20 May 2020
Polish companies Enea and Energa have announced a total write-down (PLN 1bn) of the Ostrolęka C coal-fired power project, wiping around PLN 0.5bn off each company’s profits.
The news came late last night, after new co-owner PKN Orlen ruled out its involvement in the controversial coal project. In a market announcement, PKN Orlen stated that the project would only be feasible if pursued as a gas plant. Co-sponsors Enea’s and Energa’s share prices closed up to 3.44% higher yesterday.
Ostrolęka C, now suspended mid-construction, had long drawn criticism from energy and financial market experts, and campaign groups. In 2019, Enea lost a legal case brought by shareholder ClientEarth challenging the “indefensible” financial risks of the investment – which have now come to bear.
The lawyers say this new announcement is a message to any government, company or financial institution still pushing coal in Europe – and warned against continued large-scale investment in any fossil fuel.
ClientEarth litigator Peter Barnett said: “This underlines that stranded asset risk is not a theoretical concern. This project was never viable, whether from a financial or a climate perspective, as its sponsors were repeatedly warned. Investors are fleeing coal and Ostrolęka C is just the latest example of wasted shareholder funds that could have been invested in cleaner, lower cost renewables.
“Companies and their directors are legally accountable to shareholders – and that means factoring in the financial risks and opportunities of the transition to a zero carbon economy. Clean technology, climate policy and climate litigation are becoming ever greater drivers of value and large-scale fossil fuel investment is increasingly fraught with financial and legal risk.”
ClientEarth’s case had focused on the lack of proper corporate consents, and the financial unviability of the project, in view of rising EU carbon prices, plummeting costs of renewables and a flight of global capital away from coal.
Major shareholders like Legal & General Investment Management had also expressed serious concerns about the “very high financial risks” of the project.
ClientEarth had separately asked project co-sponsor Enea to disclose details of how the plant would be financially viable, and in a second court victory won the right to this information in November last year.
Following the legal successes, co-sponsors Enea and Energa announced they were suspending financing and construction of Ostrolęka C until further notice.
Polish company PKN Orlen then acquired Energa and has now officially ruled out the coal project.
Ilona Jędrasik, Energy Lead at ClientEarth Poland, said: “The situation with coal in Poland is dire. Profitability is falling and workers are desperate. It is absolutely crucial that a firm and properly funded plan is put in place to transition the country towards cleaner power, creating long-term and sustainable jobs and combating climate change. Prolonging the pain is helping nobody.”