Orlen to decide on olefins project as costs increase
Polish refiner Orlen will determine the future of its olefins petrochemicals project by December at the latest, its chief executive said on Thursday, calling it a "trap" for the company and the Polish economy as a whole.
The project was initiated by Orlen's former management with an initial cost estimate of 8.3 B zlotys ($2.2 B), which has since soared to 25 B zlotys, Chief Executive Ireneusz Fafara told a press conference.
Fafara added that the size of the project, in Plock, central Poland, where Orlen's main refinery complex is located, has been scaled down and initial efficiency estimates have been reduced.
"This project is a trap for the board and the entire Polish economy - we can close it and pay the penalties, we can optimize it, or continue it," Fafara told reporters. "We will make a decision no later than before the publication of our strategy, which we plan in December."
Fafara said petrochemicals projects of similar size have not been built in Europe for years because of high energy prices, and said the company has hired an external adviser to help with the decision on the future of Olefins.
The petrochemical industry is grappling with the most difficult period for several decades, Orlen finance chief Magdalena Bartos told the same news briefing.
The project has already cost 12 B zlotys, Orlen said. Cancelling it could cut 15 B zlotys from the refiner's CAPEX plan totaling 320 B zlotys by 2030, according to Erste Group analyst Tamas Pletser. "The exaggerated capital expenditure plan is the main risk to the company, while the new management is highly aware of this issue," Pletser said in a note on Thursday.
But abandoning an investment of this size would involve a range of additional costs, which Orlen would have to shoulder, the company said. These would include expenses to decommission the site, penalty payments for commercial partners who have contracted future output, and costs related to demobilizing teams working on the project, both internally and externally, the CFO told analysts.
($1 = 3.8436 zlotys)
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