Energy Report

January 2016

Coal Polish Stream Coal Market Index PLN 215.78 ARA Coal (USD/TONNE) USD 47.7 (PLN/TONNE) -PLN 3.18 -USD 5.7 since October 70.6 since November 230.93 215.78 2015 47.7 2015 Nov 2014 Nov 2015 Dec 2014 Dec 2015 Oil Brent Crude Oil (usd/barrel) USD 39.1 Urals Crude Oil (usd/barrel) USD 35.9 -USD 6.8 -USD 5.2 64.0 since November 60.1 since November 39.1 2015 35.9 2015 Dec 2014 Dec 2015 Dec 2014 Dec 2015 Gas Gas prices on Polish PLN 71.36 Gas prices on the Gaspool EUR 16.2 Power Exchange (PLN/MWH) exchange market (EUR/MWH) -PLN 7.47 -EUR 1.4 22.6 116.21 since November since November 71.36 2015 16.2 2015 Dec 2014 Dec 2015 Dec 2014 Dec 2015 Fuels PB95 petrol (pln/litre) PLN 4.27 ON petrol (pln/litre) PLN 4.18 -PLN 0.13 -PLN 0.15 since November 5.04 since November 4.74 4.40 2015 4.18 2015 Dec 2014 Dec 2015 Dec 2014 Dec 2015 Electricity Electricity prices on Polish Electrical energy trading volume PLN 138.98 2451 gwh Power Exchange (PLN/MWH) on Polish Power Exchange (GWh) -PLN 14.79 +264 GWh since November since November 172.29 138.98 2015 2 164 2 451 2015 Dec 2014 Dec 2015 Dec 2014 Dec 2015

Green certificates on Polish PLN 115.6 Sources: Power Exchange (PLN) Polish Power Exchange [Towarowa Giełda Energii] -PLN 4.09 monthly indexes: BASE; GAS_BASE; OZEX_A; 155.98 since November www.polskirynekwegla.pl 115.6 (PSCMI 1 Index); Datastream (average monthly 2015 prices for ARA coal, oil, fuels and gas Dec 2014 Dec 2015 on Gaspool exchange market). The month PROGRESS OF KEY INVESTMENTS: Opole power plant (PGE): On December 30, the proces of laying concret in energy foundations has been completed in the turbomachinery at the block no.6. PGE has informed that the advancement of the construction of two energy blocks has reached 30 per cent. The first block is set to become operational in July 2018, while the second one – in 2019.

Jaworzno power plant (Tauron): On December 29 the proces of laying foundations for the boiler-house and machine-room of the new coal block Włocławek with a total power of 910 MW. The investment is to be ready in 2019.

Power and heating plant Włocławek (PKN Orlen): On January 4 a new energy block, with the total power of 463 MW, has been opened. It is Turów Opole the subsequent stage of the opening of the first gas-powered power and heating plant, which is set to conclude in half-2016.

LNG terminal (Polskie LNG): On January 7 the testing phase is to begin on gas transmissions between the LNG terminal in Świnoujście and the national transmission system. The installation is expected to become available for commercial exploitation before June 2016.

