Poland's ZAP looking for investment opportunities outside EU

28 January 2011 11:56  [Source: ICIS news]

PRAGUE (ICIS)--Zaklady Azotowe Pulawy (ZAP) is looking for investment opportunities beyond the EU because of the high costs of gas in Poland and carbon dioxide emissions, the Polish fertilizer producer said on Friday.

Costly gas had become a concern that could hinder any alternative company expansion plans drawn up for home, said Jolanta Golba, an investor relations specialist at ZAP.

Polish industry is almost completely dependent on Russia for gas. Prices are set in accordance with long-term contracts settled with Polish gas monopoly PGNiG, with no access given to the international gas spot price market due to Poland's lack of interconnectors with gas grids to the west and south.

"In the last financial year, the share of natural gas in the company’s production cost stood at around 50%. The high price of gas makes it difficult to compete with nitrogen fertilizers manufactured with the use of cheap gas by competitors on the domestic and international markets," Golba said.

"ZAP is thus taking steps to optimise the production cost. The steps include searching for possible locations for production plants in areas where cheap gas is available,” she added.

ZAP is Poland's largest fertilizer company and the third-largest melamine producer in the world. It also produces caprolactam.

The Polish chemical industry is lobbying for a greater interconnection of Poland's gas grid with that of Germany in order to access more competitively priced gas supplies.

The cost of securing carbon credits to cover emissions was also a difficulty when investing in the EU, said Golba.

However, ZAP was not at the stage of examining any specific investment proposal in Belarus, Ukraine, Africa or any other non-EU location mentioned in Polish press reports as likely future production places for the company, she added.

Jerzy Majchrzak, director of the Polish Chamber of the Chemical Industry (PIPC), has warned that if the EU went ahead with emission requirements that were too stringent, the Polish chemical industry could eventually more or less cease to exist.

As non-EU countries within eastern Europe, Ukraine and Belarus could prove attractive to Polish chemical companies looking to "mass transfer production" to cheaper locations, he added.

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By: Will Conroy
+44 20 8652 3214

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