* Project dropped because of low power prices, weak demand
* PGE shares jump as much as 3 pct
(Adds ecologists' comments, more background)
By Chris Borowski and Agnieszka Barteczko
WARSAW, April 5 Top Polish utility PGE
scrapped plans to build coal-fired power units worth $3.6
billion at a plant near the southwestern city of Opole on
Friday, citing falling electricity prices and weak demand.
Earlier this week sources close to the company said PGE's
investment committee had recommended pulling out of the plans to
build two 900-megawatt units at Opole.
"Changes on the energy market and the macroeconomic
environment have limited the economic effectiveness of this
investment for PGE," the state-controlled company said in a
PGE shares surged as much as 3 percent after the
announcement and were up 1.76 percent by 1503 GMT.
The investment in Opole had been keenly awaited by local
construction companies that have been counting on several high
profile power projects. 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
Shares in the builders, which dropped after the Reuters
report on Wednesday, were steady on Friday.
Polimex, which had a 42 percent share of the Opole contract,
has said that cancellation of the project would not destroy the
terms of its debt restructuring.
The project at Opole, near Poland's border with the Czech
Republic, was considered a strategic investment, because Poland
needs to replace its outdated capacity with new power plants to
Grid operator PSE expects that 6.6 gigawatts of the current
37 gigawatts of installed capacity will be taken off the grid by
2020 as outdated plants close.
The project was on a government list of investments in the
power sector next to Turow, Pulawy, Blachownia, Stalowa Wola,
Jaworzno, Kozienice and Wloclawek, altogether valued at around
60 billion zlotys.
From that list, Enea's 1,075 megawatt coal-fired
unit in Kozienice is the most advanced project.
Officials at the Treasury Ministry, which has a controlling
stake in PGE, could not immediately be reached for comment.
Ecologists had earlier tried to block the project but
"Future prosperity will be built on clean energy, not coal.
The Polish government needs to take note and set a course for
investment in clean energy and efficient modern energy
infrastructure," Karla Hill, director of programmes at
(editing by Jane Baird)