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PGE Polska Grupa Energetyczna: Europe's Coal Giant Betting Its Future on Baltic Winds
In central Poland, two hours south of Warsaw, a man-made canyon stretches across the landscape like a geological scar. Five thousand football pitches could fit inside its depths. Twenty-four hours a day, excavators the size of apartment buildings claw at the earth, extracting lignite—a soft, brown coal that looks like tree bark and burns like environmental poison. Above this pit sits the Bełchatów Power Station, a 5,472-megawatt behemoth that has, over its lifetime, released approximately one billion tonnes of carbon dioxide into the atmosphere. That's roughly equivalent to three full years of Poland's entire national emissions.
This is the heart of PGE Polska Grupa Energetyczna—Poland's largest power company, Europe's most coal-dependent major utility, and one of the most extraordinary corporate transformation stories unfolding anywhere in the world today.
PGE Polska Grupa Energetyczna S.A. is a state-owned public power company and the largest power producing company in Poland. The numbers are staggering: PGE holds a 38% market share in generation of electricity and an estimated 30% market share in supply in electricity. It supplies power to approximately 5.7 million households, businesses, and institutions.
But here's the central tension that makes PGE's story so compelling: How does Europe's largest coal-dependent utility transform itself into a green energy leader while keeping the lights on for 40 million Poles? The answer involves one of the largest offshore wind bets in European history, a political chess game over billions in stranded coal assets, and the inexorable pressure of carbon prices that have turned profitability upside down.
I. Poland's Coal Kingdom: The Historical Foundation
To understand PGE, you must first understand Poland's relationship with coal. It's not merely economic—it's existential, cultural, and deeply political.
When the Iron Curtain fell in 1989, Poland emerged from communist rule with one of the most coal-dependent energy systems on Earth. This wasn't an accident. Under Soviet influence, Poland had developed its abundant domestic coal reserves as a matter of strategic necessity. Energy independence from the West meant energy dependence on carbon.
The company was founded as Polskie Sieci Elektroenergetyczne S.A. (Polish Electrical Power Lines Share Company) in 1990—the year after the fall of communism. The timing was not coincidental. As Poland's economy opened to market forces, its electrical infrastructure needed to be restructured for the new reality.
The post-communist privatization wave swept through Eastern Europe, but Poland moved cautiously with its energy sector. Unlike oil and gas assets in neighboring countries that were quickly sold to foreign investors, electricity remained largely in state hands. The thinking was straightforward: electricity is too essential to national security to be owned by outsiders.
Despite this growth, coal continues to be the primary source of electricity, accounting for almost 57% of Poland's energy mix last year, the highest proportion in the European Union. Poland remains the European Union's most coal-dependent country and the only member state without a coal phase-out date.
This coal dependence isn't stubbornness—it's strategy born of geography and history. Poland sits on some of Europe's largest coal reserves. For a country that spent decades under Soviet energy control, domestic coal represented freedom. Even today, with Russia's invasion of Ukraine making energy independence newly urgent, Polish policymakers remain deeply conflicted about abandoning their coal heritage.
The Bełchatów complex exemplifies this. Bełchatów Power Station is a coal-fired power station near Bełchatów, Poland. It is Europe's largest coal-fired power station as well as the most toxic one. Opened in what was then the Polish Peoples' Republic in 1980, Bełchatów grew to become the biggest coal mine and coal power station in Europe.
At its peak in the 1980s, the Bełchatów complex employed tens of thousands of workers. Some 20,000 people work in the Belchatow plant, nearby mines and in other related jobs in the region. Belchatow also generates around 20% of Poland's electricity.
For investors evaluating PGE today, this history matters enormously. The company isn't simply running coal plants—it's woven into the social fabric of entire regions. Any transition strategy must account for these communities, these workers, and the political forces they represent.
II. The 2007 Mega-Merger: Creating a National Champion
The PGE we know today was born from strategic consolidation. On 9 May 2007 Polska Grupa Energetyczna was established by the merger of PSE, PGE Energia SA and BOT Górnictwo i Energetyka S.A. In 2007 the Transmission System Operator division (PSE-Operator) was separated from the PSE S.A. group.
The logic behind this consolidation was straightforward: Poland needed a national energy champion that could compete in the liberalizing EU energy market. By combining mining operations with power generation, and generation with distribution, PGE became a vertically integrated giant spanning the entire electricity value chain.
PGE Polska Grupa Energetyczna SA is a vertically integrated group which includes lignite mines (therein KWB Belchatow), power plants and cogeneration plants (including power plants that produce energy from renewable sources, wind power and hydropower plants), distribution system operators, retail sales companies, a wholesale trading company.
The 2007 merger created something unprecedented in Central Europe: a state-controlled utility with the scale to undertake massive infrastructure investments and the market power to shape Poland's energy future.
The 2009 IPO: Poland's Largest Ever
Two years after the merger, PGE made history again. PGE Polska Grupa Energetyczna S.A. made its debut on the Warsaw Stock Exchange on November 6, 2009.