15.12 UOKiK launches probe on creation of Nord Stream II. 17.12 Electricity prices to fall. The Energy Regulation Office 2015 The regulator received the inquiry concerning the esta- 2015 (URE) accepted all the energy tariffs for 2016. The blishment of a joint venture company by, among others, joint bills of end recipients in households which buy the Russian Gazprom, the German EON, the French EN- electricity from the so-called office sellers (PGE, GIE and the Dutch-British Shell. The company is to build Tauron, Energa, Enea), will decrease by an average of the third and fourth segment of the Nord Stream pipeline. 1.6 per cent – an equal decrease is expected for energy Apart from UOKiK, which is not going to give its consent distribution charges. URE explained that lowering the in the shortened, monthly procedure, the transaction will tariffs was possible, among others, due to lower costs be subject of examination also by a German watchdog. In of green energy purchases. Thanks to its decision, an theory, UOKiK could even block the creation of the new average household will save up to PLN 12-22 in 2016 on venture. All the entities need to be granted its consent, as its energy bills. the new company is expected to reach an annual turnover of PLN 10 million in Poland. 22.12 Nowa Kompania Węglowa will definitely be formed 2015 by mid-2016. The earliest possible date is the end of 16.12 Jasiński became CEO of PKN Orlen. The company’s March – informed MinEner. Before it can be set up, 2015 supervisory board first dismissed chief executive Jacek detailed financial analysis and talks with employees Krawiec and then appointed Wojciech Jasiński as the new are needed. CEO. Earlier, the former MinTrea in 2006-2007 and one of the closest collaborators of Jarosław Kaczyński reno- 28.12 PGNiG to return to North Sea pipeline. PGNiG’s acting unced his mandate of MP. He will be replaced in the Sejm 2015 CEO Piotr Woźniak stated that the construction of Baltic by Waldemar Olejniczak, a Sierpc poviat councillor, while Pipe between Poland and the North Sea would be very the post of the head of public finance committee will go good for the company. It would enable gas extracted by to Andrzej Jaworski. PGNiG from the Norwegian shelf to be imported more cheaply and develop this segment of the company’s 17.12 PiS puts forward draft amendment to law on RES. It puts activity. Woźniak also said that PGNiG will develop 2015 off the introduction of the auction system by half a year. a long-term strategy of takeovers in the extraction seg- If the amendment is adopted, RES infrastructure launched ment. For now though, the company will not apply for by June 30, 2016 will be able to use the current system new licences as oil and gas prices are too low. of green certificates. However, this could cause a conflict between Poland and EurCom. According to our sources, 28.12 President signs act on mining. The eight laws signed Brussels is to accept a system for supporting RES based 2015 by President Andrzej Duda include an amendment on green certificates at the start of 2016, but assuming to the law on coal mining, which extends for transfer- that it will expire on January 1, 2016. Extending its functio- ring mining companies’ redundant assets to the Mine ning could prompt the Commission to change its mind Restructuring Company to December 31, 2018. This and force the public aid to be returned. will enable mines to be closed down gradually.

Polityka Insight – Energy Report January 2016 2 29.12 Henryk Baranowski is the most likely candidate to beco- 06.01 Three new deputy energy ministers. Michał Kurtyka will 2015 me CEO of PGE – informed Puls Biznesu. He is currently 2016 be responsible for the ministry’s contacts with the EU deputy MinTrea for energy and will move to PGE when on energy matters. Andrzej Piotrowski will deal with the energy competences are transferred from MinTrea to the energy market, nuclear and renewables. He will eventu- newly-created MinEner. This means that the handover ally take over supervision of Poland’s energy companies, could be postponed slightly and that Marek Woszczyk PGE, Tauron, Enea and Energa, from MinTrea. At MinEner may keep his job until mid-2016. Wojciech Kowalczyk, deputy MinTrea until now, will help secretary of state Grzegorz Tobiszowski restructure 30.12 New CEOs at Energa and Enea. The supervisory board Poland’s mining industry. 2015 of Energa chose Dariusz Kaśków as CEO. Acting CEO Roman Pionkowski became deputy CEO for development 07.01 MinTrea drops competitions for company CEOs. MinTrea strategy. Kaśków was deputy CEO of KGHM for a few 2016 Dawid Jackiewicz announced that there will be no compe- months in 2007; earlier, he served as mayor of the town titions for CEOs of companies with a special significance of Głupczyce. There were also changes to Enea’s mana- for state security. In particular, this will apply to energy gement: Mirosław Kowalik, former director of sales and companies and those in the financial sector. MinTrea will marketing in the Polish branch of Alstom Power, became personally appoint the CEOs. According to Jackiewicz, CEO. Acting CEO Wiesław Piosik became deputy CEO this will enable the minister to take full responsibility for for corporate affairs. the functioning of these companies and guarantee that they pursue the state’s strategic interests. 31.12 Government replaces CEOs of Gaz-System and PSE. 2015 Tomasz Stępień became Gaz-System’s new CEO, repla- 08.01 Will Saudi Aramco become a listed company? „Saudi cing Jan Chadam, who stepped down on December 31, 2016 Arabia is considering listing shares in state-owned at the same time retaining his job as CEO of Polski LNG, Saudi Aramco, the largest oil producer,” informed Finan- the operator of the LNG terminal in Świnoujście. The cial Times. This stems from the country’s deteriorating same day CEO of Polskie Sieci Elektroenergetyczne (PSE) financial situation, which has been hit by low oil prices. Henryk Majchrzak was also dismissed and replaced by The FT emphasises that the company’s value is estimated Eryk Kłossowski. Piotr Naimski, the government’s pleni- to be USD 1 trillion. For comparison Apple, based in Cali- potentiary for energy infrastructure since December 21, fornia, is worth USD 543 billion. A decision on Aramco’s is responsible for the reshuffles at energy transmission possible stock exchange debut is to be made within companies. several months.

