Key investment projects in 2022
We have allocated our record-breaking revenue for 2022 to further developing our business. We keep working on investment projects that are already in progress, while embarking on promising new ones.
We spent more than PLN 1.78 billion on development projects – the largest one being the construction of the Polimery Police plant for more than PLN 1.53 billion.
Key CapEx projects
as at December 31st 2022
1Grupa Azoty Koltar, Grupa Azoty Siarkopol, Grupa Azoty PKCh, Grupa Azoty Compounding, Grupa Azoty ATT POLYMERS
Grupa Azoty Group’s capital expenditure:
| 2021 | 2022 | |
|---|---|---|
| Growth CapEx | PLN 1,279,866 thousand | PLN 1,788,074 thousand |
| Maintenance CapEx | PLN 288,618 thousand | PLN 370,551 thousand |
| Mandatory CapEx | PLN 654,268 thousand | PLN 141,544 thousand |
| Purchase of finished goods | PLN 62,883 thousand | PLN 76,777 thousand |
| Other | PLN 275,844 thousand | PLN 369,380 thousand |
Significant financial assistance received from the government by type2 (PLN ‘000)
In 2022, we also received financial assistance from the government. The subsidies, grants and tax credits allowed us to increase our capital expenditure spending. In 2022, the Group companies received free CO2 emission allowances worth: in the case of Grupa Azoty – PLN 196 million3 , Grupa Azoty Police – PLN 380.4 million, Grupa Azoty Puławy – PLN 900.5 million, and Grupa Azoty Kędzierzyn – PLN 337.9 million. The value of these allowances is reflected in the table as ‘Other financial benefits’.
| Category of financial assistance | 2021 | 2022 | |
|---|---|---|---|
| Grants | Government grants to finance property, plant and equipment | 9,741 | 4,785 |
| Research and development grants and other relevant grants | - | 4,745 | |
| Other government grants | 319,392 | - | |
| Investment grants, research and development grants, and other relevant grants | State aid related to operation within a special economic zone | Change in the data reporting method | 31,390 |
| Grants – in a special economic zone | 54,148 | 0 | |
| Other investment grants, and research and development grants | 654,819 | 0 | |
| Other financial benefits received or receivable from any government for any activity | 0 | 1,828,350 | |
| Tax relief and tax credits | Tax credits for research and development projects | 1,625 | 4,541 |
| Total | 1,039,725 | 1,873,811 | |
2 In 2022, the Grupa Azoty Group did not receive any financial assistance from the government in the categories of tax credits, awards, royalty exemptions, financial support from export credit agencies (ECAs), or financial incentives. The government of the Republic of Poland holds a 33% stake in the share capital of Grupa Azoty S.A.
3 17,022 allowances have been surrendered in 2023. The change in the allocation of free allowances was due to the discontinuation of tarnoform production.
In January 2023, the Polish government resolved to establish the ‘Aid to Energy-Intensive Sectors Related to Sudden Increases in Natural Gas And Electricity Prices in 2022’ scheme. Grupa Azoty (including Siarkopol S.A.) received PLN 234.2 million in state aid under the scheme. The amount was recognised in the company’s separate and consolidated results for the first quarter of 2023 by increasing EBITDA.
