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ClientEarth issues further warnings regarding Ostroleka C

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World Coal,

ClientEarth has issued a further legal warning to Polish energy companies Enea and Energa as they prepare to bid for state subsidies for controversial coal power plant Ostroleka C.

The lawyers say proceeding with the project risks ‘irreparable damage’ to the companies, whether the plant secures capacity contracts in the auction on 21 December or not.

ClientEarth is already taking legal action against Enea over the Ostroleka C project, saying it poses unjustifiable financial risks to shareholders.

Financing for the project remains unclear, with the most recent financing structure having expired at the end of last month. There are fears that the companies may have to contribute more than the earlier announced PLN 1 billion each – which ratings agency Fitch has warned “could lead to negative rating action.”

Meanwhile, participating in the capacity market auction, which the companies intend to do this week, also carries risks.

On the current 56 month construction schedule, the plant will not be built in time to provide capacity when due, if a contract is won. This would result both in foregone payments and repeat financial penalties. Its contract would also face termination in the event of further delays or failure to meet what Energa described as a “very challenging” financial milestone. Energa itself has acknowledged that the capacity market “is not perfectly suited for Ostroleka C.”

But without capacity payments, it is extremely hard to understand how the plant could possibly proceed.

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