Climate victory: Companies put Poland’s last new coal plant on ice

Media release

Friday 14 February 2020

Environmental lawyers have hailed “the end for new coal” in the EU as two Polish utilities announce they will suspend funding to the country’s last planned new coal plant, Ostrołęka C, over economic concerns.

Joint sponsors Enea and Energa said on Thursday night that the billions of zlotys in promised funding would be pulled from the plant due to changing market circumstances triggered by climate policy, and the continued flight of global capital away from coal.

Environmental lawyers ClientEarth had won two legal cases against the plant’s co-sponsor, Enea, in the preceding months. The courts ruled in August that the decision to proceed with the project had never been valid, and in a separate decision in November, demanded the company publish documents that would explain how the plant would be profitable.

The company had not provided these documents, nor an explanation of where the necessary extra funding would come from, before the release of the decision to put the project on hold.

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. Companies and directors must identify and manage climate-related financial risks and be instrumental in the net zero transition – or they risk a ‘Kodak moment’ and irrelevance.

“This is transition risk in action. Energa states that climate-related regulations and changing market conditions have forced their hand.

“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 the EU.”

Poland’s Minister of State Assets Jacek Sasin announced earlier this week that discussions were on the horizon about turning the Ostrołęka C project from coal into gas. This is still a possibility in the wake of the companies’ decision to suspend finance, with company Orlen, which is set to acquire Energa, flagging its ambition to deliver Ostrołęka C as a gas project. However, this option is still harmful for the climate as gas is still a fossil fuel with significant lifecycle emissions.

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.”

ENDS

Notes to editors

Read more information on ClientEarth’s first legal case challenging Ostrołęka C.

ClientEarth had flagged myriad issues with the financing structure for the project, and later warned that delays in construction could result in further fines through the capacity market.

Ratings agencies warned that proceeding with the project could result in negative rating action.

In comments made at the time of Poland’s 2018 capacity market auction, ClientEarth’s Head of Central and Eastern Europe Marcin Stoczkiewicz said: “The regulatory and economic context has fundamentally changed since this project was relaunched – Ostrołęka C is now, from all perspectives, unviable. Enea and Energa must withdraw from the project before committing the companies, shareholders and consumers to high-cost, polluting and unprofitable coal power generation. It is time for common sense to prevail.”

The lawyers also published a document outlining the comparative benefit of renewable energy investment in the Ostrołęka region.

ClientEarth won the legal argument in the first case that the corporate decision to proceed with the plant had never been valid. The company challenged this decision and that is still pending. ClientEarth also won a second case, on access to information, demanding that documents detailing how the project would be economically viable be published.

A ‘Kodak moment’ refers to the failure of the camera company to see the digital revolution coming and its resulting collapse, now seen as a cautionary tale for executives.

It has been a dark week for Polish coal as planned mine Złoczew, set to feed mammoth plant Bełchatòw, comes under fire, and the cross-border impact of new PGE plant Turòw comes under scrutiny.

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