1. Skip to content
  2. Skip to main menu
  3. Skip to more DW sites

US wind power investor sues Polish firm as Trump hits town

July 5, 2017

Invenergy has filed lawsuits against Polish energy giant Tauron for $325 million. The case is a test not only for Poland's relationship with foreign investors but also Trump's 'America First' stance as he visits Warsaw.

BdW Global Ideas Bild der Woche KW 36/2016 USA Nebraska Unwetter Sturm
Image: Getty Images/AFP/J. Edelson

The suits allege that state-owned Tauron - one of the top four energy companies in Poland - failed to honor long-term agreements with wind farms owned and run by foreign investors for the purchase of electricity and so-called "Green Certificates" - a form of state subsidy for the once burgeoning sector in Poland.

The four suits make this one of the largest ever commercial legal actions in the Polish courts.

Invenergy also alleges the involvement of former personnel at the State Treasury, which holds about 30 percent of the company.

Invenergy has been an investor in Poland since 2005, with investments of 2.2 billion zlotys ($595 million, 560 million euros) in eleven operating wind projects.

"We made a long-term investment in Poland with confidence that a legal framework existed to protect our investments from this type of behavior," Michael Polsky, Founder and CEO of Invenergy, said in a statement.

"This case will test the assumptions of our original investment decision and signal to the market whether Poland is a country where investors can rely on the sanctity of contracts," Polsky added.

Poland turns back the clock on wind energy

This browser does not support the audio element.

In 2010, after direct negotiations with Tauron, Invenergy's affiliates signed long-term contracts with a wholly-owned and controlled subsidiary of Tauron, Polska Energia – Pierwsza Kompania Handlowa (PE-PKH).

Polsky says Tauron insisted on making PE-PKH the contractual counterparty and assured Invenergy that its project partners and project lenders that it was a bona fide subsidiary.

The contracts with PE-PKH included 15-year agreements for the purchase from the wind farms of both energy and Green Certificates.

Invenergy alleges that Tauron then began a series of actions to release itself and PE-PKH of their obligations.

"This included the disposal of all significant assets of PE-PKH and the resignation, dismissal or transfer of key PE-PKH employees," its statement reads.

"Then, in July 2014, Tauron, as the sole shareholder of PE-PKH, adopted a resolution triggering the liquidation of PE-PKH with the intention of causing a de facto annulment of PE-PKH's contractual obligations," the statement continues

"Over several years, we made every attempt to work with Tauron and others in positions of authority to resolve this, and we asserted our rights in court cases against PE-PKH," Michael Blazer, Chief Legal Officer of Invenergy said.

"We were met with nothing but delays, obstructions and, ultimately, silence. Today's legal actions are an unavoidable result of Tauron's refusal to honor contractual obligations and the rule of law," Blazer said.

At the time of going to press, neither Tauron nor the Treasury Ministry had replied to requests to comment.

A Warsaw-based energy analyst told DW that Tauron is playing with fire. "They started pulling back from the long-term contracts some time ago as the underlying problem is a collapse of green certificate prices, which made these contracts hugely negative for them."

A sectoral issue

Other wind sector investors and producers face similar problems, in particular In.ventus, a German-Polish wind power developer and investor.

One Polish wind power producer, PGE Energia Odnawialna - a unit of one of Poland's largest power companies PGE - told DW it had received from another Polish power firm, Enea, termination of long-term contracts for purchase of renewable energy in October 2016.

The PGE Group told DW that these were terminated in violation of terms of the agreements. The PGE group puts the disputed amount at 42 million zlotys (10 million euros).

The head of one small Polish wind power producer, Wento, said he doubted the case would affect directly any government actions/standpoint on wind energy in Poland.

“However it is another of many annoyances they suffer because of their attitude toward the sector,” Wento CEO Wojciech Cetnarski told DW.

The wind harvester

04:30

This browser does not support the video element.

A sector in retreat

Under EU rules Poland is committed to producing 15 percent of its electricity from renewable sources by 2020. Wind accounts for just under half of that with an installed capacity of 5.5 gigawatts (GW), Moody's estimates, including from turbines owned by EDF, RWE and Eon.

President Andrzej Duda signed into law the bill on investments in wind turbines in June 2016. The law recalculates the ways existing and planned wind farms have to pay property tax and stipulates that wind turbines need to be deployed at least 10 times the tip height away from residential areas, approximately a distance of 2km.

The Polish Wind Energy Association said this would exclude 99 percent of the country's territory from wind development.

"The effect of the bill will be a complete elimination of new wind power projects from Poland," the Polish Association of Wind Energy said.

Protection for investors is provided under bilateral investment treaties to which Poland is a party, as well as a multilateral treaty containing special provisions on protection of investment projects in the energy sector, the Energy Charter Treaty.

Oliver Joy, a spokesman for WindEurope, said there has been a targeted campaign by the government to halt onshore wind development in Poland by tying the industry up in red tape and imposing punitive measures that deter future investment.

"We would like to see the European Commission scrutinize this new law on turbine siting very closely," he added.

"It makes no economic sense to penalize onshore wind deployment through such draconian measures. Onshore wind is the cheapest new form of power generation in many parts of Europe today – not just for renewables but conventional power generation too," Joy said. 

"The law could send investors running for the hills and the Polish economy could suffer as a result. Poland is in need of new power plants and onshore wind will soon be cheaper than coal," according to Joy.

"The wind industry in Poland supports 8,000 jobs and brings in 600 million zloty each year in tax revenue," he added.

The geopolitics

The move comes as US President Donald Trump visits Warsaw, to the chagrin of many EU leaders. Warsaw has been accused of undermining democratic norms and institutions since the governing Law and Justice (PiS) party came to power in late 2015.

Warsaw has since the early 1990s also been looking to diversify away from reliance of Russian sources of energy. It recently signed a large LNG contract with Qatar and another with US producers, both of which have geopolitical implications.

But if the Russia-Western Europe gas pipeline known as Nord Stream II is built, Central Europe will be flooded with Russian gas and Germany would likely become central Europe's energy hub.

Meanwhile, the first shipment of US liquid natural gas (LNG) last month was welcomed as a sign of future cooperation, with hopes about US-investments high.

Having the US as stakeholders of the region's prosperity is important to Warsaw.

While PiS' illiberalism strikes a chord with Trump, as does Poland's spending on defense, often with US contractors - one of the few NATO states to meet the NATO goal of 2 percent of GDP spending on defense - the question that remains is whether Trump is both willing and able to provide such support.

Jo Harper Journalist and author specializing in Poland
Skip next section DW's Top Story

DW's Top Story

Skip next section More stories from DW