Photographer: Bartek Sadowski/Bloomberg

Polish Coal Affection Poses Dilemma for Funding-Hungry Firms

Updated on
  • Local companies see risk of coal-related funding shortage
  • Compromise needed to provide clear energy mix outlook

As Poland is reluctant to budge in its feud with Europe over coal, some of the country’s biggest power and mining companies admit it may be the time to change the course.

The European Union’s largest eastern economy argues it needs coal plants, fired by local resources, to ensure energy security and cheap electricity. That goes against the bloc’s policy of heavy cuts in carbon-dioxide emissions and often leaves Poland stranded in its approach to the dirty fuel. The business, even state-controlled, is voicing concern over the consequences it may entail.

“We’re not able to operate for a long time in such a divergent regulatory reality: Poland’s and the EU’s,” said Jaroslaw Broda, deputy chief executive officer at the nation’s second-biggest power utility Tauron Polska Energia SA. “Sooner or later a compromise needs to be reached because it’s very difficult to make decisions on big investments.”

A shrinking funding base due to the greener policies of global banks and their Polish units as well as other financing institutions may prove to be a major incentive for both Polish utilities and miners to follow their peers in western Europe. Deep-pocketed giants like Norway’s sovereign wealth fund, JPMorgan Chase & Co. and Allianz SE decided to stop or scale back support for coal projects. At the same time, French utilities EDF SA and Engie SA withdrew from Poland, selling their coal-fired fleet to local state power groups, under their long-term plans to diminish emissions.

Striking Chord

Poland will need as much as 60 billion zloty ($16 billion) to build an additional 10 gigawatts of power by 2025, mostly coal-fired, to meet rising demand and replace aging facilities, according to Energy Minister Krzysztof Tchorzewski. That’s a short-term solution. He estimates the country would need a whopping 200 billion zloty by 2050 to reduce coal consumption to 50 percent from more than 80 percent now. Anything more ambitious would harm the economy.

“The idea to cut coal usage to 50 percent is a step forward and such a proposal from our side could help in reaching the compromise,” Tauron’s Broda said in an interview in Krakow last week. “Such a promise could also help us get financing for investments, which is getting more and more difficult because of coal limits among financial institutions.”

Tides are shifting fast. State-controlled Tauron said in March that constant questions about coal have made it increasingly challenging to obtain financing on the markets. In the same month, its smaller competitor Energa SA bent to investors’ demands by pledging that proceeds from its new bond offering won’t be used to finance a planned coal-fired plant, according to Dziennik Gazeta Prawna newspaper. The utility with the smallest share of coal-fired generation out of four state-controlled power groups raised 300 million euros ($338 million) that month for upgrading its distribution network.

The pressure creates a ripple effect across industries. Warsaw-listed JSW SA, the EU’s biggest coking coal producer, unexpectedly announced its intention to measure and reduce its carbon footprint as “without showing commitment to reducing carbon emissions, our ability to get funding will be limited,” Chief Executive Officer Daniel Ozon said on May 25.

Shares in Tauron added 0.3 percent to 3.45 zloty while JSW fell 0.7 percent to 69.16 zloty as of 12:56 p.m. in Warsaw.


Poland, which has lost most of its recent coal battles with the EU, may be coming to terms with an idea that something must change. The cabinet offered the EU that it may build a nuclear plant to cut emissions in return for being allowed to keep burning coal. It plans to build plants in so-called clean coal technology.

“Coal in Poland is a huge part of the industry and will need a transformation in the coming years, but it should be an evolution, not a revolution,” Grzegorz Nalezyty, head of power units at Siemens AG’s local subsidiary, said in an interview in Krakow last week.

Siemens, Europe’s biggest engineering company, delivers power turbines for Polish coal-, gas- and wind plants, including for Tauron and PKN Orlen SA.

Nalezyty said that he understands the logic of the Polish government to stick to coal, but “at the same time the trend to significantly change energy mix to make renewable energy dominant prevails globally. And it can’t be stopped.”

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