PGE and Ørsted are taking another step towards building offshore wind farms

The agreement, which is non-binding, will be the basis for further negotiations between PGE and Ørsted, which are to lead to agreement on detailed transaction documentation, including:

• scope of cooperation in the implementation of projects at the stage of construction, operation and maintenance of Baltica 3 and Baltica 2 wind farms;
• principles of the joint project team consisting of representatives of both companies and division of the competences thereof;
• framework of the transaction of the sales of 50% of shares in the two companies: Baltica-3 Wind Power Plant (EWB3) and Baltica-2 Wind Power Plant (EWB2).

PGE Polska Grupa Energetyczna, through the PGE Baltica special purpose vehicle, is implementing a program to build three offshore wind farms in the Baltic Sea:

• Baltica-3 Wind Power Plant (EWB3) with a connection agreement with PSE for 1 045 MW.
• Baltica-2 Wind Power Plant (EWB2), which in January 2019 received a proposal from PSE for technical conditions of connection to the National Power System for 1 498 MW.
• Baltica-1 Wind Power Plant (EWB1) with a planned capacity of up to 900 MW.

Ultimately, PGE intends to sell to a selected strategic partner 50% of shares in two companies – EWB3 and EWB2 – and then jointly manage them in the form of a joint venture with the partner. The purpose of cooperation is also building competence by PGE Baltica so that in the future the company could implement offshore projects independently.

The process began in December 2018, when PGE Baltica invited potential business partners to negotiations. At the end of January 2019, the first stage of the selection was closed, in which a dozen or so willing to negotiate companies from the global offshore industry entered.

In September 2019, during the Economic Forum in Krynica, Henryk Baranowski, the president of the board of PGE Polska Grupa Energetyczna, confirmed that the next stage of selecting a partner for investment in offshore is underway – there were four companies on the negotiating list at the time.

On October 22, 2019, the Management Board of PGE Polska Grupa Energetyczna decided to start negotiations with one entity – the Ørsted company – regarding sales of 50% of shares in two projects with a total capacity of up to 2.5 GW, as well as on determining the terms of cooperation in the implementation thereof.

By the end of the year, the parties were to decide to continue negotiations. The parties will now sit at the negotiation table to discuss the details of the potential transaction. The course and duration of the negotiations will also depend on the process of creating a legal framework for offshore wind energy in Poland.

The offshore wind energy project in the PGE Capital Group consists of:

• PGE Baltica – as a competence centre for offshore wind energy in the PGE Group; company responsible for the operational implementation of the Offshore Program, including the development of investment projects for the three design companies of Baltica Wind Power Plant.
• Three design companies (SPVs) – Baltica-1 Wind Power Plant (EWB1), Baltica-2 Wind Power Plant (EWB2) and Baltica-3 Wind Power Plant (EWB3).

All three companies – EWB 1; EWB 2; EWB 3 have location permits (permits for the construction of artificial islands) enabling the construction of offshore farms in designated areas of the Baltic Sea. For EWB-3 and 2, a procedure is in progress to obtain a decision on environmental conditions. What is more, in December 2019, PGE Baltica launched an innovative research project on the impact of wind slowdown caused by large offshore wind farms in its surroundings (so-called blockage effect). On this basis, it is possible to accurately estimate the future productivity of Baltica 3 and Baltica 2 wind farms.