In 2007, the total value of 93 domestic IPOs was EUR 1,413 million, while in the "crisis" year 2009, 37 domestic issuers raised in total EUR 1,595 million, with the biggest contribution made by the offering of PGE Polska Grupa Energetyczna (EUR 1,407 million).
This was remarkable timing. The global financial crisis was still reverberating through capital markets. Yet PGE's IPO succeeded spectacularly. In 2009, the WSE was ranked first among major European markets and PGE Polska Grupa Energetyczna's IPO was the largest offering of the year in Europe.
On 19 March 2010 PGE was included in WIG20 index. The company had arrived as a major player in European capital markets. But even as investors celebrated, the forces that would eventually force PGE's transformation were already gathering strength.
The group is largely controlled by the Polish State Treasury who as of 9 July 2014 owns 58.39% of the public limited company. This ownership structure—majority state-controlled but publicly traded—creates unique dynamics that shape every major strategic decision the company makes.
III. The Bełchatów Behemoth: Blessing and Curse
No single asset defines PGE's challenge more than Bełchatów. The numbers are simply extraordinary.
In 2011, a new 858 MW unit was commissioned, increasing the station's total capacity to 5,053 MW. After modernization of other units, the total installed capacity reached 5,420 MW in 2015. In 2017, the electrical capacity of Elektrownia Bełchatow was increased to 5,472 MW.
For decades, this was a point of national pride. Bełchatów represented Polish engineering prowess and energy independence. But as the European Union intensified its climate policies, Bełchatów transformed from blessing to curse.
This plant is one of the biggest producers of greenhouse gas emissions in the EU – producing roughly the same emissions as the whole of Slovakia every year. According to official data provided to ClientEarth, carbon dioxide emissions from the Belchatow power plant have been consistently rising. So far in its lifespan, the plant has emitted about a billion tonnes of CO2 into the atmosphere, the equivalent of three years' worth of Poland's national emissions.
In April 2014, the European Commission even dubbed it 'the most climate damaging power plant in the European Union.'
The environmental group ClientEarth filed an unprecedented lawsuit against Bełchatów's operators. In September 2020, a Polish judge ordered PGE to negotiate within three months a closure timetable for Belchatow with the environmental law NGO ClientEarth. The landmark ruling was the first time a Polish court has required a coal plant to engage in dialogue with the goal of establishing a concrete plan to reduce its emissions.
ClientEarth sought a court order that 11 of the 12 coal units at the Belchatow plant be closed by 2030 with the last unit, which was commissioned in 2011, shut down by 2035. This is several years sooner than PGE's existing schedule to close Belchatow around 2040 as coal reserves are depleted.
This legal pressure, combined with the economic pressure of rising carbon prices, forced a reckoning. The scheduled closure plan now calls for a gradual phase-out: The closure timeline envisaged is: 2030 – 1 block, 2031 – 1 block, 2032 – 2 blocks, 2033 – 2 blocks, 2034 – 3 blocks, 2035 – 2 blocks and 2036 – 1 block.
The human dimension is equally compelling. Many of PGE's 7,000 direct employees have a right to severance packages under a transition deal made between unions, the government and energy companies in 2022. But the deal does not cover any financial compensation for contract workers, and this affects some 5,500 contractors in related sectors, like machine maintenance and transportation.
As one miner put it with dark humor: "This whole transformation is a bit like yeti. We've heard about it, but no one's seen it." The transition is set to be costly and complex, and there is little time to adapt.
PGE's response has been creative, if controversial. Surprisingly, while the energy industry has put forward proposals to replace Bełchatów's coal-generated electricity with renewable sources, primarily solar and wind, PGE has a different vision. Instead of focusing on renewable development, the company plans to repurpose the massive pit mine left behind after the plant's closure, one of the largest man-made holes on Earth. PGE has outlined a 45-year-long plan to transform the pit into Poland's deepest lake, with the hills reshaped into trails, ski slopes, bike paths and even facilities for horse riding, golf, or scuba diving. By 2070, PGE envisions the remains of the power plant as a tourist hub.
IV. The EU ETS Awakening: When Carbon Became Too Expensive
If Bełchatów represents PGE's physical transformation challenge, the EU Emissions Trading System represents the financial one. Understanding carbon pricing is essential to understanding why PGE's strategy shifted so dramatically.
The EU ETS operates on a cap-and-trade principle. The EU ETS is based on a "cap and trade" principle. The cap refers to the limit set on the total combined amount of GHG that can be emitted by all participating countries under the scope of the system. The cap is expressed in emission allowances with one allowance giving the right to emit 1 tCO2eq. This cap is reduced annually in line with the EU's climate targets (i.e., carbon neutral by 2050, 55% GHG emissions reduction by 2030 compared to 1990), ensuring that emissions decrease over time.