04.01 Tchórzewski on coal mines and energy dividend. 11.01 Fortum preparing to take over Duon. „After ten years 2016 „Underground sites where deposits are running out will 2016 of independent activity Duon, a Gdańsk-based distri- be closed and the coal mines moved to new locations. butor of energy and gas, will probably be taken over by Closing down part of operations is normal in mining,” a large energy company. The company said that Finnish Krzysztof Tchórzewski told Dziennik Gazeta Prawna. Fortum wants to buy a 100-per cent stake in it. The The MinEner pointed out that energy companies’ involve- Finnish company has proposed to pay PLN 3.85 per share; ment in mining should not lead to a drop in their ratings. 19 per cent above the company’s average price over the He added that the companies face major investments past three months. This would make the entire offer and so should consider not paying out dividends. worth PLN 445 million.

PROMOTIONS AND RESIGNATIONS: Mirosław Kowalik will become CEO of Enea S.A. Acting CEO Wiesław Piosik will join the management board. Dalida Gepfert and Grzegorz Kinelski will leave the board. Dariusz Kaśków became CEO of Energa S.A. Acting CEO Roman Pionkowski became deputy CEO for development strategy. Tomasz Stępień became CEO and Artur Zawartko deputy CEO of Gaz-System S.A. Eryk Kłossowski became the new CEO of Polskie Sieci Elektroenergetycznye S.A. His deputies are Tomasz Sikorski and Cezary Szwed. Tomasz Gawlik became chairman of the management board at Jastrzębska Spółka Węglowa S.A. Anna Striżyk was dismissed from the management board of Tauron Polska Energia S.A. Andrzej Janiak, Maciej Mazurkiewicz, Irena Ożóg and Janusz Pilitowski were dismissed from the supervisory board of PGNiG S.A. They will be replaced by Wojciech Bieńkowski, Mateusz Boznański, Andrzej Gonet and Krzysztof Rogala. Mirosław Szreder and Jarosław Mioduszewski were dismissed from the supervisory board of Energa S.A. Maciej Żółtkiewicz, Marek Szczepaniec and Andrzej Powałowski joined the board. Robert Pietryszyn joined the supervisory board of Grupa Lotos S.A. Dawid Jakubowicz and Orest Nazaruk entered the supervisory board of Polenergia S.A. Piotr Woźniak, the temporary CEO of PGNiG S.A., joined the supervisory board of EuRoPolGaz S.A. Krzysztof Gerula joined the supervisory board of Rafako S.A.

Polityka Insight – Energy Report January 2016 3 FUELS

Will PiS merge Orlen 2014 DATA OF STATE UTILITIES (PLN BLN): with Lotos and PGNiG? Orlen PGNiG Lotos Suma Revenue 106.8 34.3 28.5 169.6 Ministry of Treasury analyses a possible Net profit -5.8 2.8 -1.4 -4.4 merger of PKN Orlen, Lotos, and PGNiG. Market 29.9 27.4 4.8 62.1 The European Commission will have, capitalisation however, to examine the potential tie-up.

