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PGE Group to supply energy to Polish railway network following acquisition deal

Last week, the Polish majority state-owned utility company, Polska Grupa Energetyczna (PGE) signed a preliminary agreement to purchase 100 per cent shares of PKPE Holding, the owner of the Polish railway electricity distributor, PKP Energetyka, for 1.91 billion złotych (407 million euros). Once the transaction is finalised, PGE will be the owner of a company with exclusivity to energy supplies for the railway sector and traction network maintenance services.

Following the acquisition, the sale of energy in the PGE Group is estimated to increase by 8 per cent, whilst the volume of energy distribution will increase by approximately 11 per cent with revenues rising by around 3 billion złotych annually, according to a press release from PGE.

In 2015, PKP Energetyka was bought by CVC Capital Partners from the state-owned railway company for 1.97 billion złotych (420 million euros), with PKPE Holding as the sole stakeholder. Before 2015, the company was part of the infrastructure of the Polish state-owned railway operator, Polskie Koleje Państwowe (PKP).

PKP Energetyka is one of the largest entities in the Polish power system, responsible for the distribution of 4 TWh of electricity annually, which is 2.9 per cent of all energy supplied in the country. Employing 4,200 people, the company has recently undergone an extensive modernisation program, translating into a more than three-fold increase in the value of tangible fixed assets. Currently, it has 6 modern traffic control centres in a network controlled by 52,000 smart energy meters. The infrastructure is complemented by 814 traction substations and cabins, 6,213 power stations and 70 network trains, and employing 4,200 people. In addition, the company generates close to 700 million złotych (149 million euros) in EBITDA annually.

As stated in PGE’s press release, the transaction is of “strategic importance for Poland’s energy security, but from PGE’s perspective it also has a purely business dimension”.

President of the Management Board of PGE Polska Grupa Energetyczna, Wojciech Dąbrowski said: “As part of its strategy, the PGE Group consistently strengthens the country’s energy security. The return of PKP Energetyka to Polish hands will strengthen PGE’s position as a leader in the energy industry and, at the same time, ensure greater control over the critical infrastructure, which is the railway energy network. Thanks to this transaction, the sale of energy in the PGE Group will increase by approx. 8 per cent annually, the volume of energy distribution by approx. 11 per cent, and the increase in revenues by approx. 3 billion złotych annually. The road to climate neutrality includes investments in the distribution network, but also electrification of transport and increasing the role of railways in transport. That is why the incorporation of PKP Energetyka into the PGE Group should be considered an excellent example of developing business synergy that strengthens the sovereignty of the Polish energy sector in the strategic area of ​​rail transport.”

The green factor

The acquisition of PKP Energetyka is part of the implementation process of “PGE’s vision as a leader in sustainable energy transformation”. The inclusion of the company in the PGE Group will allow it to achieve a “balance effect” as part of a broader program of investments in areas related to the green energy transformation. 

The PGE Group is in the process of implementing a major Polish off-shore wind farm project with a total capacity of approximately 2.5 GW, which is expected to start producing green energy as early as 2026.

As part of its modernisation strategy, PKP Energetyka has invested in 360 PV installations at traction substations. This translated to the production of almost 2 GWh of clean energy per year, reducing CO2 emissions by over 1,500 tons per year. In addition, devices located at such traction substations work continuously even when a failure cuts off the power supply from the network.

PKP Energetyka’s “Green Railway program” is already in-line with the objectives of the PGE Group. The goal of the program is to ensure that by 2030 – 85 per cent, and ultimately 100 per cent of energy consumption in the traction network comes from renewables. The implementation of this program contributes to accelerating the sector’s energy transition and strengthening the country’s energy security, which is consistent with the aims of the 2030 PGE Capital Group Strategy.

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