RWE in Joint Venture with Kompania Weglowa for $1.95 Billion Coal-Based Power Plant in Poland

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Researched by Industrial Info Resources (Sugar Land, Texas)--RWE AG (FRA:RWE) (Essen, Germany), one of Europe's top five utility companies, has entered into a 75:25 joint venture with Kompania Weglowa SA (Katowice, Poland), Poland's largest mining firm, to set up an 800-megawatt (MW) coal-fired power plant in Poland at an estimated cost of $1.95 billion.

The proposed plant will be developed at the site of the former Piast Ruch II coal mine in Wola in the Upper Silesian region of Poland. Although the Silesian region has reserves of soft brown coal, which accounts for 42% of Poland's hydrocarbon fuel, the Wola plant will use hard coal supplied by Kompania Weglowa. RWE has the expertise of handling various fuel mixes, having generated more than 76 terawatt-hours of electricity from brown coal and 71 terawatt-hours from hard coal.

Investment details for the project have already been worked out, based on an initial feasibility study. Registration formalities for the new company will be initiated once the project receives clearance from Urzad Ochrony Konkurencji i Konsumentow, the Polish Office for Competition and Consumer Protection. The joint venture will make the final investment decision only after determining the financial viability of the project.

The Wola power plant will be based on RWE's strategy of "More growth, less CO2" and will utilize modern technology to achieve a power generation efficiency of 46% and to reduce carbon dioxide emissions to 1.3 million tons per year. The plant has been designed to consume 30% less coal per kilowatt-hour of output. On the technical front, the Wola plant will closely resemble the twin power plants, comprising two 800-MW units, being established by RWE in Hamm, Germany. Kompania Weglowa, which owns the plant site, will manage infrastructure and fuel requirement of the venture. The Wola plant is scheduled for commissioning in 2015.

With the demand for power in Poland set to grow at an annual rate of 3%-5% over the next few years, the country is planning to meet 15% of its demand through clean energy projects by 2020. Currently, 94% of the country's power requirements are met by conventional coal-based power plants. Energy ventures in Poland are required to comply with the stringent environment standards set by the European Union.

According to RWE, Poland, being home to the best wind conditions in Central Europe, makes for an ideal investment in the wind energy sector. RWE Renewables Polska (Warsaw, Poland), a unit of RWE, plans to invest about $652 million in Poland's wind energy sector. Three windfarms, with a combined capacity of 730 MW, have been planned in the Masuria, Pomerania and Wielkopolska regions.

Work on two windfarms in Suwalki and Tychowo is already in progress. The units are being set up at a cost of $1.3 billion and have a total capacity of 80 MW. The first unit in Suwalki, housing 18 turbines of 2.3 MW each, is partially operational. The Tychowo unit, with 15 turbines, is expected to commence operations in 2010.

RWE is also vying for a controlling stake in Enea Power Group (WAR:ENA) (Poznan, Poland). Vattenfall AB (Stockholm, Sweden), the other contender for the acquisition, already holds a stake of 18.7% in Enea. The Polish government has also indicated the possible sale of Tauron Polska Energia (Katowice, Poland) and Energa SA (Gdansk, Poland) in 2010. RWE currently operates seven subsidiaries in Poland in the energy production, trading and distribution, oil and gas, and water supply and sewerage service sectors.

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