Robert Tomaszewski, Business Analyst

The government considers building an oil and gas champion. Brussels would have to approve a potential transaction. In line The idea of merging PKN Orlen and Lotos is not new – it da- with the EU regulations EurCom has to look into a transaction tes back to the SLD government in 2003 and was revisited by when global revenue of the counterparties exceeds EUR 5 bln, the first PiS government, as well as both PO-PSL Cabinets. EU-based revenue of at least two joining companies exceeds However, the current MinTrea’s proposal to add the coun- EUR 250 mln, and at least a third of the revenue of a partici- try’s biggest natural gas company PGNiG to the mix is new. pant is obtained outside of Poland. The potential PKN Orlen, The ministry announced it would verify whether such a mer- Lotos, and PGNiG link-up meets all of these conditions, and ger makes sense. For MinTrea the biggest upside of the tie up thus it would fall to the commission to approve the merger is to secure the state-controlled companies against a hostile rather than to the Office of Competition and Consumer Pro- takeover. tection (UOKiK). Since the Polish oil market share of the new combined group would exceed 90 per cent, Brussels would Savings and stronger negotiating position with Russia. Lin- only approve the deal if Lotos and PKN Orlen sell part of their king the two oil companies would allow for significant cost refining and retail businesses. cutting in maintenance, fuel distribution, but also in oil re- serves management. Meanwhile, PGNiG could bring its oil Tie-up could face protests. The consolidation, should it hap- exploration and production know-how to the group, with Lo- pen, will revolve around PKN Orlen – it has good financial tos and PKN Orlen having less experience in the area they are results and is led by Wojciech Jasiński, one of Jarosław Ka- forced to expand. The new champion could expedite shale gas czyński’s trusted associates. The merger would face oppo- exploration in Poland and – thanks to its stronger market po- sition from Pomorze-based politicians and local government sition – reduce financing costs on investments. officials, both from PiS and PO. The tie-up would undermine their influence and the region itself would lose in terms of Consolidation would limit domestic market competition. The taxes and jobs. In 2015, the Pomorze-based politicians prote- combined group would have over 90 per cent market share sted against PGE-Energa merger advocated by then MinTrea in gas sales, nearly 90 per cent share in oil wholesale market, Włodzimierz Karpiński. Ewa Kopacz’s government, however, and 46 per cent stake in retail oil market. Experts say, it wo- dropped the idea. uld result in increases of fuel prices on gas stations and would hamper competition, with private retailers like Shell, Statoil, and BP suffering the most. The merger could also increase WHAT’S NEXT Lotos and PKN Orlen’s refining costs with both companies MinTrea is set to finalise analysing the merger by forced to buy natural gas from the state-owned supplier, whi- the end of March. With preparations for the tran- le now they diversify supplies by receiving cheaper gas from saction, it is testing waters to get a feeling for the the Western Europe via a virtual reverse. After the link-up it market’s reaction and local authorities’ willingness would be no longer possible. to approve such a move. Incorporation of Lotos by PKN Orlen is bound to meet a stiff resistance from Pomorskie voivodeship officials, although PiS’s regional representatives will have less of an influence on the government than their PO coun- terparts had over Ewa Kopacz’s Cabinet. Should PiS squeeze through the transaction, EurCom will impose conditions aimed at limiting the cham- pion’s activities. Thus, we believe the merger of PKN Orlen, Lotos, and PGNiG will not take place.

Polityka Insight – Energy Report January 2016 4 RENEWABLE ENERGY SOURCES

What PiS has in store 1 July 2016 RES auctions begin for renewables 31 December 2015 The entry into force of the amendment PiS MPs proposed an amendment to the renewable of the RES Bill energy sources act, which delays the introduction 18 December 2015 of the auction system by six months. This could lead PiS puts forward draft amendment to law on RES to a conflict with the European Commission. 12 March 2015 PiS puts forward draft amendment to law on RES Robert Tomaszewski, Business Analyst

Postponement of the auction system. According to the amen- A blow to wind farms. The written opinion that justified the dment, the system is to come into effect on July 1, 2016, six introduction of RES legislation refers to the need to introduce months later than initially stipulated by the legislation. Up till “necessary regulations” with regard to “rules for localisation then the current system of green certificates is to remain in and construction of wind farms”. The government will likely force. There is a considerable difference between the two: un- try to limit the options that enable to construct windmills. In der the auction system, the subsidy is received by the energy late 2014, PiS presented draft amendment to the construction producer, one that offers the lowest possible amount. Under law as well as planning and zoning law. The proposal stipula- the current system, the producer sells RES energy to the na- ted that no windmills with a capacity exceeding 500 kW sho- tional grid and receives certificates, which could then be sold uld be constructed within 3 km from housing. on the market. EurCom planned to accept green certificates, but on assumption that the system expires by January 1, 2016. Biogas plants to increase their profitability. The amendment also includes regulations that would “prevent agricultural bio- Extending the subsidies for dual firing. Delay in the imple- gas plants from going bankrupt”. PiS will likely use a PSL’s mentation of the new system means an extension of support proposal, which has not been implemented. Problems expe- for dual firing of coal and biomass and large hydroelectric po- rienced by the biogas sector result from a low price of green wer stations. This is what EU officials do not like about the certificates, which shrinks production profitability. In order to current support system – EurCom believes that such aid is increase their price, PSL wanted companies that sell energy to unwarranted. The decision to extend subsidies for dual firing write off biogas-related green certificates. There are 60 biogas is beneficial for large state-controlled energy groups, which plants in Poland, with only half of them currently profitable. need cash as a result of a rather difficult situation of the coal Biogas plants are important for the government because of mining industry. The RES sector is speculating that the go- the rural electorate. vernment could decide to retain support for dual firing even beyond July 1, 2016. WHAT’S NEXT Extending support for prosumers. The amendment, proposed Extending the time green certificates remain in by PiS MPs, also delays the introduction of the so-called pro- operation might conflict Poland with EurCom. sumer amendment, which introduces guaranteed tariffs for Possible need to return illegal public aid would producers of green energy from micro-installations. A later bring about bankruptcy of various companies from implementation date is meant to help adjust the regulations the RES sector. This would become a problem for to the EU law. Yet the sector seems full of concerns. According the government, as the companies could demand to the Renewable Energy Institute (IEO), around 2,000 house- compensation from the state. The changes will also holds are currently waiting for new conditions of supporting lead to an increased number of green certificates prosumers. A majority of them are burdened with loans, and on the market, which would result in lower prices if there are no guaranteed tariffs, their financial situation will and a decrease in profitability of RES installations. considerably worsen. In recent months the sector has braced itself for the new auction system. Now it looks as though it will suffer from a deteriorating investment climate.

