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UPDATE 1-Poland's PKN Orlen switches last coal power project to gas

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OSTROLEKA, Poland, June 25 (Reuters) - Polish state-run refiner PKN Orlen will build a gas, not a coal-fuelled power plant in Ostroleka by 2025, with capex seen at 2.5 billion zlotys ($661.55 million), the company’s Chief Executive Daniel Obajtek said on Friday.

Warsaw had planned the power plant in north-east Poland would be fuelled by coal, but a surge in the price of the carbon permits utilities need to pollute in Europe forced the companies behind the project to change the fuel.

The plan to build a coal-fuelled power plant was initiated by state-run utility Energa in 2009 but abandoned because of financing problems.

It was revived in 2016, when it was dubbed the last coal power plant in Poland, with capex related to building a 1 gigawatt unit seen at around 5 billion zlotys.

Construction began, but after PKN Orlen took over Energa in 2020, it signalled the fuel for the plant might change. Opposition parties and activists, opposed to the coal plant, have accused the ruling Law and Justice (PiS) party and state-run companies behind the project of wasting public money.

“The losses related to continuing the investment would be bigger than stopping it,” Obajtek told a press conference. “A smart company has the right to withdraw when it sees the risks.”

Carbon emission prices were 5-7 euros per tonne when investment began, he said. Now they exceed 55 euros.

Poland, which relies on coal for most of its power, sees gas, which is less carbon intensive, as a transition fuel pending a switch to emissions-free nuclear and renewable generation.

PKN Orlen says its project falls under the government’s plan to cut emissions, but environmentalists, who criticised Ostroleka from the start, say the use of gas will not deliver emission cuts fast enough.

$1 = 3.7790 zlotys Reporting by Karol Badohal; Writing by Agnieszka Barteczko; editing by Barbara Lewis

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