(Reuters) -Polish oil refiner Orlen will not continue with its Olefins petrochemical project in its current form and will decide by December between “optimising”, suspending or terminating the investment, the company said.
The company had said on Wednesday that continuing the investment under existing plans would mean delaying its completion until 2030 and imply costs of between 45 and 51 billion zlotys ($12.65 billion).
“The choice of scenarios is driven by the protection of the company’s interests and is based on analysis of the petrochemical market, macroeconomic situation, and the profitability of the project,” the company said.
With billions of zlotys already spent on the Olefins project, Orlen said it faces a choice of weather to terminate it and pay several billion zlotys in costs or complete it.
“My dream would be for the 14 billion zloty invested in it to be used sensibly,” Ireneusz Fafara told reporters on Thursday.
“If we look at how much money we need to spend to complete it, we would like this money to be also used on sensible projects that bring a fair rate of return, this our dilemma.”
The project has already needed several investment writedowns. Fafara said Orlen would decide its fate before the company publishes an updated strategy in December.
“Although it’s late to decide to halt work on the project, this is the construction that has caused the most controversy among minority investors”, said Erste Group analyst Jakub Szkopek.
“The market should react positively due to the increase in FCF (free cash flow) in the years to come”, he added.
As of 0955 GMT, Orlen shares were up 2.2%, in line with gains in Poland’s blue-chip index.
($1 = 4.0303 zlotys)
(Reporting by Rafal W. Nowak and Marek Strzelecki; Editing by Janane Venkatraman and Jane Merriman)
