action.”
In November, we won a separate legal case demanding the company publish documents that would explain how the plant would be profitable. The company had not provided these documents before the release of the decision to put the project on hold.
In their announcement, joint sponsors Enea and Energa said that the billions of zlotys in promised funding would be pulled from the plant due to changing marketing circumstances triggered by climate policy and the continued flight of global capital away from coal.
Since 2016, when plans to build Ostroleka C were resuscitated, the price of carbon has risen significantly while the cost of renewables has plummeted. These changing market conditions have led to increasing concerns and questions from shareholders about how the project could possibly be viable.
Stoczkiewicz said: “This is transition risk in action. Energa states that climate-related regulations and changing market conditions have forced their hand. Companies and directors must identify and manage climate-related financial risks and be instrumental in the net zero transition – or they risk irrelevance.
“In Poland, coal power has been fiercely defended – but the economics are coming to bear and companies can no longer deny it. It is only fair to workers, communities and the planet to embrace this shift now, not when it’s too late.
“Operators of straggler plants in countries with declared phase-outs – like Germany’s Datteln IV and Greece’s Ptolemaida V – should be eyeing this decision with unease. It’s looking like the end for new coal in Europe.”
ClientEarth lawyer Peter Barnett said: “All energy providers must think extraordinarily carefully about their future investment decisions. Regulation and market forces have rarely changed so fast and, as we’ve seen with Ostrołęka C, companies cannot bank on finance for fossil fuels in today’s climate.”