With record coal-fired power generation capacity and the development of new coal mining and power generation, Polish utility PGE ranks among the worst coal offenders in Europe. Unless PGE quickly announces a break with the strategy deployed so far, it will be impossible for its shareholders, including BlackRock, to maintain their support for the energy company without reneging on their own climate commitments. The upcoming general meeting may be the last opportunity to put pressure on the company’s management.
Coal-fired until … 2049
With installed coal power capacities of 15 GW, accounting for 88% of the power production, PGE is the most coal-intensive utility in Europe, as well as the largest supplier of coal-fired electricity (1). The group is also involved in coal mining in Poland and extracts 51,40 millions metric tons of coal per year. Overall, PGE derives over 71% of its revenue from coal.
Among the European utilities, the Polish group ranks second in terms of coal-based emissions. Europe’s most polluting coal power plant, Bełchatów, is operated by PGE and will only close in 2038. To limit global warming to 1.5°C, it is essential to phase out all coal-fired power generation in the EU/OECD by 2030, and globally by 2040. In Poland, PGE plans to get out of coal in 2049 … which is 19 years too late.
Still developing new coal mining and power
Last year, the IEA added its voice to the multiple scientific reports published since COP21 indicating that no new coal mines or mine expansions are needed beyond the projects already committed from 2021.
Yet PGE does not intend to stop down its climate-devastating path: the Polish utility is constructing new coal-fired power plants as well as illegally expanding the lifetime of its Turów coal mine (2). Poland approved the mine’s license expansion to 2044 even though the European Commission has confirmed that the mine’s permitting process violates at least two European laws (3).
A climate disaster brought to you by BlackRock
Regardless of the fact that PGE is developing new coal capacity, and that its business model relies disproportionately on coal, BlackRock remains the utility’s third largest shareholder (with 67.3 Mio $), after the Polish State Treasury and the Polish PZU Group (4).
Despite a very weak coal policy, BlackRock excludes mining companies with more than 25% of revenues from coal (5). Yet PGE derives 71% of its revenue from coal mining and power generation, making it highly likely that BlackRock’s policy would place it on its exclusion list … for actively managed assets. BlackRock’s policy is not only weak because it does not cover the power sector. It is also very limited because it does not apply to passively managed assets, which make up the bulk of BlackRock’s assets.
BlackRock pledged in 2020 to align its portfolio with a 1.5°C trajectory and net-zero target by 2050. Holding assets in PGE is highly inconsistent with these objectives, which require a 50% GHG reduction by 2030. Indeed, getting out of coal by 2030 is only the first condition to be met in Europe to limit warming to 1.5°C. The urgency to massively reduce our emissions requires EU utilities, including PGE, to quit coal to make room for renewable energies.
Yet, while PGE is clearly reluctant to leave coal behind, it also plans to diversify its carbon-based energy mix by adding more fossil fuels. Indeed, although the current gas capacities of the Polish utility are quite low (around 5% of its generation mix), PGE is also developing new gas power plants in Poland and plans to triple its gas capacities between 2020 et 2035 (6).
It’s high time for BlackRock to walk the talk and make a choice between either reviewing its energy policy and divesting PGE for good, or voting against all management resolutions at the coming AGM.