Grupa Azoty submitted a notification to the District Prosecutor's Office in Tarnów regarding the implementation of the Polimerów Police (later GA Polyolefins) project. The installation costing approximately PLN 7.5 billion was one of the largest investments in the petrochemical industry in Europe and in the entire history of the Polish industry. Causing large-scale damage in the course of business may be punishable by up to 10 years' imprisonment.
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The idea was supposed to be a great development leap for the Polish fertilizer company and enable the company to open up to new, promising business branches in the form of propylene and polypropylene production. The company wants to hold the authors of the flagship industrial project of the rule of Law and Justice accountable.
— We have to import much more chemical goods, various types of products and semi-finished products than we can produce and export at home. This means that an investment such as this was not only very necessary from the point of view of complementing the product offer of the Azoty group, but is also important crucial for the entire economy of the Republic of Poland – said Prime Minister Mateusz Morawiecki during the production launch ceremony in 2023.
Jacek Sasin in Police in 2020
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MAP / Ministry of State Assets
– It is even more important that State Treasury companies continue their current operations and do not abandon planned investments during such a difficult period of the coronavirus pandemic for the economy – said the Minister of State Assets and Deputy Prime Minister Jacek Sasin during his visit to Police in 2020.
Polymer fiasco
The business objectives of the investment were never achieved — construction delays, a raw materials crisis and a decline in demand for polypropylene meant that the installation never achieved its potential. The banks that financed it called for repayment of liabilities, and the company also entered into a dispute with the main contractor – Korean Hyundai Engineering. She has not recovered from the financial problems she found herself in to this day.
The notification concerns a suspected crime of causing significant property damage to the Azoty Group. It was supposed to consist in mismanagement of property matters in connection with the construction of Polimery.
The irregularities concern actions and omissions from 2016-23. Although the company responsible for the construction of the complex, controlled by Azoty, was established before the change of government in 2015, the damage was said to have occurred during the decision to choose the concept – the costly expansion of the investment from the concept of an installation producing only propylene (the so-called PDH installation) to a model of an installation producing both propylene and polypropylene.
The choice and implementation of this formula could have led to an increase in financial debt limits in 2018 by approximately PLN 5.5 billion, and subsequent investment decisions made as part of the project resulted in a further increase in debt in the period 2021-2024 by approximately PLN 2.1 billion.
Azoty is looking for help
The company GA Polyolefins (GAP) controlled by Azoty is undergoing restructuring, and the group hopes that its sale to Orlen will be finalized soon. The Płock concern's offer for shares owned by Azoty (except them Orlen currently has 17.3 percent, Hyundai Engineering Co. – 16.6 percent and Korea Overseas Infrastructure and Urban Development Support Corporation – 1.1 percent) amounted to PLN 1.022 billion. Azoty has just submitted a counteroffer which does not differ in this amountbut predicts “bonuses” in the future.
The transaction is intended to allow Azoty to turn the corner, because, according to the company's current management, the plan for a polypropylene production installation did not meet business requirements from the beginning, and the previous authorities ignored the business irrationality of the project. — A decision was made to make a large-scale investment that was not suited to the group's financial capabilities. It was also based on risky business assumptions. All these assumptions simply do not come true. In this way, the group was forced into a business that weakened its potential, instead of implementing many more promising projects – says Andrzej Skolmowski, president of Grupa Azoty, in an interview with Business Insider Polska.
— After analyzing the report of the Supreme Audit Office, conducting audits and internal analyses, we decided to notify the prosecutor's office for acting to the detriment of the company. We cannot talk about details, he adds.
The Polimery Police project still weighs on Grupa Azoty
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Dariusz Gorajski / Forum / Forum Polish Photographers Agency
NIK scores points for Azoty's investment
The report of the Supreme Audit Office from February described, among other things, that the company in its analyzes before starting the project underestimated the risk associated with a possible economic downturn on global markets and the project's sensitivity to the global economic situation.
It also confirmed that core business goals had not been achieved. “As a result of delays in the implementation of the Project, the Company produced 166,680 tons of propylene in 2024 (39% of the assumed annual production potential of 429,000 tons) and 144,100 tons of polypropylene (33% of the planned annual production of 437,000 tons),” the Supreme Audit Office said.
Azoty's lost benefits
The investment in Polimery was based on the assumption of importing cheap gas to power the installation. At the same time, Azoty was entering an unknown area of activity – the production of polypropylene, which had previously been handled by Orlen in the portfolio of state-owned companies.
According to the current management board, Azoty, by focusing on an expensive and risky project, lost the opportunity to develop in more promising directions. — The group has four seaport complexes. We have the third largest seaport in Police. It was possible to implement many interesting projects that would now be a great response to what is happening on the market, instead of entering areas that are difficult to implement from this market perspective, when there are no other synergies in the entire supply chain – says Skolmowski.
Another report
This is yet another notification received by the prosecutor's office in matters relating to Azoty's operation under the previous government. Previously, the company announced that it had submitted them in matters such as the natural gas purchase strategy in 2022-2023, delays in the construction of the coal unit in Puławy, and the extension of the non-competition clause in management contracts.
Grzegorz Kowalczyk, journalist of Business Insider Polska