For years, carbon allowance prices remained low enough that coal plants could operate profitably. But that changed dramatically starting in 2018. The ETS1 carbon price has increased to levels well above EUR 50 per ton of CO2 since 2021. The introduction of the Market Stability Reserve in 2018 helped to re-balance supply and demand of allowances, lifting ETS1 carbon prices from previously low levels. Subsequently, the strengthening of ETS1 in line with the target to reduce net greenhouse gas emission by at least 55%, together with the energy crisis caused by Russia's war of aggression against Ukraine, pushed average carbon prices up to EUR 80 in 2022-2023, before they decreased to EUR 65 in 2024.
In the EU, it was around €65–85/tonne in 2024.
For a company like PGE, these prices are devastating to traditional operations. "With high coal and CO2 emission allowance prices, energy production from this fuel is simply unprofitable. At the same time, it's no secret that the coal deposits exploited today in Poland are ending and mining is less and less efficient."
The total company revenue for 2015 was 28.542 billion złoty and the company made a net income loss of 3.032 billion złoty. That 2015 loss was an early warning sign. The financial pressure from carbon costs was only beginning.
The carbon intensity of EU Member State economies ranges between 56 tCO2 in Sweden and 168 tCO2 in Poland. Poland isn't just the EU's most coal-dependent country—it's the most carbon-intensive economy in the bloc, with all the financial consequences that implies.
The impact on PGE's recent results tells the story starkly. Strata netto przypadająca akcjonariuszom jednostki dominującej wyniosła 3,153 mld zł. W poprzednim roku strata ta przekraczała 5 mld zł. (Net loss attributable to shareholders of the parent company was PLN 3.153 billion. In the previous year, this loss exceeded PLN 5 billion.) The losses come primarily from impairment charges on coal assets.
Tests indicated impairment of the book value of selected assets of PGE Capital Group companies in the amount of approximately PLN 9.1 billion, including: in the Coal Energy segment of approximately PLN 8.7 billion and in the Renewable Energy segment of approximately PLN 0.4 billion. At the same time, the work identified the need to reduce the deferred tax asset in the Coal Energy segment by approximately PLN 2.5 billion.
For investors, this creates an unusual dynamic. PGE's reported losses are heavily influenced by non-cash impairment charges on coal assets that the market has long known are declining in value. The company's operational cash flow tells a different story: Zysk powtarzalny EBITDA Grupy w 2024 roku wyniósł 10 878 mln złotych wobec 10 722 mln złotych rok wcześniej. Poziom ekonomicznego zadłużenia netto Grupy PGE za 2024 roku wyniósł 17 204 mln zł, co oznacza spadek o 4 442 mln złotych w stosunku do końca 2023 roku. (Recurring EBITDA of the Group in 2024 was PLN 10,878 million versus PLN 10,722 million a year earlier. The level of economic net debt of PGE Group for 2024 was PLN 17,204 million, a decrease of PLN 4,442 million compared to the end of 2023.)
V. The October 2020 Strategy: A Company Transformed
On October 19, 2020, PGE's then-CEO Wojciech Dąbrowski stood before investors and announced what analysts called the most significant strategic shift in Polish energy history.
PGE Polska Grupa Energetyczna has published a new strategy. The company presented the Group's transformation plan and the path to decarbonisation of generation and announced the goal of achieving climate neutrality by 2050. Already within a decade, the PGE Group will become a completely different company," announces Wojciech Dąbrowski, President of the Management Board of PGE. The new Strategy of the PGE Group presents a transformation plan aiming at the Group's climate neutrality in 2050.
"In the new strategy, we have responded to public expectations, regulatory and market changes, and we have firmly committed to low and zero-carbon energy sources. Our goal is the climate neutrality of the PGE Group in 2050. In order to achieve this, we are accelerating the process of change in the company. Already in 2030, the PGE Group will be a completely different company."
In October 2020, PGE Polska Grupa Energetyczna published a new strategy by 2030 with a perspective by 2050 and a transformation plan aimed at achieving climate neutrality of the Group in 2050. The key directions of the PGE Group's development will be offshore and onshore wind energy, photovoltaics, grid infrastructure, low-emission heating and energy services. The area of divestment and limitation of activity will include coal energy and hard coal trade.
The ambition was staggering. PGE's aspirations were defined in two time horizons. By 2030, the share of renewable energy in the Group's portfolio will be increased to 50% and carbon dioxide emissions will be reduced by 85%, which means 120 million tonnes less CO2 emissions, while by 2050 the Group intends to achieve climate neutrality, i.e. zero net CO2 emissions and provide 100% green energy to its customers.
Energy analysts were struck by the boldness. "It's the first time anyone, let alone the CEO of Poland's largest utility, is saying publicly that PGE should get rid of its coal assets and become a green company. They are saying they want to be a company based on renewables, distribution and supply. It's a clear vision."
Tomaszewski said that "in Polish circumstances" it was extraordinary for a state-owned company to declare climate neutrality before the government. Poland is the only EU country not aiming to reach net zero by 2050.
But analysts also noted the strategy's critical dependency. "The current PGE group has no chance to meet the challenges. It would be wise to separate the coal part and then obtain money from the EU for the energy transition."
The strategy depended on the Polish government agreeing to take responsibility for managing the coal business decline—effectively asking taxpayers to shoulder the burden of stranded assets.
