Polenergia and Equinor start construction of Baltyk 2 and 3 offshore wind farms

"We have just made the final investment decision at the level of the Baltyk 2 and Baltyk 3 OWF companies (...) The development phase has already ended with obtaining all the necessary permits," Polenergia's CFO Piotr Sujecki said.

"We have contracted practically all elements related to the construction of the farms, all level one subcontractors have been selected. (...) We are moving from the development phase to the construction phase," he added.

The Baltyk 2 and Baltyk 3 are offshore wind farm projects with a planned maximum capacity of 720 MW each being developed by Polenergia together with Equinor under the joint venture formula, in which each partner holds a 50 percent stake.

The Baltyk 2 offshore wind farm is expected to become commercially ready in the first half of 2028 and the Baltyk 3 offshore wind farm - in the second half of 2028. First power generation from both projects is planned for 2027.

The combined budget of the two projects fluctuates around EUR 6.4 billion (Polenergia accounts for 50 percent), excluding financing costs during construction.

On Wednesday, the project companies of offshore wind farm Baltyk 2 and offshore wind farm Baltyk 3 concluded agreements for financing the construction of offshore wind farms in the total amount of EUR 5.8 billion.

The financing period covers the construction period and a further 22 years. The agreements were signed with a consortium of around thirty Polish and foreign financial institutions.

"We have fully funded the project from the side of both capital contributions from the two partners in this project, as well as having fully secured financing from a broad consortium of Polish and foreign institutions," CFO Sujecki said.

He added that Polenergia assesses that the financing conditions are favourable and that the financing period is exceptionally long.

"Financing has been arranged for the period of both the construction of the wind farms and for the next 22 years, which in practice means financing for about 25 years," Sujecki reported.

Polenergia's CFO said that the company has also achieved a very satisfactory level of financial leverage.

"Taking into account the equity capital contributed to date, as well as the capital we will still be contributing in the future during the construction period, the financial leverage oscillates around 80 percent," Sujecki said.

"This is a very high level, but at the same time one of the best that is possible in the market today. You can see that the sentiment of financial institutions to finance this type of investment is still very solid and it is possible to obtain financing that covers such a large part of the project budget requirement," he added.

CFO Sujecki indicated that interest rate risk had been hedged.

As he reported, demand from financial institutions was very strong.

Sujecki continued that the project is fully funded on the equity contribution side in terms of equity contributions.

"To date, we have contributed approximately PLN 2 billion of equity to the two projects. In addition, we are securing future capital contributions to be made to the project in further phases of implementation, rather in the period 2027-28," the CFO said.

"We secure this amount, which today oscillates around EUR 145 million, by contributing to a dedicated escrow account," he added.

Sujecki said that Polenergia has already raised this cash well in advance.

"The measures we have implemented in the area of bond issuance or the national recovery plan KPO loan have meant that we have fully closed financing for the construction of both farms at this point," Sujecki added.

As stated, in the event of project cost overruns or lower than expected cash flows during the start-up period of the projects, the company may be required to make an additional capital contribution of up to EUR 280 million.

To this extent, the obligation will be secured by bank guarantees issued on behalf of the company and a corporate guarantee.

The project companies will have the possibility to use additional and standby credit lines totalling approximately EUR 230 million in the case of OWF Baltyk 2 and approximately EUR 240 million in the case of OWF Baltyk 3.

"We are prepared for a situation where there may be contingent additional financing needs for this project. Part of this is covered by, among other things, debt arranged under signed loan agreements," the CFO said.

"We have secured part as Polenergia by issuing bank guarantees and corporate guarantees," he added.

Representatives of the company did not want to disclose the load factor for both projects.

They also said they would not provide details of the business plan assumptions, including OPEX, at this stage.

According to Polenergia's COO Lukasz Buczynski preparations are underway to participate in the auction of the Baltic 1 offshore wind project, with a capacity of up to 1,560 MW.

"In the first quarter of this year, we recapitalised the Baltyk 1 project company with an amount of PLN 45 million and the total value of the capital put into this company is PLN 215 million," he said.

"We hope that in June Poland's energy market regulator URE will announce an auction date for December," the COO added.

Buczynski said that Polenergia, together with its partner Equinor, will certainly be ready for this auction.

"It is very important not only for us, but also for all the other investors, that this auction can actually take place this year, so that synergies can be achieved in the implementation of the current phase of offshore projects with this phase in preparation," he added.

pel/ han/ ao/