The company’s CEO Krzysztof Kilian stated that PGE is surprised with the high prices offered in the tender for construction of a power unit in Elektrownia Turow power station and within several weeks it will make further decisions concerning the process. According to the CEO, the firmhad estimated the cost of the investment at PLN 2.5bn gross, based on market analysis. PGE has a limited possibility to negotiate the offers; it can either accept one of them or cancel the whole tender. The latter option may strongly delay the construction process, which the board will also take into account when pondering how to solve the problem. Two consortia bid for the project: one led by Alstom Power and one consisting of Hitachi Power Europe and Budimex. The prices are said to have settled at PLN 4.722bn and PLN 4.965bn, respectively. Both bidders offered similar technical parameters of the unit. PGE announced a tender for building a 430-450 MWe power block at the Turow power plant in October 2010 with the hope of launching the new block in 2016.
Our view:
The price offered by these two consortia really looks pricey to us. It implies the price tag per 1MW at PLN 10.5m – PLN 11m which is 63% and 71% higher respectively than at the Opole contract where the price tag stood at PLN 6.4m per 1MW. The difference is even higher comparing to Kozienice contract offer: bids for Turow plant are 105% and 116% higher respectively. We believe that this situation may be the outcome of extreme measures of precaution taken by construction companies after the series of bankruptcies in the sector. Most likely scenario seems to be cancellation of the tender offer by PGE and publishing another one with the hope to get better offers next time.