Polish Utilities Loss Exceeds $1.5 Billion as Outlook Ebbsby
Producers post first combined net loss in at least seven years
Utilities ask government to introduce market support mechanism
The combined net loss of Polish utilities topped 6 billion zloty ($1.52 billion) last year as a gloomier outlook for power prices drove the companies into asset write-offs.
The loss stands in a stark contrast with at least seven years of uninterrupted combined profits for the power industry, where coal-fired facilities prevail. The new management boards at the mainly state-controlled groups, appointed by the Law & Justice government, see “unfavorable” market conditions cutting the value of their electricity generation assets and possibly altering their investment decisions. Almost all of them asked the cabinet of Beata Szydlo to introduce a support system for the traditional power generation.
Tauron Polska Energia SA swung to a net loss of 1.81 billion zloty in 2015 from a profit of 1.18 billion zloty a year earlier, the country’s second-largest power group said on Wednesday. That compares with a 1.27 billion-zloty loss seen by analysts. The record loss stems from a 3.56 billion-zloty impairment of its mostly coal-fired power units due to decline in power prices. Enea SA, the nation’s fourth-biggest utility, also reported on Wednesday that its net loss stood at 398.9 million zloty, while privately-owned ZE PAK SA said its 2015 earnings will be lower by at least a 1.88 billion-zloty write-off.
The government has said it plans to introduce so-called capacity market support mechanism to help utilities build new plants and defend profitability at the existing ones. Tauron argues that without such tools new units won’t be built and it’s not “a question of will but a question of real financing,” Chief Executive Officer Remigiusz Nowakowski told reporters in Warsaw on Thursday. The write-offs at the power groups may be a helpful argument to speed up the process.
“The fact that we’ve made the decision on impairments shows that we don’t want to paint a rosy picture,” Nowakowski said. “We’re sending a clear signal that we can’t afford to keep units that aren’t profitable.”
Tauron is now building a 910-megawatt coal-fired unit at Jaworzno, located in southern Poland, which it plans to complete in 2019. Without the mechanism and at current power and carbon-dioxide prices this and other similar units would be unprofitable, which is something that the country can’t afford, according to Nowakowski.
“We can’t provide such power capacity in any other way,” the CEO said. “The energy security will require such plants to function.”
Even as Tauron and PGE reported record losses, they kept pledges to pay dividends as they still generate cash. Tauron, whose 2015 earnings before interest, taxes, depreciation and amortization, or Ebitda, fell 4.7 percent to 3.52 billion zloty, plans to pay out 0.1 zloty a share this year, while PGE may pay half of its profit adjusted for write-offs.