Poland's power grid to span the east-west divide
Some households and businesses throughout Germany will soon be getting electricity from Poland, Russia, and Lithuania, all of which will travel through Poland's power grid and be overseen by a new joint venture called Polenergia.
Power grid company Polskie Sieci Elektroenergetyczne (PSE), Kulczyk Holding and Germany's PreussenElektra will each take a 33.3% stake in the new company, which is expected to begin transporting energy through Poland's power grid sometime in the next few months.
"The trading activities are a very effective instrument for cross-optimization," said a PreussenElektra spokeswoman who asked for her name to be withheld, explaining that energy producers are always on the lookout for deals that beat their own production costs. And just as important in this case, the spokeswoman said, "the main intention of the deal is a closer cooperation between Eastern European countries and Western European countries."
With electricity production costs in countries east of Poland 50% lower than production costs in Germany, and transport costs absorbing only 10% of those savings, integration probably looks even more inviting, said Pawel Zach, senior research analyst at Citibank (Poland). "(Germany's) market is at capacity. They're just looking for cheaper sources," Zach said. "PreussenElektra could sell (the electricity) to other entities."
Energy trading is nothing new and was common among Soviet-bloc countries before 1989, Zach said. PSE has been trading electricity internationally since 1995, according to its corporate Web site.
PreussenElektra actively trades energy with Western European countries and even has its own trading floor, the company spokeswoman said. She was not certain if the company has gone east for power prior to the Polenergia partnership.
The agreement spells out that 50% of the 10,000 Megawatt hours (MWh) of electricity being exported will be generated in Poland and the other half in the Commonwealth of Independent States (CIS), Lithuania and possibly other Eastern European neighbors, Zach said. The energy will transit through Poland's existing power lines.
Poland should benefit from this arrangement, Zach said, as only 60% of the country's 33,000 watts of installed capacity are needed during peak consumption hours. Polenergia energy surging through Poland en route to Germany will equal 4% of Poland's yearly production. Energy exports account for less than 4% of overall Polish production, Zach said.
Also, Zach said, PreussenElektra has agreed to purchase some 4 million tons of coal annually from Poland, a significant amount considering Poland currently exports a combined 5 million tons each year. The economy ministers of both Poland and Germany, Janusz Steinhoff and Werner Muller, respectively, gave their blessing to Polenergia and were present as the venture was signed into being.
In related news, Poland's Energy Regulation Office (URE) reported last week that energy producers fared better in 1999 than energy distributors that rely on treasury-owned PSE's management of the national power system and its long-term contracts with private energy producers. Producers saw profit of zl. 1.1 billion ($268.3 million) while distributors grossed only zl. 89 million ($21.7 million).
URE President Leszek Juchniewicz announced that although the energy sector is short on capital, he would not allow energy companies to raise rates by 30% as had previously been suggested by numerous energy companies. Rate increases of 12-13% are more likely, he said.