Polityka Insight – Energy Report January 2016 5 GOVERNMENT Piotr Naimski, secretary of state for energy matters Piotr Naimski was to become energy minister, but will instead supervise companies Born: February 2, 1951, Warsaw responsible for the transfer of energy and gas. Education: PhD in Biochemistry, PAN (1981) Earnings: PLN 149 000 (gross, in 2015) His ambitions, however, run much higher. Public profile: deputy MinEcon (2005-2007) adviser to head of BBN (2008-2010) Robert Tomaszewski, Business Analyst MP (2011 – present)

Co-founder of KOR, friend of Macierewicz. Naimski started Influential deputy MinEcon. When PiS came to power in 2005, work at the Polish Academy of Sciences’ Institute of Bioche- Naimski became deputy MinEcon and the government pleni- mistry and Biophysics in 1975. He was an active member of potentiary for the security of raw materials deliveries. Altho- the opposition: after the events of June 1976 in Ursus and Ra- ugh Woźniak was the minister, Naimski was considered to be dom, he organised help for repressed workers. He co-founded the most influential person at the ministry. He came up with the Workers’ Defence Committee (KOR) and the Mazowsze the concept of an LPG terminal in Świnoujście and had influ- branch of Solidarność. After receiving his PhD in 1981, he went ence over state companies – critics accused him of giving jobs on a scholarship to the US. He returned to Poland after three to his colleagues from UOP. When PO won the 2007 election, years and continued his activity in opposition. Naimski moved to Lech Kaczyński’s PresChan and became adviser to the head of Office for National Security and a mem- Supporter of vetting, head of UOP. After the fall of commu- ber of a team for energy security. nism, Naimski became involved with the right. In 1992, he joined Jan Olszewski’s Cabinet upon Macierewicz’s recom- Main energy expert for PiS. Naimski formally joined Jarosław mendation, initially as the deputy MinInt, then as head of the Kaczynski’s party in 2011, when he first won a parliamenta- Office for State Protection (UOP) – the predecessor of ABW ry seat running from the PiS list. He quickly emerged as the and AW. He only held the post for four months, but became main expert for the party on energy matters. He has never known as a radical supporter of lustration. He was involved, built any faction around himself within PiS, instead relying on among other things, in the preparation of the so-called Ma- close collaborators, who included, among others, Przemysław cierewicz list, which included the names of people in top po- Wipler, Krzysztof Rogala (now head of the MinFin’s political sitions in the state who were accused of ties with the secret office), Antoni Fałkowski and Maciej Woźniak (manager with police under communism. After its publication, a scandal PGNiG). Before the October election, he was an almost cer- erupted which led to the collapse of the Olszewski govern- tain candidate for MinEner, but the ministry finally went to ment on June 4, 1992. Krzysztof Tchórzewski.

Academic teacher in Nowy Sącz and expert on gas. After leaving UOP, Naimski became the head of the conservative TO SUM UP Atlantic Club and has been lecturing in political science at According to our information, at the end of this year the Academy of Business in Nowy Sącz. In 1999, Jerzy Buzek on in early 2016 Naimski will become secretary of appointed him as advisor for energy security. Naimski focused state in PMChan and government plenipotentiary on gas, working with Piotr Woźniak, an infrastructure advi- for energy infrastructure. Formally, he will be re- ser and, at the time, the deputy head and the present head of sponsible for supervising PSE, Gaz-System and Pol- PGNiG. Both recommended that Poland should become inde- skie LNG, which is the operator of the LNG terminal pendent of Russian gas by building a pipeline from Norway. in Świnoujscie – he will decide on who runs these The project was abandoned after SLD came to power in 2001. companies. In addition, he will have a big impact on the energy policy of the government. If Tchó- rzewski does not succeed with the restructuring of the mining industry, Naimski will be his successor.

