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www.pwc.pl<br />
Challenges<br />
for the Polish<br />
power sector<br />
British-Polish Energy Forum<br />
13 November 2012
Coal share in the fuel mix expected to decrease,<br />
but keeps dominant position<br />
Electricity production by fuel type in Poland (2010)<br />
Gas<br />
4%<br />
Water<br />
2%<br />
RES<br />
5%<br />
Others<br />
2%<br />
Electricity production by fuel type in Poland<br />
(Forecast for 2030)<br />
Nuclear<br />
17 %<br />
Others<br />
1%<br />
Hard coal<br />
22%<br />
Lignite<br />
34%<br />
Hard coal<br />
53%<br />
RES<br />
16%<br />
Water<br />
1%<br />
Gas<br />
10%<br />
Lignite<br />
33%<br />
TODAY:<br />
• Over 37 GW of total installed capacity<br />
• 87% electricity produced from hard coal and<br />
lignite<br />
FUTURE:<br />
• Share of coal to decrease to 55%<br />
• Renewable energy sources rise up to 16 %<br />
• Nuclear power generates 17% of electricity<br />
• Natural gas starts to play signficant role<br />
S ource: Energy Market Agency, Polish Ene rgy Policy<br />
<strong>PwC</strong><br />
Slide 2
Consolidated market <strong>with</strong> dominant position<br />
of vertically integrated state-owned utilities<br />
Electricity market structure<br />
Generation Distribution Supply<br />
ZE PAK<br />
7%<br />
EDF<br />
10%<br />
PGNiG<br />
3% Energa<br />
3%<br />
Others<br />
18%<br />
Enea<br />
8%<br />
Tauron<br />
15%<br />
PGE<br />
36%<br />
Energa<br />
16%<br />
Enea<br />
14%<br />
RWE<br />
6%<br />
Others<br />
Others<br />
3% PGE<br />
PGE<br />
25%<br />
RWE 13%<br />
25%<br />
6%<br />
Tauron<br />
36%<br />
Energa<br />
15%<br />
Enea<br />
13%<br />
Tauron<br />
28%<br />
As % of e le ctricity produced As % of e le ctricity distributed As % of e le ctricity sold<br />
• Polish energy groups (PGE, Tauron, Energa, Enea) dominate all segments<br />
• Foreign companies (i.e. EDF, GDF Suez) mostly active in the generation<br />
S ource: <strong>PwC</strong> analysis on the basis of the latest available data<br />
<strong>PwC</strong><br />
Slide 3
Pacing gas market liberalization does support<br />
reshaping of the fuel mix to the benefit of natural gas?<br />
Regulated<br />
market:<br />
• One<br />
dominant<br />
trading<br />
company<br />
• Gas price<br />
subject to<br />
tarriffication<br />
Infrastructure<br />
development<br />
Current longterm<br />
contract<br />
changes<br />
Strong<br />
regulator<br />
Gas exchange<br />
foundation<br />
Freedom<br />
of trading<br />
Free market:<br />
• Competition in<br />
gas trading<br />
• Market<br />
mechanisms<br />
create gas<br />
price<br />
S ource: <strong>PwC</strong>, 4 freedoms on gas market, 2012<br />
<strong>PwC</strong><br />
Slide 4
Yes, but first we do invest in the gas infrastructure<br />
Natural gas import routes (bn m3 per year)<br />
• LNG terminal under<br />
construction<br />
1,5<br />
2,4<br />
3,1<br />
• Interconnectors <strong>with</strong>:<br />
• Czech Republic<br />
• Slovakia<br />
• Lithuania<br />
• Investments in Internal Gas<br />
Transmition Network mainly<br />
in new routes - by Gaz<br />
System<br />
Source: <strong>PwC</strong> analysis based on publicly available data<br />
<strong>PwC</strong><br />
Slide 5
Similarly to other European markets,<br />
we have areas which are regulated<br />
Key regulations in the Polish energy value chain<br />
Tariffs approved<br />
by the Energy<br />
Regulatory Office<br />
Tariffs approved<br />
by the Energy<br />
Regulatory Office<br />
Transition fee<br />
Tariffs for households<br />
approved by the<br />
Energy Regulatory<br />
Office<br />
Generation<br />
Transmission<br />
Wholesale trade<br />
Distribution<br />
Supply<br />
RES and CHP<br />
eligible to receive<br />
certificates of origin<br />
An obligation to sell<br />
electricity on the open<br />
market imposed on<br />
generators came into<br />
force in August 2010<br />
Suppliers obliged<br />
to obtain and submit<br />
certificates of origin in a<br />
given share of the total<br />
sales<br />
to end-users<br />
• Retail sales open for business end-users<br />
• Liberalization of tariff discipline for households expected by the market, but socially sensitive<br />
<strong>PwC</strong><br />
Slide 6
EU environmental requirements –<br />
a challenge for outdated installed capacity<br />
Age structure of Polish power plants (%)<br />
44<br />
33<br />
Ov er 30 y ears 20-30<br />
y ears<br />
10 7 6<br />
10-20<br />
y ears<br />
Decommissioning declared<br />
by electricity generators (MW)<br />
17 44<br />
3557<br />
1986<br />
5-10<br />
y ears<br />
Bel ow 5 y ears<br />
4955<br />
• 2010-2020 decommissions<br />
driven by new SO x and NO x<br />
emission standards levels<br />
• Units below the new<br />
standards to be shut down<br />
until the end of 2015 or<br />
undergo modernization<br />
2011-2015 2016-2020 2021-2025 2026-2030<br />
S ource: <strong>PwC</strong> analysis on the basis of publicly available data<br />
<strong>PwC</strong><br />
Slide 7
Huge scale of financing of the investments is the issue<br />
over32<br />
bn € - 4 major energy<br />
groups investment<br />
declarations up to 2020<br />
(excl. nuclear)<br />
huge CAPEX needs for<br />
complex nuclear power<br />
plant project up to 2030<br />
3000MW<br />
Finance sourcing:<br />
• balance sheet financing<br />
• project finance<br />
• debt security market<br />
• EU<br />
• EBRD<br />
• EBI<br />
• NIB<br />
Source: <strong>PwC</strong>-ING, The Financing of Power Industry Investments in Poland, 2011; <strong>PwC</strong>-<br />
ING, Attractiveness of gas-fuelled power generation investments, 2012; <strong>PwC</strong> analysis on<br />
the basis of publicly available data; 1 Euro = 4,15PLN as of 09.11 average exchange rate<br />
<strong>PwC</strong><br />
8
Summary: main challenges for the market<br />
Huge investment<br />
needs in new<br />
capacities and<br />
modernization<br />
of outdated assets<br />
Regulatory<br />
uncertainty<br />
in regard to<br />
Renewable Energy<br />
Sources act<br />
Privatization<br />
Fuel mix<br />
uncertainty:<br />
• EU CO2 policy<br />
• power price<br />
vs. gas price ratio<br />
• Future<br />
of nuclear power<br />
<strong>PwC</strong><br />
Slide 9
![[the zone of great potential] - KSSE](https://img.yumpu.com/43384797/1/190x134/the-zone-of-great-potential-ksse.jpg?quality=85)
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