Construction of Unit C at the Ostrołęka Power Plant. The Supreme Audit Office announces notification to the prosecutor's office.

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The operations carried out by the Ostrołęka Power Plant’s management board concerning the cessation of the Ostrołęka C coal-fired unit’s construction and the resolution of the halted investment were deemed unlawful and wasteful, as stated by the Supreme Audit Office (NIK) on Monday, following the release of their audit findings. The NIK has indicated that it will forward the issue to the prosecutor’s office.

The report indicates that the management board, against the company’s interests, approved the general contractor’s claims totaling over PLN 958 million net, without validating either their legitimacy or the amounts.

NIK notes that the motivation behind such actions was the intention to finalize the investment swiftly, which was meant to facilitate the initiation of the subsequent project – the construction of a gas-steam unit designed to utilize natural gas for electricity generation instead of coal.

Notification to the prosecutor’s office

In light of the audit results, the Supreme Audit Office is preparing to notify the prosecutor’s office regarding a suspected offense that involves causing substantial financial harm to Elektrownia Ostrołęka by the management board members due to their failure to execute their responsibilities.

The audit further revealed that the management board provided misleading information to its principal shareholders – Enea and Energa – by presenting incomplete and inaccurate cost data. The reported PLN 958 million solely included settlements with the contractor and excluded legal expenses, among others.

The Supreme Audit Office identified a significant irregularity during the recent audit, which was the agreement and closure of the investment without adhering to the contractual stipulations related to the Ostrołęka C Power Plant construction, which has a capacity of roughly 1,000 MW, thus compromising the interests and assets of the company.

„Procedures were established that obstructed or even rendered it impossible for the company’s management and staff to adequately assess the legitimacy and amounts of the claims put forward by the main contractor. The management consented to adopt terms that were detrimental to the company while being aware of the challenges and issues connected to the quality of the project documentation provided. They also relinquished the right to impose penalties for contractual breaches, as outlined in the contract,” reported the Supreme Audit Office (NIK).

The Chamber highlights that two previous audits pertaining to the establishment of a new power unit at this facility were conducted by the Supreme Audit Office in 2020 and 2021. Both concluded with negative evaluations for all entities audited, whose actions or inactions led to an irrecoverable loss exceeding PLN 1.3 billion due to the investment.

Read also: The bill for Ostrołęka. A billion-dollar loss that could have been avoided. >>>

Controversial investment

The initiative to construct a significant coal-fired unit at the Ostrołęka Power Plant, owned by the energy company Energa, was first outlined in Energa’s strategy covering 2008-2015. In December 2011, Energa announced a bid for a contractor, and in 2012, the project was halted due to challenges in securing financing.

The plan for Ostrołęka C was revived in 2016, following the rise of the Law and Justice party (PiS) to power. The 1,000 MW hard coal-fired unit was intended to be jointly constructed and operated by two state-controlled energy firms: Energa and Enea. In April 2018, a consortium of GE and Alstom was selected as the contractor at a gross price of PLN 6 billion. Initial groundwork officially commenced in October 2018, just five days prior to the last local elections.

The Notice to Commence Construction (NTP) was issued on December 30, 2018. In December of that year, Enea committed PLN 1 billion, while Energa pledged at least PLN 1 billion. By late 2019, PKN Orlen expressed its intention to acquire Energa, and then-Minister of State Assets Jacek Sasin affirmed that the investment would proceed, although full financing for the project was still being sought.

In February 2020, the investors, Energa and Enea, halted financing for the Ostrołęka C project. Both companies recorded write-downs linked to the project, with Energa writing down PLN 876 million and Enea PLN 647 million. By June 2020, both firms decided to abandon the construction of the hard coal-fired unit in favor of a gas-fired unit, and in December of that year, Enea completely withdrew from the investment. State-controlled companies PKN Orlen, Energa, and PGNiG remained shareholders.