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COVID and carbon crunch

December 02, 2020
Paolo Coghe and Gerard Wynn
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Key Findings

In this note, we update our modelling of the profitability of Poland’s biggest energy company, Polska Grupa Energetyczna (PGE). Our update reflects the impact of the coronavirus pandemic on energy and foreign exchange markets, and assesses the impact of PGE’s “Strategy 2030” unveiled in October.

The context for the analysis is PGE’s failure to respond to a low-carbon transition that has been long telegraphed by European policymakers and is now in full swing. In mid-2020, coal still accounted for 86% of PGE’s total power generation, compared with 94% in mid-2011.

Executive Summary

Our main findings were:

  • PGE’s new strategy is a wasted opportunity for a significant company re-set. The company’s 2030 target for offshore wind is unchanged (2.5 gigawatts), compared with its previous direction. Regarding onshore, we generously assume a 90% increase (>1GW versus 0.7GW), and for solar PV, a 30% upgrade (>3GW versus 2.6GW). We note that these renewables targets are still less ambitious than Poland’s National Energy and Climate Plan (NECP).
  • This strategy fails to overcome the severe impact of the coronavirus pandemic. Applying the company’s 2030 strategy, plus updated exchange rates, commodity prices and renewables capacities, PGE’s EBITDA collapses by two-fifths in 2030, to PLN4.7 billion from PLN8.2 billion.
  • Focusing on fossil fuel generation, post-COVID, the EBITDA of PGE’s combined coal and lignite generation is negative from 2026, when capacity payments to these fuel sources start to fall significantly. This is an extraordinary finding: The vast majority of PGE’s generation today will lose money in six years. These findings illustrate why it is unlikely that a buyer will emerge for these assets, and that a coal asset spinout will have to be subsidised by Polish citizens. A lower cost option may be to access private and public capital to fund coal power retirements, by radically revising the company strategy to align better with a low-carbon transition, and thus appealing better to investors and EU funds supporting a low-carbon transition.
  • Focusing on the rest of PGE’s power generation—renewables, gas and CHP—EBITDA more than doubles, to PLN5.9 billion in 2030, from PLN2.5 billion in 2021.

Paolo Coghe

Paolo Coghe is president of Acousmatics.

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Gerard Wynn

Former IEEFA Energy Finance Consultant Gerard Wynn is a U.K.-based 10-year veteran of energy and economics reporting at the Thomson Reuters News Agency and has authored numerous papers on energy issues ranging from solar power in Great Britain to coal-burning in China and India. He blogs at

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