July 6, 2018 / 11:07 AM / a year ago

Poland's Tauron to spend up to PLN 1 bln upgrading power plants by 2021

WARSAW (Reuters) - Polish state-run utility Tauron, which generates most of its electricity from coal, will spend around 1 billion zlotys ($268.40 million) to upgrade its power plants to reduce toxic pollutants in line with EU targets by 2021, Tauron’s CFO said.

Power plants in the European Union have to cut the amount of toxic pollutants, such as nitrogen oxides, they emit under rules approved by EU member states in 2017.

Poland has appealed the EU decision over the limits, but utilities in the country are making plans to upgrade their coal-fueled power stations as failing to do so could incur fines.

“By 2021 we want to be ready with adjusting our plants to the regulations. We have already announced tenders for the modernization of all plants that have to meet the requirements. The whole budget should not exceed 1 billion zlotys,” Tauron’s Chief Financial Officer Marek Wadowski told Reuters.

Tauron, the third biggest power producer in Poland, is also the country’s most indebted utility, with net debt amounting to 9.7 billion zlotys compared to its market capitalization of 3.9 billion zlotys.

Wadowski also said that Tauron wants to produce more power from renewable sources to satisfy its debt-holders, as banks are reluctant to finance energy produced from polluting coal.

“What is important for the financial institutions is the way we approach the market changes...of course we realize that renewable energy plays a more important role,” Wadowski said.

“This is why in the long term we want to bet on green energy,” he added.

Cash-strapped Tauron wants to finance green investment with the funds it expects to receive from the so called capacity market - this is a planned scheme in which power producers are paid not only for the power they sell but also for their readiness to provide electricity when needed.

The mechanism will help Polish utilities finance the modernization of existing coal-fueled power stations and the construction of new ones. Critics say that this will only extend the life of the most polluting power stations with tax-payers, facing a rise in electricity bills as a result.

“The capacity market is to help transform the energy industry, but this support will be limited in time. This is why it is so important to use the money in a proper way,” Wadowski said.

He added that power producers will receive the first money from the capacity market contracts in 2021 but declined to say how much Tauron expects to receive from the scheme. The energy ministry has previously estimated the budget at 2-3 billion zlotys.

Reporting by Agnieszka Barteczko and Anna Koper; Editing by Kirsten Donovan

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