In late 2024, PGE announced an updated strategy extending to 2035. The PGE Group has announced a new strategy until 2035, with the motto 'Energy for a Secure Future. Flexibility'. It assumes investment in smart grids, new large-scale and flexible gas-fired power plants, renewable energy sources, energy storage and integrated district heating systems. The estimated total expenditure on development, maintenance and acquisitions will amount to PLN 235 billion, which will translate into an almost threefold increase in EBITDA by 2035 and enable a resumption of dividend payments.
One of the effects of PGE's implementation of the new strategy will be an inflow of PLN 150 billion to companies in the domestic supply chain (local content), which will enable long-term support for their development. The strategy maintains the goal of achieving climate neutrality for the PGE Group by 2050, with CO2 emissions already reduced by 75% by 2035.
VI. The NABE Coal Spin-Off Saga: Political Football
The critical question hanging over PGE for years has been: What happens to the coal assets?
The answer has proven extraordinarily contentious. The plans foresee the establishment later this year of a new entity, the National Energy Security Agency (NABE), which will purchase coal assets from existing state-owned energy firms PGE, Tauron, Enea and Energa.
The rationale was elegant. Poland plans to spin off the state-owned utilities' coal-fired power plants into a new state-owned company, NABE, making it easier for Warsaw to focus on green energy as many banks steer clear of financing coal-dependent companies.
NABE would have enormous market power, accounting for around 55% of electricity generation.
But the valuation negotiations proved brutal. The treasury offered 849 million zloty ($214.23 million) for PGE's mining and generation unit, 2.48 billion zloty for Enea unit Wytwarzanie, and 153 million zloty for Energa's Ostroleka power generation unit. The offer for Tauron Wytwarzanie's unit was a token amount - 1 zloty - along with repayment of some of the company's debt.
One zloty for Tauron's coal assets. That symbolic valuation spoke volumes about how the government viewed these assets' long-term worth.
The political change in 2023—when Donald Tusk's coalition replaced the Law and Justice government—threw the entire NABE plan into question. Poland's largest energy provider PGE should have the outlines of a new plan to spin-off its coal assets in the fourth quarter, its deputy operations chief said, after the new government cooled on the previous one's proposal. Under the previous government's plan, the units of state-controlled PGE, Tauron and Enea that operate coal-fired power plants were to be bundled into NABE, a new state-owned company that would assume their debts. The plan was aimed at easing the burden on the companies as coal assets become harder to finance. But NABE could pressure Poland's already stretched budget. Earlier this month, state asset minister Jakub Jaworowski called NABE "a somewhat nuclear option" and said the ministry was considering a "middle ground" solution.
The current administration appears, however, to have abandoned the NABE plan in favour of leaving coal assets with the companies, devising separate transformation plans for each company. The ruling coalition believes that state-controlled energy companies can secure financing for investments without offloading their coal assets to a separate entity.
The market's reaction was swift. The report led to a sell-off of energy stocks on the Warsaw Stock Exchange. PGE's share price was down 6.8%, Tauron's stock price declined 5.7% while Enea dropped 2.3%. While the media reports remain unconfirmed, it appears that a full spin-off of coal assets is now unlikely.
For investors, this uncertainty represents one of the key risks in PGE's story. Without a clear resolution to the coal asset question, the company remains caught between its transformation ambitions and the financial drag of its legacy business.
Fitch Ratings has warned that, without a clear strategy for coal assets, state-owned companies risk credit rating downgrades. This could complicate access to financing and affect their ability to invest in forward-looking projects.
VII. The Baltica Offshore Wind Bet: PGE's Green Future
While the coal debate continues, PGE has moved decisively into what may prove to be the defining investment of its transformation: offshore wind in the Baltic Sea.
The partnership with Ørsted—the Danish company that pioneered offshore wind and transformed itself from a fossil fuel utility—is strategically brilliant. Baltica 2 and 3, a 50/50 joint investment of PGE and Ørsted, is to build the biggest offshore wind farm in Polish waters of the Baltic Sea.
In January 2025, the project achieved a crucial milestone. Ørsted and PGE Polska Grupa Energetyczna (PGE) have taken the final investment decision (FID) on the 1.5 GW Baltica 2, which is the first stage of the Baltica Offshore Wind Farm in the Polish Baltic Sea.
Baltica 2, which will be located approx. 40 km off the Polish coast near Ustka, is expected to be fully commissioned in 2027. Baltica 2 has a 25-year inflation-protected contract for difference (CfD) in place with the Polish state.
The financing structure demonstrates the institutional confidence in the project. According to PGE, the Baltica 2 offshore wind project obtained PLN 11.1 billion (approximately EUR 2.6 billion) in loan from 24 Polish and international financial institutions, including European Investment Bank and European Bank for Reconstruction and Development.
The wind farm will comprise 107 Siemens Gamesa 14 MW-222 wind turbines, which will be installed by Cadeler and Fred. Olsen Windcarrier, while Van Oord will be installing foundations and offshore substations.
