Poland's PGE advised to quit $3.6 bln Opole project-sources

WARSAW, April 3 Wed Apr 3, 2013 10:06am EDT

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WARSAW, April 3 (Reuters) - The investment committee of Poland's biggest utility PGE has advised the group's management board to pull out of a project to build a $3.56 billion coal-fired power plant at Opole, two sources close to the company told Reuters.

The board was scheduled to discuss the recommendation on Wednesday, the sources said, but the outcome of that discussion was not yet known. A company spokeswoman did not respond to an emailed request for comment, and did not answer phone calls.

The plan to build two 900-megawatt coal-fired units at Opole, near Poland's border with the Czech Republic was considered a strategic investment as Poland needs to replace its outdated capacity with new power plants to avoid blackouts in the coming years.

But falling electricity prices and weaker demand, linked to Poland's slowing economy, have raised questions about profitability of the new investment.

"The investment committee in the group recommended not to build Opole. The management board was supposed to discuss this on Wednesday," a person close to the company said.

"But it is unlikely that the management board will not follow this recommendation," the person added.

A second source confirmed the investment committee had advised pulling out of the project.

The investment in Opole had been keenly awaited by local construction companies. Weak prices and tough competition for road-building deals had pushed them to the brink of insolvency.

The consortium to build Opole includes Polimex, Rafako, a unit of another troubled builder PBG , and Mostostal Warszawa, a unit of Spain's Acciona.

($1 = 3.2628 Polish zlotys) (Editing by Christian Lowe and James Jukwey)

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