PGE finally confirmed that it has given up the project at Elektrownia Opole power station. The investment, calling for the construction of two coalfuelled power units, of total capacity 1,800 MW, was estimated at net PLN 9.4bn. According to communique issued by the investor, "the changes on the power market and in the macroeconomic environment have limited the economic efficiency of the investment for PGE." Set of analyses indicated that due to the production portfolio of PGE, which is based on brown coal mainly, and other investment projects held by the group, the continuation of the Opole II project would not raise the value of PGE for shareholders.
Our view:
As we commented it before, we see the news positive and itself may adding up to PLN 3.5 per share of PGE valuation. We believe that the company will soon report its new strategy where we could see as we think more stress put towards retrofits and renovation projects instead of brownfield investments in hard coal technology. We don’t expect the company to abandon the Turow project as it is supposed to be lignite-fired which means a cheap produced energy.