Polityka Insight – Energy Report January 2016 6 GOVERNMENT Michał Kurtyka, deputy minister of energy The new deputy minister of energy will be responsible for European matters. Negotiations with Brussels on Born: July 20, 1973 state aid for mines and climate package will fall to him. Education: PhD, University of Warsaw Managerial CEO, BPI (2002-2012) experience: Chair of Supervisory Board, BPI (2012-2015)

Robert Tomaszewski, Business Analyst

Physicist and UKIE officer.Michał Kurtyka comes from Kra- Non-partisan professional. Kurtyka has never been a member ków. He graduated in physics at the elite École Polytechnique of any political party, nor has he been associated with any po- in Paris and in economics at the Warsaw School of Economics. litical circles. Our sources say that he “has anti-communism in He started his career in 1998 in the Office of the Committee his genes” but never demonstrates his political views openly. for European Integration (UKIE), where the present MinDev, During the first PiS government, he was deputy chairman of Mateusz Morawiecki was also working at the same time. Kur- the supervisory board of the state-owned Gaz-System (2006- tyka was quickly promoted: within two years he moved from 2008). In July 2015 he took part in the PiS programme confe- being a trainee to become head of the analysis department. He rence in Katowice, where he gave a speech on energy security. was responsible for issues related to energy and transport in He is on friendly terms with Piotr Naimski, the government the accession negotiations. plenipotentiary for energy infrastructure. Kurtyka was offe- red the position of deputy minister by the head of MinEner, President of BPI and expert in EU talks. After leaving the Krzysztof Tchórzewski. UKIE, Kurtyka worked for two years as a researcher at the University of Warsaw. In 2002 he moved to the private sec- Supporter of gradual shift away from coal. At the PiS congress, tor and became head of the Polish branch of BPI Group, an Kurtyka said that Poland’s energy security should be based “on international consulting firm. He specialised in advising on a gradual diversification of production methods and energy mergers, acquisitions and corporate restructuring. Our so- generation.” According to him, this has to be a process slow urces emphasise his considerable negotiating skills; he lead enough to not lead to an uncontrolled increase in energy pri- talks with unions at LOT over a new collective agreement in ces, but also fast enough to give an opportunity for the deve- 2009, among others. In addition, he has also worked for Ener- lopment of indigenous renewable technologies. At the same ga, Enea, Tauron and PKN Orlen. time, Kurtyka stands in favour of faster electrification of road transport. In his view, a gradual adjustment of the automotive Expert in energy and in cooperating with EurCom. In 2011, he industry to the production of electric cars will boost the deve- founded his company, Energy Design, dedicated to long-term lopment of energy storage technologies and reduce Poland’s analysis of the energy market. He undertook various work, dependence on imports of Russian oil. including preparing analyses for EurCom on restructuring selected companies in Central Europe. Since his days at the UKIE, he has kept up good contacts in the EU institutions. In TO SUM UP 2013, LOT CEO, Sebastian Mikosz, hired Kurtyka to support Michał Kurtyka will strengthen the ministry in efforts in Brussels to secure EurCom approval for the airline’s substantive terms and improve its relations with rescue plan and to allow aid from public funds. Brussels. His main task will be to negotiate directi- ves of the energy union, the drafts of which EurCom is expected to present in 2016. He will probably also be responsible for the Polish position on reducing emissions in the sectors outside the ETS and take part in discussions about state aid for coal mines, led by deputy ministers Grzegorz Tobiszowski and Wojciech Kowalczyk. His appointment signals that Beata Szydło’s government wants to be a reliable partner in talks on energy to Brussels and will most likely give up on the radical idea of Poland’s exc- lusion from the EU’s energy and climate package.

Polityka Insight – Energy Report January 2016 7 STATE-OWNED ENTERPRISES

Who are the new executives 7 January 2016 Mirosław Kowalik became CEO of Enea of state utilities 4 January 2016 Dariusz Kaśków became Energa CEO On the last day of 2015, the PiS government 31 December 2015 replaced the heads of Gaz System and PSE. Eryk Kłossowski became CEO of PSE Two days earlier, changes swept through 31 December 2015 Tomasz Stępień became CEO Enea and Energa management boards. of Gas-System