PGE's CEO Dariusz Marzec called the project transformative: "The Baltica 2 offshore wind farm, the largest renewable energy project currently under development in the Baltic Sea, will diversify Poland's energy production, enhance energy security, and provide cleaner and more affordable energy."
"As Poland's largest-ever renewable energy project, Baltica 2 will lead the way for Poland's transition to green energy, producing green electricity to meet the needs of approximately 2.5 million Polish households and deliver first power in 2027."
The project represents substantial execution risk and substantial opportunity. The vessel Olympic Electra has begun relocating boulders at the Baltica 2 project site, marking the start of the preparatory work ahead of offshore construction of what will be the biggest offshore wind farm in Poland. Boulder relocation is a key stage in preparing for the installation of foundations and underwater infrastructure.
Poland has committed to ambitious offshore wind targets. With its Offshore Wind Act, Poland has committed to installing 5.9 GW offshore wind by 2030, and 11 GW by 2040.
PGE's ambitions extend beyond Baltica 2 and 3. PGE Polska Grupa Energetyczna (PGE) has obtained environmental approval for its 900 MW Baltica 1 offshore wind project, clearing the way for its participation in Poland's upcoming offshore wind auction on 17 December 2025. With a capacity of approximately 900 MW, Baltica 1 is one of three projects currently under implementation by the PGE Group in the Polish Baltic Sea. The wind farm is situated some 80 kilometres from the coastline, roughly off the town of Łeba in the Pomeranian voivodeship. Baltica 1 is planned to be commissioned by the end of 2032 if it secures a Contract for Difference (CfD) in this year's Polish offshore wind auction.
VIII. The PKP Energetyka Acquisition: Railway Energy as Stable Backbone
Amidst the drama of coal transformation and offshore wind development, PGE made a strategically important but less glamorous acquisition: railway electricity distribution.
CVC Capital Partners Fund VI has signed a preliminary agreement for the sale of PKP Energetyka, an energy distributor for the Polish railway sector and provider of traction network maintenance services, to PGE, the state-controlled public power company and the largest power producing company in Poland for an EV of PLN 5,944.5 million.
PGE Energetyka Kolejowa S.A., until 2023 PKP Energetyka S.A. is the cross-country electricity distributor to the Polish railway network and other business customers. It also provides nationwide maintenance and emergency response services to the railway network, operates fuel stations for diesel locomotives and is active in electricity and gas reselling. It owns 20,000 km of distribution network.
On 3 April 2023, PGE Polska Grupa Energetyczna acquired from the CVC Fund 100% of shares in PKPE Holding sp. z o.o. thus closing the purchase transaction of PKP Energetyka S.A. On 4 April 2023, the company's name was changed from PKP Energetyka to PGE Energetyka Kolejowa.
The strategic rationale is clear. "With the acquisition of PKP Energetyka, PGE is strengthening its position as a leader in the energy sector. According to the figures for 2022, the acquisition of PKP Energetyka increases the volume of energy distribution by around 12 per cent and sales by around 9 per cent, which increases the revenue of the entire PGE Group by around PLN 4.3 billion and the recurring EBITDA by around PLN 770 million."
In 2023, following the acquisition of PKP Energetyka, the PGE Group created a new business segment Railway Energy Services, which increased the Group's results by more than PLN 1.2 billion.
This acquisition provides PGE with a regulated, stable infrastructure business that will generate predictable cash flows regardless of commodity price volatility or energy transition challenges. As Poland electrifies more of its railway network, this business should grow steadily.
IX. The Żarnowiec Energy Storage Announcement: Enabling the Renewable Future
One of the most significant gaps in Poland's electricity system has been energy storage. Without adequate storage, intermittent renewable sources like wind and solar cannot fully replace dispatchable coal plants. PGE is addressing this directly.
In 2024, the company announced plans to build Europe's largest energy storage facility in Żarnowiec, Poland. It will have a capacity of up to 263 MW and a minimum of 900 MWh. The project aims to support the balancing of PGE's land and offshore wind farms on the Baltic Sea and to improve the stability of the National Power System.
The irony of the location is not lost on historians of Polish energy. Żarnowiec was the site of Poland's abandoned nuclear project from 1990—a plant that was halted by political opposition shortly after the fall of communism. Now, three decades later, it will host Europe's largest battery storage facility instead.
Polish utility PGE Group has selected local unit of Korean battery maker LG Energy Solutions as the contractor for the 263 MW/ 900 MWh Zarnowiec battery energy storage project. LG Energy Solution Wroclaw will be in charge of the project design and construction on a turnkey basis. The facility will be located in the vicinity of the Żarnowiec Pumped Storage Power Plant, owned and operated by PGE Group.
LG's bid was selected as the most advantageous with a price of PLN 1.555 billion ($384 million).
Power firm PGE has started building a 262MW/981MWh BESS in Poland with LG batteries. The state-owned power firm held a groundbreaking ceremony on the 3.7-hour Żarnowiec battery energy storage system (BESS) project last week, claiming it as one of the largest BESS in Europe. Completion is scheduled for the second quarter of 2027, and the firm is investing PLN 1.5 billion (US$416 million) in it.