Companies’ key projects (PLN ‘000)
| Project name | Project budget | Expenditure incurred | Expenditure incurred in 2022 | Project purpose | Scheduled completion date |
|---|---|---|---|---|---|
| Grupa Azoty S.A. | |||||
Neutralisation unit (for ammonium nitrate) | 210,000 | 4,605 | 2,646 | Project to build a new concentrated ammonium nitrate solution unit, called a neutralisation unit, to ensure continuity and improved efficiency of nitrate fertilizer production. It will result in lower heat consumption, mitigate the environmental impact of the production process, and bring down costs. In addition, it will reduce the product’s carbon footprint. | 2025 |
| Construction of a neutralisation and precipitation unit | 141,000 | 7,168 | 5,708 | Project to construct a new neutralisation and precipitation unit and upgrade the caprolactam and ammonium sulfate production process to reduce heat consumption through better use of the heat generated by neutralisation of caprolactam ester. Reduced steam consumption will help lower the cost of caprolactam and ammonium sulfate production and improve cost competitiveness. In addition, it will reduce the product’s carbon footprint. | 2025 |
| Grupa Azoty POLYOLEFINS | |||||
| Polimery Police | 7,210,95744 | 4,639,875 | 1,533,925 | Project to construct an on-purpose propylene dehydrogenation plant (PDH) and a polypropylene production plant with associated infrastructure, including expansion of the Police Seaport to include a propane and ethylene handling and storage terminal. | 2023 |
| Grupa Azoty POLICE | |||||
| Project to make production of demineralised water independent of variable salinity of the Oder River and increase the capacity to produce treated water for special applications | 111,000 | 108,497 | 13,459 | The upgrade and expansion of the water treatment and demineralisation station will help protect Grupa Azoty POLICE against periodic spikes in the Oder salinity levels, allowing it to use the river as the sole source of water supply. The project will also secure the supply of demineralised water to Grupa Azoty POLYOLEFINS units. | 2023 |
| 220/110 kV main transformer station upgrade in Police to connect and supply propane dehydrogenation and polypropylene units | 57,292 | 56,152 | 9,618 | The upgrade of the transformer/switching station of the Main Point of Power Supply (GPZ) Police will secure the distribution of electricity for the purposes of the planned propane dehydrogenation and polypropylene production unit. The first autotransformer was commissioned and connected to the national power grid. | 2023 |
| Recycling of hydrogen originating from the propylene unit to be used at the ammonia unit | 30,000 | 4,396 | 20,320 | The purpose of the project is to utilise a stream of pure hydrogen, a by-product of propane dehydrogenation (PDH), at the ammonia unit, and to ensure that the hydrogen stream can be delivered from the ammonia unit to start the PDH unit. | 2023 |
| WA II tower replacement Line 7 | 16,350 | 16,096 | 166 | The absorption tower will be replaced to ensure continuous operation of the sulfuric acid plant and to prevent unforeseen failures involving a potential risk of sulfuric acid leakage. | 2022 |
| Purchase of equipment for loading fertilizers onto ships | 15,200 | 1,216 | 11,484 | Starting to replace the old loading equipment with a new device with a higher loading capacity to ensure safe and failure-free loading of ships up to 40,000 DWT, with a width of up to 30 metres. | 2022 |
| Grupa Azoty PUŁAWY | |||||
| Construction of coal-fired power generation unit | 1,200,000 | 1,005,052 | 45,767 | Bringing Grupa Azoty PUŁAWY’s energy generation units in line with the latest environmental requirements, while increasing the share of the autoproducer CHP plant in the electricity volumes consumed by the production units, and ensuring uninterrupted supplies of energy (process steam and heating water). | 2023 |
| Upgrade of existing nitric acid production units and construction of new nitric acid production and neutralisation units and units for production of new fertilizers based on nitric acid | 695,000 | 432,316 | 39,124 | Increase in the efficiency of nitric acid production and the economics of production of nitric acid-based fertilizers. Any nitric acid surplus will be processed on the new line for the production of speciality fertilizers: magnesium nitrate, calcium nitrate and potassium nitrate. | 2028 |
| Facility for production of granulated fertilizers based on ammonium nitrate | 430,000 | 423,323 | 8,492 | Improvement of the quality of fertilizers by applying modern mechanical granulation. Key element of the complex will be two lines for manufacturing granulated fertilizers based on ammonium nitrate melt as the feedstock for granulated ammonium nitrate and calcium ammonium nitrate. | 2022 (completed) |
| Upgrade of steam generator OP-215 No. 2 to reduce NOx emissions | 145,000 | 128,773 | 38,035 | Bringing the generator into compliance with new NOx emission standards and refurbishing the generator, which is to become a principal generating unit at the captive CHP plant along with generators Nos. 4 and 5. | 2023 |
