Annualized GDP growth of 3.9% in January-March boosted power consumption among business customers which allowed both PGE and Energa to increase their distribution volumes by 3% year-on-year to 8.64 TWh and 5.64 TWh respectively. Tauron and Enea saw growth of 2% or just under to 12.7 TWh and 4.73 TWh respectively.

PGE and Energa saw their generation volumes fali 9% and 16% respectively to 13.16 TWh and 1,005 GWh thanks to a higher maintenance load and lower demand from the transmission system operator, PSE, for Energa's must-nin bard coal-fired 647 MWe Ostroleka B plant. Tauron's generation was fiat but Enea saw 13% growth on lower maintenance.

Lignite-fired generation, which accounted for 65% of PGE's total production in January-March, feli 16% year-on-year to 8.5 TWh due to the maintenance and the removal of unit 1 at the 5.3 GW Belchatow plant to peak-only operation, which saw the company's total lignite unit availability fali eight percentage points.

PGE sald its outlook for conventional generation is substantially lower this year than in 2015 thanks to a lower wholesale blended electricity price, which it now forecasts in the range of Zloty 165-167/MWh (around €37.75/MWh), compared to Zloty 173/MWh (€39.234/MWh) last year.

The company sald lower lignite and hard coal-fired generation, with two units at its hard coal-fired Dolna Odra plant shifting to cold reserve, would also depress the company's performance.

"The only positive trend in the sector we could see in this quarter was in distribution. The negative trends were generation, a decline in power prices and renewable energy production, which is being hit by declining black electricity prices, falling green certificate prices and reduced subsidies for co-firing and large hydro; said Pawel Puchalski, head of equity research at BZ WBK.

Co-firing hit for all Renewable energy generation from ali of the utilities feli significantly in the quarter due mainly to the reduction of 50% of subsidies for co-firing from January 1, as well as declining green certificate prices that rendered the practice unprofitable.

Average green certificate prices in April continued their year-long slide reaching Zloty 108.71/MWh, down 5% month-on-month and 14% year-on-year. Green certificate prices

have fallen from a high of Zloty 249/MWh in February 2014 and since March last year have been below Zloty 140/MWh thanks to an oversupply on the market, which is currently estimated at the equivalent of 18 TWh.

PGE saw its RES generation fali 9% to 0.64 TWh, with co-firing accounting for just 0.09 TWh. Tauron saw a 24% fali to 0.41 TWh on co-firing and lower hydro production. Energa and Enea saw falls of 32% and 44% respectively to 0.36 TWh and 0.15 TWh.

Policy highlights In terms of policy there were two issues dominating this year's first quarter, the unveiling of new capacity market mechanisms by the Ministry of Energy, which is scheduled next month, and amendments to the country's renewable energy law.

PGE, Enea and Tauron a re in the process of building major conventional generation projects and Energa is seriously considering relaunching a project to build a 1 GW unit C at Ostroleka. Tauron's management sald it cannot afford to keep its investment to build a 910 MW unit at its hard coal-fired Jaworzno III plant on its balance sheet without state support.

The ministry has stated its policy is to support conventional generation in Poland to ensure energy security but it is yet to release any details about its capacity market piens, save that it will be similar to the UK's solutions. Poland currently has two temporary capacity mechanisms, an operational reserve capacity and an intervention cold reserve.

Deputy energy minister Andrzej Piotrowski said May 10 the govemment is proposing to use funds already collected from end users to fund long-term contract payments and money to be collected to fund upcoming RES auctions to create a pool of cash that could be used to fund a new capacity market and direct investments in new, mostly coal-fired projects.

However Puchalski sald the capacity market proposals may be disappointing for some utility bosses. don't believe it will be as beneficial as management hopes it will be. Why would the government create a capacity market scheme that would make utilities extremely profitable? Then the companies have to pay higher dividends and profits out of the group and the government wants them give money to the ailing coal mining sector," he said.

—   Adam Easton

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