PGE's storage ambitions extend well beyond this single project. Polish utility PGE Group is planning to add more than 80 energy storage facilities through to 2035 to the tune of PLN 18 billion ($4.7 billion). PGE Group has laid down ambitious plans for energy storage deployment over the next ten years. In a bid to tackle the challenge of the growing electricity production from renewable energy sources, the Polish utility is looking to add more than 10 GWh of energy storage capacity by 2035. Its plans involve more than 80 projects, the value of which is estimated at around PLN 18 billion ($4.7 billion).
Today, PGE Group's energy storage fleet stands at nearly 7 GWh. It is comprised almost exclusively from pumped hydro storage facilities aside from three single-digit-megawatt battery energy storage systems.
X. The Nuclear Question
Nuclear power remains a wild card in PGE's strategy—and in Poland's energy future more broadly.
As of 2018 the Polish government was still considering whether to continue pursuing nuclear power in Poland, but in May 2018 PGE decided to invest in offshore wind power instead.
However, PGE later re-engaged with nuclear through a partnership with Korea Hydro & Nuclear Power (KHNP). Polish companies ZE PAK and Polska Grupa Energetyczna have signed a preliminary agreement on the creation of a joint special purpose vehicle to implement the project to construct a nuclear power plant in Pątnów in central Poland. The plant is to be supplied by Korea Hydro & Nuclear Power.
"On the basis of the preliminary analyses conducted so far, it has been assessed that it is prospective to site at least two APR1400 reactors with a total capacity of 2800 MW. Two reactors could supply Polish homes and businesses with about 22 TWh of energy, which is about 12% of today's energy consumption in Poland. The commissioning of the first unit of the power plant is possible as early as 2035."
Poland's Ministry of Climate and Environment has issued a decision-in-principle for the country's second large nuclear power plant. Two South Korean-supplied APR1400 reactors are planned in the Patnów-Konin region.
More recently, PGE moved to take full control of the nuclear joint venture. The agreement will make PGE the sole shareholder in the venture once approved by the Ministry responsible for energy resources. The transaction is expected to be finalised by 27 November 2025. The Pątnów project, launched in April 2023, is being developed in partnership with Korea Hydro & Nuclear Power (KHNP) and supported by both the Polish and South Korean governments.
But PGE's management has been clear about financial constraints. "Therefore, PGE will not be an investor in the project. PGE's development role in the nuclear program would end once environmental and location permits were obtained. We cannot afford a project with estimated outlays of between 60 billion zlotys to 80 billion zlotys. We focus on offshore and onshore wind, other renewable energy and the heating sector."
The Pątnów project faces uncertainty. According to Polish media, aside from the skeptical attitude of the government of Donald Tusk towards the Patnow project and various financial and technical challenges, the main reason for the probable freezing of the plans is the ongoing dispute between KHNP and the US Westinghouse over technology exports. While development of the Westinghouse project still seems to be on course, there is growing uncertainty about the Pątnów plans.
For investors, nuclear represents optionality rather than a core investment thesis. If it proceeds, it would significantly accelerate PGE's decarbonization. If it doesn't, PGE's offshore wind and storage investments provide an alternative path to its climate neutrality goals.
XI. Poland's Accelerating Energy Transition: The Context Shifts
PGE's transformation is occurring against a backdrop of rapid change in Poland's overall energy mix.
Solar energy led the growth among renewable sources, expanding by 2.34 percentage points last year as a proportion of Poland's electricity output. Meanwhile, coal accounted for 56.7% of Poland's power production last year, down from 63.8% in 2023.
Hard coal's share, meanwhile, dropped sharply by 7.3 percentage points – the largest decline recorded since the Fraunhofer Society began tracking data in 2015.
This decline is accelerating. Poland's share of electricity generated by coal last month fell below 50% for the first time, marking a significant milestone in the country's ongoing transition towards cleaner energy sources. According to a report by Forum Energii, an energy think tank, electricity produced from coal in April 2025 amounted to 6.5 terawatt-hours (TWh), accounting for 49.4% of the total energy mix.
In the entire second quarter, coal's share in Poland's energy mix was 45.2 per cent, so it was the first quarter in the history of the Polish energy sector when less than half of the energy produced came from this source.
Poland generated a record 29% of its electricity from renewables in 2024, up from 26% the previous year. Onshore wind accounted for 14.9% of electricity production last year, followed by solar at 11%. However, coal still generated 56.7% of power in 2024.
For PGE, this macro trend is favorable. As Poland's overall generation mix shifts toward renewables, PGE's investments in offshore wind, solar, and storage align with the direction of travel. The company isn't swimming against the tide—it's positioning itself to ride it.
XII. Business Segments and Competitive Position
Understanding PGE requires understanding its diversified business model. PGE Polska Grupa Energetyczna S.A. engages in the production and distribution of electricity and heat in Poland. It operates through Eight segments: Conventional Generation, District Heating, Renewables, Supply, Distribution, Circular Economy, and Other Operations.