Robert Tomaszewski, Business Analyst

The new head of Gaz System is a philosophy graduate from the Jagiellonian University. He has worked at the company since 2008, The new head of Energa is a graduate of Uni- and, among others, has been responsible versity of Silesia Law department. He began for preparations to build underground storage his career in the local government adminis- facilities. Earlier on, he worked at PGNiG in tration – in 1991-2006 he served as deputy the diversification department. He is one mayor and mayor of Głubczyce (Opolskie of the closest associates of Piotr Naimski. voivodeship) and a chief executive of SKOK Tomasz Stępień When the latter was deputy MinEcon in the Krapkowice. In the 1990s, he was a member Gaz-System first PiS government in 2005-2007 Stępień of Unia Wolności, having later switched was his advisor and a deputy director at the Dariusz Kaśków to PiS. In the party, he was linked to Adam department for diversification of energy Energa Hoffman and Adam Lipiński. During Jarosław resources. He also sat on supervisory boards Kaczyński’s government, Kaśków acted for of Nafta Polska and Gazoprojekt. He will several months as deputy and acting CEO replace Jan Chadam, who will be leaving of Energa Operator (a distribution arm of the company. Energa). In November 2007, just after PiS lost the elections, he briefly sat at manage- ment board of KGHM. Most recently, he was a Głubczyce councilman and a director at Kłossowski is a Warsaw University law Zakład Aktywności Zawodowej in Branicach. school graduate. He specialises in energy Roman Pionkowski, Energa’s current acting and competition laws, speaking as an expert CEO will become the company’s chief strate- on issues of transportation and infrastruc- gy officer (CSO). ture. Between 2000 and 2003, Kłossowski was tied to E&Y and for three more years he worked at the Domański, Zakrzewski, Palinka law firm. He finished attorney apprentice- He moves to Enea from SNC-Lavalin Polska, Eryk Kłossowski ship in 2005 and moved to JPDI law firm, an international company building energy in- PSE at which he was one of the founders. In 2011, frastructure, where he worked in 2004-2008 he became a head of legal department at and from July 2015, dealing with project de- United Oil Services, a Polish exploration and velopment. He has been sitting on a board of production oil and gas company. He was tied Energy and Environment Protection Chamber to a right wing think-tank, the Jagiellonian of Commerce since 2002. Between 2008 and Institute, and lectures at Collegium Civitas, June 2015, he was a marketing and sales di- and Warsaw University of Technology. Kłos- Mirosław Kowalik rector at Alstom Power’s Polish unit. Henryk sowski replaced Henryk Majchrzak, who left Enea Baranowski, the current deputy MinTrea, who the company. oversees Enea, was a business development director at the same company since 2013. Kowalik will start as the CEO on January 7, with the current acting CEO Wiesław Piosik remaining on the management board, and will be responsible for corporate affairs.

Polityka Insight – Energy Report January 2016 8 FORESIGHT What’s next for the energy sector Further changes at state-owned companies, the integrated procedure for nuclear power plant construction, amendments to the RES bill – these are the topics that will make rounds in the energy sector in the coming weeks.

At the turn of January and February the government is like- energy production sector. The French EDF seeks potential buy- ly to present detailed assumptions of the establishment of ers for its coal-related assets. Electrical power and heating Nowa Kompania Węglowa. Beata Szydło’s Cabinet has with- plants in Kraków, Gdańsk, Gdynia, Zielona Góra, Toruń and drawn from the idea of TF Silesia taking over the unprofitable Wrocław have been put up for sale, as well as a large power mines – it will, in turn, become a stakeholder in NKW. The new plant in Rybnik. The transaction could be completed before company will also see the involvement of Węglokoks, as well June 2016. as state-owned utilities. MinTrea does not exclude the mines receiving financial support from PZU and PKO BP as well. NKW The coming weeks will bring further personnel changes in state- is set to be created at the turn of March and April at the latest. owned companies. Until January 25 the call for applications is open in the competition for members of the new manage- Meanwhile, the proces of reducing extraction in some of the ment board of PGNiG. Interviews with selected candidates are mines has been ushered in, although on a limited scale. Until the scheduled to take place between 8 and 19 of February. The end of February, one of the mineshafts of the Wieczorek min- frontrunner for the post of company’s CEO is Piotr Woźniak, ing site, owned by Katowicki Holding Węglowy, will be moved to who is currently the acting CEO of the group. Other manage- the Mines’ Restructuring Company (SRK). The move will allow ment positions will most likely be given to Bogusław Marzec, the company to save PLN several million annually. Already in Janusz Kowalski and Maciej Woźniak. 2015, KWH has transferred to SRK the segments of the already dissolved “Mysłowice” mining site, as well as the “Boże Dary” Enea and Energa aim to complete their managements as well. segment from the “Murcki-Staszic” mine. Other sites which will The former company announced a competition for deputy likely be gradually silenced include “Pole Bojków”, owned by the chairmen – for financial and commercial affairs. Competitors “Sośnica” mine, the “Anna” shaft, owned by “Rydłutowy-Anna”, have time until January 20 to submit their bids, while interviews as well as the “Pawłów” shaft from the “Bielszowice” mine – all will take place on January 21 and 22. Energa, in turn, seeks dep- the aforesaid belong to Kompania Węglowa. uties for investor relations and corporate affairs. Deadline for application submission runs due on January 18, while interviews Between January 28 and February 26, Fortum – a Finnish en- between candidates and supervisory board members will be ergy company – will be accepting inquiries for the shares of conducted until January 23. Duon, one of Poland’s biggest private sellers of gas and elec- tricity. It will not be a hostile takeover – Fortum itself is seeking a strategic investor since October 2015. Changes also await the

