Poland: District heating as a success factor

The generation and transport of district heating is a booming business in Poland. In a highly competitive market with a great need for expansion and modernization, SFW Energia, a member of the STEAG Group, relies on working in partnership with local authorities and by doing so is achieving considerable success.

When our eastern neighbors suffered a cold spell last winter, it was clearly visible in the air: In order to warm up the millions of homes, thousands of stoves, which were already quite old, roared at full blast and caused smog for weeks, especially in the Silesian regions of the country. More than 60 percent of households in Poland still use coal for heating and – illegally – also use other materials that burn and generate heat, but also produce harmful exhaust gases. “This effect is not new in Silesia: Unfortunately, it has existed for decades,” says Ewa Wassmuth, who manages the business of SFW Energia together with Antoni Slomiany and Bernard Barteczko. “But in Poland, too, people have become more environmentally conscious. Everyone wants to live in a clean environment today,” she adds.

“We approach the local authorities and ask them very precisely how they envisage a solution to their problem on the ground.”

Antoni Slomiany, Chairman of the SFW Management Board

The message has been heard – and the Polish government has announced that it will reduce CO2 emissions by at least 20 percent by 2020. It is therefore promoting efficient combined heat and power generation (CHP) and the use of renewable energy sources. Practical implementation is largely the responsibility of the municipalities, they are the owners of the power generation plants and distribution networks – and that is where SFW Energia comes in. “We approach the local authorities and ask them very precisely how they envisage a solution to their problem on the ground,” explains Antoni Slomiany, Chairman of the SFW Management Board. “And then, together, we work out a solution that exactly meets the relevant needs. For some of them, the focus is on the renewal of district heating pipelines, while for others a completely customized generation concept has to be developed.”

Cooperation as a competitive advantage

As in Piekary Slaskie, for example: In 2003, SFW Energia acquired over 97 percent of Miejskie Przedsiebiorstwo Energetyki Cieplnej Piekary Slaskie (MPEC). The municipal district heating company in the Silesian city with a population of 60,000 had a market share of around 30 percent. “Then we set to work together with the city authorities,” recalls Antoni Slomiany. “What needs to be modernized and what financial resources do we need? Where does the network need to be expanded?” The measures developed together with the city council have led 14 years later to lower emissions, greater convenience for customers and ultimately to an improvement in the quality of life. Today, MPEC has a 100 percent market share in Piekary Slaskie. The SFB affiliate now supplies housing estates, schools, hospitals, and also public buildings in the city. This development can also be seen directly in the key financial figures: Since the start of the cooperation between SFW and the city administration, annual sales have increased fivefold. “The development of MPEC is a prime example of fruitful and successful cooperation,” says the Chairman of the SFB Management Board. And there is more: SFW and the city council are currently planning to connect a housing estate with apartment buildings in the northern part of the city to the MPEC district heating network. This positive trend also applies to the company as a whole: SFW Energia has grown continuously since its foundation in 1997. This was also not insignificantly due to supplies to industrial enterprises. The largest customer in this segment is the car manufacturer General Motors, which manufactures the mid-range Opel Astra in Gliwice. There, the STEAG Group company supplies thermal energy for heating in the production shops and process heat for the paint shop. Bernard Barteczko, a member of the SFB management team since the company was founded, explains: “We have built up a wealth of expertise in this area over the years, which is in great demand.” Other industrial customers in the Upper Silesian city are the IZO-ERG chemical plants, which are continuously supplied with steam, the nationally prestigious specialist clinic for oncology and the British supermarket chain Tesco, which is also based there.

“The direction is clear: less CO2, less smog. That’s why CHP is important.”

Bernard Barteczko, member of the board of SFW Energia

Highly competitive market

In addition, the energy service provider has taken over competitors in recent years or has entered into joint ventures with them. The largest acquisition to date was that of 85.37 percent of the shares in the district heating company Heizkraftwerk EC Mielec, which mainly operates in south-eastern Poland and supplies heat to around 160 companies in the mechanical and aircraft engineering sectors and their component suppliers. “The competition is undoubtedly getting tougher,” says Bernard Barteczko. “We are operating in a relatively stable and regulated market. The new subsidy programs are also currently pushing many providers onto this market, whereas they previously invested exclusively in renewable energy sources, for example, because they are hoping for stable yield opportunities.”

Nevertheless, the directors of SFW Energia can still see sufficient growth potential. After all, the expansion of combined heat and power generation is an important section of the master plan in the policy to increase the efficiency of the Polish energy system. “The guideline is clear: less CO2, less smog, That’s why CHP is important,” says Bernard Barteczko. “And on that basis we can see very good opportunities to expand our business further.”

To this end, the SFW management intends to maintain the existing business on the one hand and to examine takeover and cooperation opportunities with and from other competitors on the other. In particular, however, cooperation with local authorities is to be expanded. As owners of plants and networks, they find themselves under considerable pressure to adapt their partly obsolete infrastructure to meet the current objectives.

SFW Energia
SFW Energia SFW Energia Sp. z o.o., founded on December 3, 1997, is a wholly owned subsidiary of STEAG GmbH. SFW Energia is based in Gliwice, Poland, the westernmost city in the Upper Silesian industrial region, some 95 kilometers west of Krakow and around 270 kilometers south-west of Warsaw. SFW Energia plans, constructs and operates heating, cooling and power generation plants based on hard coal, wood, mine gas and natural gas – including one of the few private mine gas plants in Poland. The company also provides engineering and consultancy services. SFW Energia currently operates at eleven locations throughout Poland. In 2016, 560 employees generated a turnover of around 227.3 million zloty, which corresponds to around 54 million euros. In the process, 1,025,765 megawatt hours of heat and 147,460 megawatt hours of electricity were sold. The commercial success of SFW Energia also has a favorable effect on STEAG’s consolidated earnings.

 

 

Employee-friendly company

“That's why approaching people at the local level is so important,” says Ewa Wassmuth. “We’re talking to the local mayors, because in the end they are the ones who have to make the final decisions.” And in addition to its know-how, SFW Energia has another key characteristic that makes it an attractive cooperation partner for the city leaders: the STEAG company has received an award as an ‘employee-friendly company’. “This is an important factor in the decision-making process on entering into cooperation with us,” says Antoni Slomiany. “In addition to qualifications, the cooperation between employees and employers is very important to us in this country. We know that the district mayors who we approach also ask their counterparts about this. And in this respect we also have the best references.”