U.S. Wind Firm Seeks $700 Million in Damages From Poland

The biggest U.S. backer of Polish wind farms is accusing the east European nation of undermining its investment by deliberately depressing renewable energy prices and unlawfully terminating electricity-supply contracts.

Invenergy LLC said that the government orchestrated the cancellation of long-term energy contracts that the Chicago-based company signed with state-controlled power utilities in 2010, according to a statement Monday. It said the government’s actions, which caused $700 million in damages to Invenergy, were “tantamount to an expropriation” and violate a U.S.-Poland bilateral investment agreement.

“Bilateral investment treaties protect investors whose rights have been violated by another country, and that is what has happened to Invenergy in Poland,” Invenergy Chief Legal Officer Michael Blazer said in the statement.

The company said it will take the case to international arbitration if a settlement isn’t reached in six months. The Energy Ministry in Warsaw didn’t have an immediate comment when reached by Bloomberg News on Monday.

The clash comes as Poland has moved to the top of Europe’s political agenda amid the European Union’s first-ever investigation of a member state’s respect for the rule of law. The European Commission said last month that the ruling Law & Justice party’s attack on judicial independence has given foreign investors jitters about the credibility of the Polish legal system.

“While the Polish government’s disregard for the rule of law continues to escalate, we are working to secure our rights, and other investors are watching,” Blazer said.

At the heart of the EU’s inquiry are planned overhauls of the nation’s Supreme Court and the powerful Judicial Council. The European Commission has said it will study the proposals and remains ready to trigger unprecedented sanctions on the country of 38 million, while the U.S. government last month called on Poland to respect judicial independence.

In the energy market, Poland earlier this year adopted a law to slash a special fee that utilities must pay if they opt not to buy the so-called green certificates representing energy from clean-power producers. That helped push clean-energy prices down sharply.

Separately, state-controlled energy company Energa SA canceled part of its agreements with wind farms, a move that earlier this year triggered complaints by some contractors. Poland is currently a party to 11 international arbitration proceedings, according to Invenergy.

The U.S. company said it accepted what were below-the-market prices for energy from its wind farms in 2010 in exchange for the stability that long-term contracts provide. The Polish government’s actions were “tantamount to an expropriation,” it argued in the notification letter.

“Due to the Polish government’s unlawful termination of commercial contracts in combination with these actions, Invenergy was forced to sell its production into the market at prices significantly lower than the contracted amounts, resulting in major financial losses,” the company said.

Rule of Law
Invenergy, which already is suing state-controlled Tauron Polska Energia SA for 1.2 billion zloty ($333.5 million), has invested 2.2 billion zloty in the country since 2005. It built 11 wind farms of total capacity of 310 megawatts, or 5 percent of Poland’s total wind power. Poland joined the EU with a group of mostly east European nations in 2004.

“We saw it as a new EU member, and a party looking to embrace the concepts of the EU, including renewable energy,” Jim Murphy, Invenergy’s president, said in an interview Monday. But now, “we would be hesitant to invest new money in the country until we could see support for rule of law and honoring long-term contracts.”

An EU-wide target aims to boost the share of renewables to 20 percent by 2020. Poland’s goal has been set at 15 percent. Experts are split over whether that target can be attained without additional efforts from national authorities. So far, wind has been the biggest contributor, according to the country’s energy regulator.

Led by Polish Prime Minister Beata Szydlo, a miner’s daughter, the government relies on coal as the leading source in Poland’s energy mix. It has underscored the stability that coal-fired power plants bring while highlighting the intermittent nature of wind and solar energy.

Wind producers in Poland added only 17 megawatts of capacity in the first half of 2017, compared with 1,225 megawatts in the same period a year earlier.

Source: Bloomberg