BDM Brokerage started issuing recommendations for Energa with "reduce". The reason for the negative recommendation is the continuous lack of financing for Ostrołęka C, many months of delays in the construction of the power plant and the associated future penalties.
"In the medium/long term, we see a risk of a significant increase in the CAPEX in Wytwarzanie related to the implementation of strategic projects such as Ostrołęka C and 3 smaller gas units. Thus, we issue a Reduce recommendation for a company with a target price of PLN 8.4 per share," BDM Brokerage analysts write in their recommendations.
The authors of the report draw attention to the lack of financing for this project and another serious problem of Energa - the construction of Ostrołęka C power plant is to last 56 months, which means a delay of about 8 months. Commissioning of the power plant on 1 January 2023, to which the company was obliged after having won an auction on the capacity market, is virtually impossible and will have serious consequences:
"The current lack of financing for the strategic Ostrołęka C 1000 MW project and the reluctance of other investors to participate in this investment may lead to greater financial involvement of Energa, as allowed by the amendment of the investment agreement of 28.12.2018. Moreover, the commissioning of the unit after 2023 may lead to failure to meet the power obligation which entails considerable penalties and, in consequence, reduces the expected NPV."
The analysts recall the cases of other power plants: unit 11 at the Kozienice, Opole 5/6 and Jaworzno B7, the construction of which lasted from 63 to 68 months and in the latter two cases the assumed costs were exceeded by about PLN 2 billion.
This is another financial institution which warns about the negative consequences that the construction of the Ostrołęka C power plant will have for Energa. In July 2018, EuroRating Agency lowered Energa's credit rating in response to the utility signing an agreement with the general contractor of Elektrownia Ostrołęka C, and recommended to resign from its construction at the earliest possible stage of the investment process. Interestingly, in the report for 2018 issued on 13 March, the Management Board of the Energa Group remains silent about this fact, only informing about the maintenance of the rating by Fitch Ratings. It should be emphasized that Fitch announced its positive rating on March 21, 2018, i.e. before the tender was resolved and also before the publication of the first of the series of reports confirming the unprofitable and deep unprofitable nature of Ostrołęka C, not to mention the issuance of the Work Commencement Order, which took place only at the end of December 2018.