by Dieter Lobnig, managing director and head of the Investment Banking and Real Estate Financing Department, Bank Pekao S.A.

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Poland has the highest share of solid fossil fuels in the energy mix in the EU. To get rid of this shameful title the Polish energy sector must be significantly transformed over the next 15 years.

The vision is grand: by 2040, 88% of our energy is to be harnessed from low-emission sources (51% from renewable sources). But let’s face it, ambition is one thing, execution is quite another. We’re talking about deploying tens of thousands of megawatts in production capacity – a scale that will not only reshape our energy landscape but also has the potential to impact the financial one. To meet the objectives, investors need to deploy 18 GW of offshore wind farms, 8 GW of nuclear power, 9 GW of combined cycle gas turbines (CCGTs), and 40 GW in other renewable energy sources (mostly solar). And to make sure that this capacity isn’t wasted, there’s the need for 8GW energy storage.

Turning this vision into reality comes with a price tag. And it’s not a small one. The current capital expenditure requirements for these technologies suggest an eye-watering investment in the ballpark of €170-180 billion. But that’s not the end of the story. Currently, the energy sector is like a high-stakes poker game, where the suppliers hold most of the cards. It’s a suppliers’ market, and they know it. This leverage is often used to drive up contract values. So, who is going to pony up this kind of cash? That’s where things get interesting.

The Polish energy market – navigating the funding maze
At Bank Pekao and Pekao Investment Banking (Pekao IB), we’ve been observing the changing landscape of energy financing from a front-row seat. Debt-raising transactions are becoming increasingly complex, requiring a deep understanding of financial markets and turning towards new funding sources like private debt. It’s no longer just a matter of knocking on the bank’s door and asking for a loan. Raising capital on this scale demands creativity and a solid grasp of the financial tools available.

Polish banks have long been the backbone of domestic infrastructure financing, but even the strongest lenders have their limits. For larger projects, there’s a need to look beyond our borders to tap into global financing markets. That’s especially important as Poland’s largest projects are often carried out by state-controlled giants, which brings its own set of challenges, like lenders’ concentration limits. Therefore, consortia must be cleverly crafted, combining the local expertise of domestic lenders with the deep pockets of foreign counterparts.

Then there’s the matter of new technologies entering the Polish market – such as offshore wind, battery energy storage systems or nuclear power. Here, foreign lenders can play a crucial role. New types of projects bring new risks, and that means a whole lot of education is needed for the lending community. Polish lenders need to get up to speed on unfamiliar technologies and their associated risks, while foreign lenders must familiarise themselves with Poland’s regulatory landscape. A diverse lender group within the consortium provides comfort all around: Polish lenders gain confidence that the structure aligns with what’s acceptable globally, and foreign lenders get the reassurance that Polish-specific elements are sound.

With so many potential projects waiting in line, sponsors are increasingly looking to push leverage to levels beyond what banks usually find acceptable. And here’s private debt. At Pekao IB, our private-debt desk taps into a network of private-debt investors to meet our clients’ expectations. This source of capital is also crucial for projects with risk profiles that banks find too hot to handle. The first energy storage projects in Poland, for example, may find private-debt structures essential for moving forward.

At Pekao IB, we act as matchmakers, connecting clients to global financial markets. We’ve also learned the importance of making the most out of available credit enhancements – from export credit agencies, through thoughtful use of international financial institutions, to unfunded risk participation structures when financing in local currency. It’s all about increasing the liquidity pool and ensuring that no stone is left unturned. Our goal as financial advisors is to select debt instruments which maximise the leverage and minimise financing costs for the sponsors to optimise returns at project level.

Bank Pekao’s strategic goals focus on green transformation. It is one of the leading lenders of green financing in Poland.

Bank Pekao and Pekao IB – guiding clients through uncharted waters
For the past years, Pekao IB has been right in the thick of things, helping clients navigate some of the largest energy and infrastructure deals in Poland. We’ve helped raise billions in debt financing, including award-winning projects like the €4.4 billion Baltic Power offshore wind farm, the 2.6 billion złoty CCGT Ostrołęka project or Baltic Hub – the €800 million project finance for port infrastructure (Bank Pekao also plays the role of the lender in all of these transactions). We are here to lighten the load for sponsors’ financial teams dealing with multiple projects and a multitude of lenders. In a market this complex, having the right financial advisor can make all the difference.

Poland’s energy journey is a thrilling one – full of promise, potential pitfalls, and a hefty dose of complexity. As we move forward, one thing is clear: when it comes to raising financing for the energy transition projects there’s less and less room for business as usual. And that, perhaps, is the most exciting part of all.