THINGS TO WATCH: On January 27 the extraordinary general shareholders’ meeting will take place in Lotos. On January 28 PKN will publish its report for Q4 2015. On January 28 subscriptions open for the shares of Duon, upon the call of Fortum. On January 29 the extraordinary general shareholders’ meeting will take place in Lotos.

Robert Tomaszewski Business Analyst (+48) 22 436 73 14 [email protected]

Polityka Insight – Energy Report January 2016 9 Polityka Insight is Poland’s leading provider of executive-level analysis – our daily service is read by leading CEOs, Cabinet ministers and ambassadors in Warsaw.

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A quick PaUNnKsTYw KLeUCrZ tOoWE your question in PI’s proven one-page format – coherent and to Wymiana gotówki w obiegu - 190 mln euro. Nie ma dokładnych wyliczeń, ile kosztowałoby wycofanie złotówek i zastąpienie ich banknotami oraz To learn more about monetami euro. Łotewski Bank Centralny oszacował te koszty na 12 mln łatów - czyli 17 mln euro. W Polsce w obiegu jest 11 razy więcej gotówki niż na Łotwie, dlatego też wydatki byłyby znacznie większe - około 190 mln euro. Jednocześnie, im dłuższy będzie okres przejściowy, kiedy obie waluty będą w obiegu, tym wyższe koszty poniesie sektor bankowy. Wedle szacunków NBP z 2009 r. przy dwutygodniowym okresie przejściowym PI Research please contact koszty te wyniosłyby 0,14 proc. PKB i 0,26 proc. przy okresie półrocznym. our sales department: Wpłata do EBC - 5,5 mld euro. Polska musiałaby wpłacić 555 mln euro na kapitał własny Europejskiego Banku Centralnego - udział Polski, wy- liczony na podstawie liczby ludności i wielkości PKB, wynosi 4,86 proc. (20 mln euro już zostało wpłacone z tytułu członkostwa w Unii). Z chwilą wstąpienia do strefy euro NBP przekazałaby też EBC część rezerw walutowych - wedle odpowiedzi MinFin na interpelację poselską z lutego 2013 r. do F - nalną do posiadanych udziałów w kapitale. Anna Puchacz Wpłata do ESM - 5,2 mld euro. Wchodząc do unii walutowej, Polska musiałaby zostać udziałowcem funduszu ratunkowego strefy euro - Europej- - Director of Sales tylko 5,2 mld euro (reszta kwoty byłaby wymagalna na żądanie funduszu). Gdyby Polska należała do unii walutowej przed kryzysem, na pierwszy pakiet ratunkowy dla Grecji musiałaby przekazać około 5,5 mld euro. Wpłata na SRF - ponad 1 mld euro. Wchodząc do strefy euro, Polska będzie musiała przystąpić do unii bankHowej. iWspólgnyh- nadzór polwstajee vel +48 602 42 00 14 idzie, dodatkowych wpłat stolic. Realne zobowiązania przyniesie wspólny mechanizm restrukturyzacji banków, ale dopiero w 2026 r. Krajowe [email protected] fundusze restrukturyzacyjne zostaną wówczas połączone w jeden fundusz unijny (SRF). Bankowy Fundusz Gwarancyjny będzie musiał przekazać do SRF równowartość 1 proc. wartości depozytów gwarantowanych w Polsce - dzisiaj byłoby to około 1,2 mldr oeuro. undtables Niższe wpływy NBP. Po wejściu do strefy euro w Polsce obowiązywać będą stopy procentowe EBC - dziś są one niższe o 2,25 pkt proc. niż stopy NBP. Redukcja stóp spowoduje niższe wpływy z pożyczek udzielanych bankom przez NBP, ale w ślad za stopami spadnie też rentowność polskich obligacji, co przyniesie oszczędności dla skarbu państwa. Obecnie rentowność 10-letnich obligacji Niemiec wynosi 1,9 proc., a polskich - 4,4 proc. Jeśli Polska wejdzie do unii walutowej, rentowność polskich obligacji spadłaby do poziomu około 2,2 proc. On client’s request we organise closed

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