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Pursuant to the contract, ENERGA will organise the construction of the CHP plant and hold a majority interest in a special purpose vehicle established for that purpose, PGNiG will provide fuel, while LOTOS Group will be the main customer of the plant. Accordingly, following the completion of 10+ Programme, the CHP plant will provide electricity and steam for the expanded refinery.

The modern CHP plant will also contribute to the energy balance of Pomerania region as well as to the national energy security.

The facility will be the second largest, electricity capacity-wise, gas-fired CHP plant in Poland. Its annual heat production is to exceed 5m GJ, while the electricity production is to exceed 1.5m MWh. This means additional 1.05m MWh for the electricity market (allowing for the energy needs of LOTOS Group). The produced energy will suffice for no less than 330 thousand households.

The annual plant’s demand for natural gas is estimated at 370m Nm3. The planned technological solutions will be characterised by a low environmental footprint, in line with the EU Climate and Energy Package.

Due to the high purity of gaseous fuel, pollution in the form of sulphur oxides or dust will be virtually non-existent, while carbon dioxide emissions of the plant will be 40 percent lower than those generated by a coal-fired plant having the same capacity.

 ‘This investment project gives us an opportunity to implement other development programmes at our refinery in Gdańsk’, says Paweł Olechnowicz, President of LOTOS SA Group. ‘The new consortium is another important step in the, vital to the region and energy sector companies, cooperation efforts, whose first result will be the planned CHP plant.’

‘The construction of new energy production facilities is a part of our development strategy. In the case of this investment project, it is particularly important that the plant will be constructed in the region with the highest electricity deficits, therefore improving the energy security of Pomerania region, all the more so in the light of the fact that we are planning further similar undertakings’, says Mirosław Bieliński, President of ENERGA SA.

Increased natural gas sales and expansion of the company operations to electricity projects are both important elements of our strategy. Through our involvement in this project, we gain a long-term customer for natural gas, which is important in the context of the expansion of the natural gas market in Northern Poland, especially in relation to the construction of the LNG terminal in Świnoujście’, says Michał Szubski, President of the Management Board of PGNiG SA.

Following the signing of the letter of intent in fall 2008, during the last 6 months the companies explored the opportunities for cooperation in the area of securing the increased energy demand of the LOTOS SA Group’s refinery in Gdańsk following the completion of 10+ Programme. In order to perform those tasks, a work team was established, with a purpose of preparing a preliminary study of technical and business feasibility of the undertaking.

Having prepared the preliminary feasibility study for the project, the companies jointly decided to implement the investment project on the project finance basis, without encumbering the balance sheets of the consortium members. This means that over 75% of the project’s worth will be financed by loans secured by long-term contracts warranting, respectively for each security interest, the deliveries of natural gas (PGNiG), purchases of heat and electricity (LOTOS) and purchases of electricity (ENERGA).

The companies also agreed to establish a special purpose vehicle for the project which will be directly responsible for the construction of the CHP plant. The shares in the SPV will be held by: ENERGA Group (60%), LOTOS Group (20%) and PGNiG (20%).

The signed schedule sets forth the following stages for the project implementation: preparation of feasibility study for the project – end of 2009, establishment of the SPV – beginning of 2010, preparation of documentation and bidding specification – fall 2010, award of an EPC/turnkey contract – spring 2011, CHP launch – fall 2013.

The Gdańsk joint energy undertaking complies both with LOTOS Group’s 10+ Investment Programme and ENERGA Group’s development strategy, which involves PLN 20bn investments, also in new energy production facilities.

10+ Programme, being implemented at the Gdańsk refinery, involves the construction of a number of new technologically advanced installations which would mainly enable a 75% increase of oil refining capacity, from 6 million to 10.5 million tonnes per year. Even now, the expansion of the Gdańsk refinery involves cutting-edge technologies, warranting a high efficiency of oil products desulphurisation and low environmental footprint. 10+ Programme is being implemented in cooperation with renowned companies such as Shell, Technip, Uhde, Fluor and Lurgi, which ensures that LOTOS Group will fulfil its aims related to sustained production of fuels and other oil products meeting the stringent EU requirements. The first installations constructed as a part of 10+ Programme will become operational as early as late spring 2009.

In line with its new strategy, in incoming years, ENERGA Group plans to invest approx. PLN 20bn, mainly in projects aimed at improving energy security. The investment plans include the construction of both conventional, coal-fired power plants, as well as smaller energy production facilities, some of them gas-fired. ENERGA Group also intends to invest in innovative distributed energy production, renewable gas energy production, i.e. biogas power plants, biomass power plants, wind farms and local hydroelectric plants. These investment projects will be implemented through ENERGA Group’s own efforts or in cooperation with external partners.

Joanna Zakrzewska, Spokesperson for Polskie Górnictwo Naftowe i Gazownictwo SA, ul. Kasprzaka 25, 01-224 Warsaw, phone (+48 22) 691 79 30, mobile (+48) 667 95 12 63, e-mail: rzecznik@pgnig.pl

Marcin Zachowicz, Spokesperson for LOTOS S.A. Group, ul. Elbląska 135, 80-718 Gdańsk, phone (+48 58) 308 75 70, (+48) 505 050 454, e-mail: marcin.zachowicz@grupalotos.pl

Beata Ostrowska, Spokesperson for ENERGA Group, ul. Reja 29, 80-870 Gdańsk, phone (+48 58) 347 39 54, (+48) 603 649 057, e-mail: beata.ostrowska@energa.pl, http://media.energa.pl