The company operates 5 conventional power plants; 16 CHP plants; 2 lignite mines; 17 wind farms; 5 photovoltaic power plants; 29 run-of-river hydro power plants; and 4 pumped-storage power plants.
The current segment mix shows the transition in progress. According to company disclosures, sales break down approximately as: - Electrical and natural gas electricity supply: 37.4% - Production of conventional electricity (including lignite mining): 26% - Electricity distribution network operation: 16.6% - Heat production: 8.9% - Electricity and fuel consumption from railway companies: 8.1% - Production of electricity based on renewable energies: 2.4% - Other: 0.6%
The distribution segment deserves particular attention. A modern distribution infrastructure is the foundation of the energy transition and a prerequisite for the integration of distributed energy sources. The Group is focusing on the development of reliable and smart distribution grids that will enable an increase in the available connection capacity for RES, reduce the duration of planned and unplanned supply interruptions and reduce the cost of breakdown repairs.
This is a regulated, capital-intensive business that generates predictable returns. As Poland's grid requires modernization to handle distributed renewables and electric vehicle charging, PGE's distribution business should see steady growth.
XIII. Porter's Five Forces and Competitive Analysis
Threat of New Entrants: LOW-MEDIUM
The energy generation business requires massive capital investment and extensive regulatory approvals. PGE's scale—more than 40 power stations, two lignite mines, 17 wind farms—represents barriers that new entrants cannot easily replicate.
However, the renewable transition is lowering barriers in some segments. Distributed solar generation allows new competitors to enter at smaller scale. EU policy actively encourages new renewable entrants. The threat is not imminent but is increasing over time.
Bargaining Power of Suppliers: MEDIUM-HIGH
PGE's lignite mines are captive—the company controls its primary fuel supply, which provides significant cost stability. Hard coal involves more supplier exposure. Natural gas is the critical vulnerability: "Poland's overall dependence on imports of energy carriers is growing - in a decade it has increased from 29 per cent to 45 per cent. The greatest dependence for years has been on crude oil, almost 97 per cent of which comes from abroad."
For renewable equipment, supplier concentration is increasing. Siemens Gamesa supplies the turbines for Baltica 2. A handful of manufacturers control the offshore wind turbine market globally.
The EU ETS is effectively a supplier with unlimited pricing power—PGE must purchase allowances at whatever price the market dictates.
Bargaining Power of Buyers: LOW-MEDIUM
Retail customers have limited power in a market with high switching costs and regulated rates. Large industrial customers can negotiate contracts and, increasingly, develop their own generation capacity. The Polish government, as both largest shareholder and rate-setter, creates unique dynamics that sometimes prioritize political considerations over pure economics.
Threat of Substitutes: HIGH (and rising)
Distributed solar—prosumers with rooftop panels—is growing rapidly in Poland. Energy efficiency reduces demand growth. The fundamental substitution threat comes from the electrification of heating, transport, and industry: these trends expand the market but shift which technologies serve it.
Competitive Rivalry: MEDIUM
PGE is the dominant player with 38% generation market share, but faces competition from Tauron, Enea, and Energa. All are state-controlled, limiting truly aggressive competition. Foreign entrants (Ørsted is a partner, not competitor) focus on specific segments like offshore wind rather than head-to-head rivalry.
Hamilton Helmer's 7 Powers Analysis
Scale Economies: PGE possesses significant scale advantages in generation, distribution, and now railway energy. These advantages are most pronounced in capital-intensive segments like offshore wind, where project finance capabilities and technical expertise create meaningful barriers.
Network Economies: The distribution business exhibits network effects—as more users connect, the value of the network increases. The 20,000 km of railway distribution network represents irreplaceable infrastructure.
Counter-Positioning: PGE's October 2020 strategy represented classic counter-positioning—declaring climate neutrality before the government, committing to renewables while competitors hedged. The coal spin-off uncertainty has muddied this positioning.
Switching Costs: Retail electricity customers face modest switching costs. Industrial customers on long-term contracts face higher barriers. The railway energy business has captive customers—trains need electricity, and PGE owns the distribution network.
Branding: Energy is largely a commodity business where branding provides limited advantage. PGE's sponsorship of sports venues and teams builds awareness but not pricing power.
Cornered Resource: PGE's lignite mines represent a cornered resource, though one of declining value. The real cornered resources are the offshore wind development rights and grid connection agreements that took years to secure.
Process Power: PGE's integration of EDF district heating assets, PKP Energetyka, and the partnership with Ørsted demonstrates organizational capability in executing complex transactions. This process power will be tested as the company scales up offshore construction.
XIV. Key Metrics for Tracking PGE's Transformation
For investors monitoring PGE's progress, three KPIs stand out as most critical:
1. Renewable Energy Share of Generation (%)
This is the single most important metric for tracking PGE's transformation. The company has committed to 50% renewables by 2030 and 100% by 2050. Progress toward this goal—or slippage from it—will determine whether PGE successfully transitions from coal giant to green energy leader. Watch quarterly generation reports for the mix of TWh from different sources.