| Replacement of the TG-1 turbine generator set | 85,000 | 80,774 | 13,514 | Increasing the efficiency of electricity and heat cogeneration by replacing the TG-1 30 MWe pass-out and condensing turbine with a new 34 MWe turbine as part of the power system upgrade. | 2022 (completed) |
| Grupa Azoty KĘDZIERZYN | |||||
| Upgrade of the synthesis gas compression unit supplying the ammonia plant | 180,000 | 146,708 | 60,966 | Rebuilding synthesis gas compression capacities for the ammonia plant through installation of new compressors. The project will reduce maintenance expenditure and energy intensity of the ammonia production process and significantly lower department overheads. | 2023 |
| Peak-load/reserve boilers | 110,087 | 63,430 | 44,588 | The peak-load/reserve boiler house as a peak-load source will interoperate with steam generators at the existing CHP plant. In the event of any downtime in coal-fired boilers, the peak-load/reserve boiler house will operate as a stand-alone reserve steam generator. | 2024 |
| Purchase and installation of a new oxygen compressor | 72,800 | 69,845 | 10,546 | The purpose of the project is to replace the old steam turbine-driven oxygen compressors K-101 A and K-101 B with a single electric unit. The project is part of a broader initiative focused on innovative use of heat generated by the ammonia production process as an alternative to heat produced in a coal-fired boiler system. | 2023 |
| 2-ethylhexanoic acid unit | 120,000 | 2,886 | 778 | Enabling the production of 20,000 tonnes of 2-EHA per year. | 2024 |
| Upgrade of the urea production line | 172,447 | 6,378 | 6,378 | Improving consumption rates of utilities and raw materials/feedstocks, improving environmental performance of the unit, and increasing daily production capacity to 780 tonnes, which will raise the output of technical-grade urea and significantly improve the company’s overall balance of liquid ammonia and carbon dioxide. | 2025 |
4 Project budget translated into the Polish złoty at the PLN/USD mid exchange rate assumed in the project’s financial model. Project budget approved by the corporate bodies: USD 1,837,998 thousand.
In 2022, the construction of Polimery Police entered its final phase. It is our flagship investment, and one of the largest projects to have been undertaken within the chemical industry in Poland and Europe. The integrated chemical complex will comprise propylene and polypropylene production units, a storage and handling terminal, and logistics infrastructure. The terminal will allow us to receive deliveries of the project’s two key feedstocks: propane and ethylene. Three tanks have been built for this purpose at the gas terminal in Police: two for holding propane, with a capacity of 40,000 cubic metres each, and one for holding ethylene, with a capacity of 12,000 cubic metres. The total estimated project budget exceeds EUR 1.5 billion. The project, scheduled for commissioning in 2023, is intended to support the Grupa Azoty Group in its responsible climate efforts and promote the circular economy, contributing to a reduction of the carbon footprint of plastics throughout their life cycle.
At the end of December, the percentage of the construction work completed was 98%. In addition, the Guadalupe Explorer gas tanker delivered the first 22,000 tonnes of propane, which was transferred to the propane tanks at the marine storage and handling terminal. It will be used to launch the propane dehydrogenation unit and to produce polypropylene. The delivery was made under a USD 250 million-worth propane purchase contract with Trafigura PTE, which will cover more than 50% of Grupa Azoty Polyolefins’ demand for propane in 2023–2024.
The feedstock delivery confirms that the construction of the new plant has entered its final phase. According to information released by Grupa Azoty on February 15th 2023, the overall progress of work on the Polimery Police project at the end of January 2023 was in excess of 99.01%, meaning that it reached its last stage. The plant’s commissioning took place in June 2023.
Best practice
Construction of a gas terminal by ORLEN Paliwa
In 2022, Grupa Azoty Polyolefins, ORLEN Paliwa, and the Police Seaport Authority signed a letter of intent concerning potential construction by ORLEN Paliwa of an LPG terminal on the premises of the Police Seaport. If the partners proceed with the cooperation, the wharf built by Grupa Azoty Polyolefins will be used to establish a gas terminal. Its construction would include a tank park and handling infrastructure for cargoes transported by water, road, and rail. The terminal would enable collection of propane delivered by sea and butane delivered by rail or road and their further distribution for the purposes of ORLEN Paliwa’s business.
Best practice
EU funding for the Port of Police project
In 2022, the Port of Police, a member entity of our Group, applied for EU funding for its project designated as ‘Strengthening of the comprehensive network by increasing the accessibility and efficiency of the Port of Police’. Its implementation would enable the construction of a railway link between the Police Seaport and railway line No. 437, currently under construction, as well as new railway sidings within the port area. Also, it would be possible to extend the heavy cargo wharf by 300 metres, to a total of 715 metres.
