Sale proces of PGE GiEK S.A.
The PGE Group is ready to fulfil its role in the transition processes of the sector. The conventional base of the power system has been prepared to operate in the new ownership structure. As part of the energy transition, in line with the PGE Capital Group Strategy, the necessary steps have been taken to ensure the Group’s continued operation, in connection with the planned sale of PGE GiEK S.A. (PGE Górnictwo i Energetyka Konwencjonalna).
PGE GiEK S.A is a PGE Capital Group company in which 100% of the shares are held directly by PGE Polska Grupa Energetyczna S.A. PGE Group’s coal-fired generation assets subject yo the transformation process, located in PGE GiEK S.A, comprise two lignite-fired power plants: Bełchatów and Turów, together with functionally connected lignite mines, and three hard coal-fired power plants: Opole, Rybnik and Dolna Odra.
Benefits of coal asset sales
The discontinuation of Conventional Generation’s operations based on coal combustion results from the strategy of the PGE Capital Group, published on October 19, 2020, which assumes climate neutrality by 2050.
The sale of PGE GiEK will bring measurable benefits for the Group, among others, in the following areas:
- greater and more favorable access to sources of debt and equity financing, lower financing costs;
- greater and more favorable access to the insurance market;
- lower cash requirements for hedging CO2 emission costs and stocks of production raw materials;
- release of credit limits in financing institutions as a result of reducing the demand for EUA allowances;
- increasing the possibility of using financial resources for investments in distribution networks and green technologies, with a higher rate of return;
- reducing the risk of exposure to the price of CO2 emission allowances.
All the above actions, in the opinion of the Management Board, will increase the attractiveness of the Company for shareholders.
Historical sales activities of PGE GiEK S.A.
On March 1, 2022, the Council of Ministers adopted a resolution on accepting the document: “Transformation of the electricity sector in Poland. Separation of generation coal assets from companies with State Treasury shareholding”.
According to the document, the asset spin-off process was to be pursued through acquisition by the State Treasury from PGE S.A., ENEA S.A., TAURON Polska Energia S.A. and ENERGA S.A. all assets related to the generation of energy in hard coal-fired and lignite-fired power plants, including service companies providing services to them. Due to the inseparability of lignite-fired energy complexes, lignite mines were also among the acquired assets.
The scope of the project did not include hard coal mining assets. CHP plants were not subject to his transaction, as they are planned to be modernised towards low and zero-emission sources. It was planned that the carve-out of assets from the energy groups would take place through the purchase of shares of individual companies directly by the State Treasury and their subsequent consolidation through their contribution of shares of particular companies to a capital increase in PGE GiEK S.A.
The role of the planned National Energy Security Agency (NABE) was to operate as a holding company, concentrated around PGE GiEK S.A., and the companies being acquired from ENEA S.A., TAURON Polska Energia S.A. and ENERGA S.A. as subsidiaries in its group.
On July 14, 2023 PGE received from the State Treasury, represented by the Minister of State Assets, proposal of a non-binding document summarising terms and conditions for acquisition by the State Treasury of all shares held in PGE GiEK S.A. On August 10, 2023 PGE and the Minister of the State Assets, signed a document summarising terms and conditions for acquisition by the State Treasury of all shares held by PGE in PGE GiEK S.A. in order to set up NABE.
The terms of the sale transaction were to include, among other things:
– the sale price of shares of PGE GiEK (Equity Value) would amount to PLN 849 million on the basis of the Enterprise Value settled as at September 30, 2022 (settlement according to locked-box mechanism) and adjusted for the net debt.
– the debt of PGE GiEK towards PGE in amount of PLN 5.4 billion would be subject to repayment throughout 8-year period from the conclusion of the transaction and the repayment of 70% of the debt would be secured by the guarantee of the State Treasury.
Conclusion of the sale transaction of PGE GiEK S.A. to the State Treasury depended on the fulfilment of number of conditions precedent, inter alia, involving obtaining preliminary credit decisions from banks for the financing of NABE and the conclusion of agreements to ensure the operation of the companies forming NABE after the closing of the transaction, which have not been fulfilled. In addition, in February 2024, the Council of Ministers withdrew from the Parliament a draft law on the principles of guaranteeing the National Energy Security Agency’s liabilities by the State Treasury.
Current status of the project for sale of PGE GiEK
Work is currently underway to develop a new formula for the sale of PGE GiEK S.A. outside the PGE Capital Group. In May 2024, a team was set up by order of the Minister of State Assets with a view to spinning off coal assets from energy sector enterprises in which the State Treasury holds shares that is a support body to the Minister of State Assets. Work on the sale of PGE GiEK S.A. is also underway at the PGE Group level, and an advisor has been selected to develop a financial and regulatory model for the sale of PGE GiEK S.A.
Milestones
Coal
carve-out
pathway