June 4, 2019 / 3:13 PM / 4 months ago

PKP Energetyka expects Poland to fully cover power price cap loss

KATOWICE, Poland, June 4 (Reuters) - PKP Energetyka, one of few private energy companies in Poland, expects the government to fully compensate the industry’s potential losses resulting from a cap on power prices, Chief Executive Wojciech Orzech said.

PKP Energetyka is one of Poland’s biggest energy groups and electricity supplier to the national railway, the second largest power consumer in the country. It does not generate electricity, but buys it on the wholesale market and resells it to clients.

Poland’s ruling Law and Justice (PiS) imposed a cap on power prices in a legislation adopted in December in order to prevent a surge in prices for individuals and bigger clients as a result of rising carbon emission costs.

The move, seen as politically motivated ahead of a general election in Poland later this year, has been widely criticised as the legislation needs to be clarified in terms of the compensation for energy companies which are obliged to sell electricity at lower, mid-2018 prices.

“For the time being we do not have grounds to take legal steps, it depends on further developments. We try to act in a very transparent way and in our communication with the market clearly formulate our recommendations,” Orzech told Reuters.

“For example, when it comes to compensation we think they should fully cover the difference between the signed contract and the imposed end-price. Only this way the effects of the expropriation could be neutralised,” the chief executive said.

Orzech said that while PKP Energetyka continues to sell electricity to rail carriers, it reduced its activity in other energy markets due to the risk of losses.

“As long as we do not know the compensation system, we do not know whether we will generate profit or loss,” Orzech said.

PKP Energetyka is owned by private equity fund CVC, which bought it from state-owned railways PKP in 2015 in an almost 2 billion zlotys ($525 million) deal. The privatisation was criticised by PiS, which said the company was key to Poland’s energy security and should not be controlled by a private fund.

But Orzech said that since 2015 PKP Energetyka has transformed into a modern, effective, stable and safe company, which has spent 240 million zlotys on IT and plans to invest 4.2 billion zlotys by 2025 mostly on distribution infrastructure.

PKP Energetyka also plans to expand in Germany, where it cooperates with Deutsche Bahn. ($1 = 3.8070 zlotys) (Reporting by Agnieszka Barteczko; editing by David Evans)

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