2. Recurring EBITDA by Segment (PLN billion)
As the business mix shifts, tracking EBITDA contribution by segment reveals where value is being created and destroyed. The company's 2024 recurring EBITDA of PLN 10.9 billion needs to grow to PLN 17 billion by 2030 and PLN 30 billion by 2035 under the latest strategy. The mix should shift from conventional generation toward renewables, distribution, and flexible gas capacity. Any quarter where coal segment EBITDA unexpectedly rises or renewable segment EBITDA disappoints would warrant investigation.
3. Net Debt / EBITDA Ratio
PGE is undertaking massive capital expenditure while managing declining coal assets. Wskaźnik ekonomicznego zadłużenia netto w relacji do EBITDA wyniósł 1,58x. (The economic net debt to EBITDA ratio was 1.58x.) This ratio must remain manageable to maintain investment grade credit ratings and access to project finance for renewable investments. Any material increase in this ratio could signal financing stress that delays the transition.
XV. Bull Case, Bear Case, and Key Risks
The Bull Case
PGE represents a rare opportunity to invest in an energy transition at scale. The company has:
- First-mover advantage in Polish offshore wind: The Baltica projects with Ørsted position PGE as the dominant player in what will become a 11 GW market by 2040
- Integrated infrastructure platform: Distribution networks, railway energy, and emerging storage capabilities create a defensible, regulated business mix
- State backing with public market discipline: Majority state ownership provides implicit support while public listing ensures transparency and performance pressure
- Attractive valuations: The stock trades at a significant discount to Western European peers, despite similar long-term earning profiles in renewables and distribution
- Structural tailwinds: EU climate policy, declining coal competitiveness, and Poland's need for energy security all push in PGE's strategic direction
If the coal spin-off resolves favorably and offshore wind projects execute on schedule, PGE could emerge as a green energy champion with fundamentally different risk and return characteristics than today's mixed portfolio.
The Bear Case
PGE faces substantial risks that could impair value:
- Coal asset resolution remains unclear: Without a government-backed solution, PGE may be forced to manage coal asset decline on its own balance sheet, consuming capital that could fund transformation
- Execution risk on massive projects: Offshore wind construction is technically demanding, and cost overruns or delays could erode projected returns
- Political intervention risk: State ownership means political priorities can override shareholder value—workforce protection, energy price controls, or industrial policy goals could all influence decisions
- Regulatory uncertainty: EU climate policy continues to evolve, with carbon prices and phase-out timelines subject to change
- Currency and macro exposure: PLN-denominated business with EUR-denominated costs for imported equipment creates currency mismatch risks
Key Risks to Monitor
Regulatory/Legal Overhang: The ClientEarth litigation against Bełchatów continues. Any adverse ruling that accelerates closure timelines could force significant impairments and operational disruption.
Coal Asset Accounting: The significant impairment charges taken in recent years (PLN 8.7 billion in the coal segment in 2025) reflect management's updated view of coal asset value. But the timing and magnitude of future impairments remains uncertain and depends on carbon prices, capacity market revenues, and closure schedules.
Offshore Wind Execution: Baltica 2's 2027 commissioning target is ambitious. Weather delays, supply chain disruptions, or installation challenges could push first power later and increase costs.
Financing Access: The company has secured project finance for Baltica 2, but future projects depend on continued access to green financing. Any material change in PGE's credit profile or lender appetite for Polish energy assets could affect capital availability.
XVI. The Road Ahead: Watching PGE Transform
PGE Polska Grupa Energetyczna stands at an inflection point in corporate history. From its origins as a post-communist electricity consolidator, through its IPO as Poland's largest ever, past the EU ETS awakening that made coal uneconomic, to today's massive bet on Baltic winds—the company has continuously evolved to survive.
The next decade will determine whether PGE completes its transformation from Europe's coal giant to a leader in green energy. As part of the Strategy, which sets flexibility as the direction of development, the PGE Group expects its operating profit to evolve in such a way that gas capacity and energy storage facilities will account for an increasing share alongside the regulated and RES segments, which will translate into an increase in EBITDA from PLN 11 billion in 2024 to PLN 17 billion in 2030 and PLN 30 billion in 2035.
The strategy envisages a total capital expenditure of PLN 235 billion, including maintenance and development expenditure of PLN 175 billion, PLN 39 billion for acquisitions and PLN 21 billion for the implementation of development options.
That's roughly $60 billion deployed over ten years—one of the largest energy transformation investments in European history.
The ultimate test will come when Baltica 2's 107 turbines begin spinning off the Polish coast in 2027, when the first Bełchatów units shut down in 2030, and when PGE's generation mix crosses from majority fossil to majority renewable.
Poland is the EU's most coal-dependent nation. If PGE can successfully navigate this transition—keeping the lights on, managing the social consequences, and generating acceptable returns for shareholders—it will provide a template for energy transformation in challenging circumstances worldwide.
The story isn't over. But it's becoming clear that Europe's coal giant is betting everything on becoming something else entirely. The winds in the Baltic will determine whether that bet pays off.
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