Key projects in 2021
The Grupa Azoty Group’s growth requires investment, its size and momentum being determined by the scale of our operations.
The Grupa Azoty Group’s growth requires investment, its size and momentum being determined by the scale of our operations. In 2021, we continued the already commenced projects and were preparing for new ones in line with our Strategy until 2030. We are fully capable of financing our investment projects and of securing additional sources of financing for expenditures made in the implementation of the Green Azoty project and aligned with the objectives of our ESG Strategy.
In 2021, our growth CapEx was close to PLN 1.3 billion, with more than PLN 828 million allocated to the construction of Polimery Police, our largest project.
Ongoing CapEx projects
as at Dec 31 2021
Breakdown of Grupa Azoty Group’s capital expenditure:
| 2020 | 2021 | |
|---|---|---|
| Growth CapEx | PLN 1,744,675 thousand | PLN 1,279,866 thousand |
| Maintenance CapEx | PLN 323,542 thousand | PLN 288,618 thousand |
| Mandatory CapEx | PLN 449,395 thousand | PLN 654,268 thousand |
| Purchase of finished goods | PLN 54,520 thousand | PLN 62,883 thousand |
| Other (components, major overhaul work, other) | PLN 182,592 thousand | PLN 275,844 thousand |
Significant financial assistance received from government (in PLN), by type1
We also received financial assistance from the government in 2021. The subsidies, grants, tax relief and tax credits we received supported, among other things, our capital expenditure on investment projects.
| Category of financial assistance | 2020 | 2021 | |
|---|---|---|---|
| Government grants | Government grants to finance property, plant and equipment | 11,839,023 | 9,740,705 |
| Other government grants | 315,935,956 | 319,392,404 | |
| Investment grants, research and development grants, and other relevant types of grant | State aid related to operation within a special economic zone | 10,652,482 | Change in the data reporting method |
| Grants – in a special economic zone | Data not reported in 2020 | 54,148,137 | |
| Other investment grants and research and development grants | Data not reported in 2020 | 654,818,723 | |
| Tax relief and tax credits | Tax credits for research and development projects | 3,467,484 | 1,624,700 |
| Total | 34,1894,945 | 1,039,724,669 | |
1 Due to an update of the scope of Disclosure 201-4 reporting, not all amounts can be compared with the data presented in the Grupa Azoty Group’s integrated report for 2020. In 2021, the Grupa Azoty Group did not receive any financial assistance from government in the following categories: awards, royalty payment suspension, financial assistance from Export Credit Agencies (ECAs), financial incentives and other financial benefits received or receivable from any government for any operation. The government of the Republic of Poland holds a 33% stake in the share capital of Grupa Azoty S.A.
| Project name | Budget (PLN ‘000) | Expenditure incurred (PLN ‘000) | Expenditure incurred in 2021 (PLN ‘000) | Project purpose | Scheduled completion date |
|---|---|---|---|---|---|
| Grupa Azoty POLYOLEFINS | |||||
| Polimery Police | 7,210,9572 | 3,105,949 | 828,605 | The project is to build an on-purpose propylene dehydrogenation plant (PDH) and a polypropylene production plant with associated infrastructure, including the expansion of the Police Sea Port to include a propane and ethylene handling and storage terminal. Expansion of the Police Sea Port will help expand the existing portfolio and extend its reach globally. The fairway dredging will allow the Police Sea Port to manage larger ships, which in turn will translate into gains from lower freight rates for the transport of phosphate rock and loading of fertilizers. Laying of tracks will connect the port with the railway network. This in turn will contribute to the development of intermodal transport and allow all Group companies, especially the plants in Tarnów, Kędzierzyn, Puławy and Grzybów, to handle outbound and inbound flows of raw materials. Once constructed, the new terminal for Polimery Police will allow both LNG as well as propane and ethylene carriers to dock, which will open new waterways and facilitate winning of new contracts. | 2023 |
| Grupa Azoty POLICE | |||||
| Making production of demineralised water independent of variable salinity of the Oder River and increasing the ability to produce special waters in the units | 108,000 | 95,037 | 34,866 | The upgrade and expansion of the water treatment and demineralisation station will help protect Grupa Azoty Police against periods of elevated salinity in the Oder river and will enable the use of the Oder river as the only supply source. The project will also secure the supply of demineralised water to Grupa Azoty POLYOLEFINS units. | 2022 |
| 220/110 kV main transformer station upgrade in Police to connect and supply propane dehydrogenation and polypropylene units | 56,000 | 46,533 | 26,540 | 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. The second autotransformer was removed and work is under way to construct a new autotransformer station. Upgrade of facilities and transmission networks for the second autotransformer started. | 2022 |
| Recycling of hydrogen originating from the propylene unit to be used at the ammonia unit | 30,000 | 4,396 | 4,396 | 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. Contracts for the lining of secondary reformers and for the construction of new hydrogen, boiler water and steam pipelines were signed. The supplier of catalysts for methanisation units was selected. The construction site for new steam expanders was handed over. Progress of work on the contract for the supply of I&C systems is 30%. | 2023 |
| WA II tower replacement Line 7 | 16,350 | 16,096 | 5,436 | The replacement of the absorption tower is aimed at ensuring continuing operation of the sulfuric acid production plant and preventing an unexpected accident creating a risk of sulfuric acid leakage. | 2022 |
| Purchase of equipment for loading fertilizers onto ships | 15,200 | 1,216 | 1,216 | 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. Design plans and specifications were developed and prefabrication of equipment commenced. | 2022 |
| Grupa Azoty PUŁAWY | |||||
| Construction of coal-fired power generation unit | 1,200,000 | 959,285 | 547,208 | To bring 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 to ensure uninterrupted supplies of energy (process steam and heating water). | 2022 |
| 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 | 393,102 | 40,631 | Increase in the efficiency of nitric acid production and the economics of production of nitric acid-based fertilizers. Any excess of nitric acid 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 | 414,732 | 26,367 | The project is being implemented in the Starachowice Special Economic Zone and is a key component of the fertilizers production development project at Grupa Azoty Puławy. It will bring about a fundamental change in the overall process of manufacturing granulated ammonium nitrate and ammonium nitrate-based fertilizers. The key elements of the projects are:
| 2022 |
| Upgrade of steam generator OP-215 No. 2 to reduce NOx emissions | 145,000 | 90,738 | 30,442 | 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. | 2022 |
| Replacement of the TG-1 turbine generator set | 85,000 | 67,230 | 38,639 | 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 |
| Grupa Azoty KĘDZIERZYN | |||||
| Upgrade of the synthesis gas compression unit supplying the Ammonia Plant | 180,000 | 85,742 | 19,135 | Rebuilding the synthesis gas compression capacities for the Ammonia Plant through the installation of new compressors. The project will reduce maintenance expenditure and the energy intensity of the ammonia production process, significantly lowering department overheads. | 2023 |
| Peak-load/reserve boilers | 110,087 | 18,842 | 9,542 | The peak-load/reserve boiler house functioning as a peak-load source will interoperate with steam generators at the existing CHP plant. In the event of downtime of coal-fired boilers, the peak-load/reserve boiler house will operate as a stand-alone reserve steam generator. | 2024 |
| Purchase and installation of new oxygen compressor | 72,800 | 59,300 | 25,006 | The objective is to replace old steam turbine driven oxygen compressors K-101 A and K-101 B with one electric compressor. The project follows the concept of innovative management of heat from ammonia production processes as an alternative to heat generation in coal-fired boilers. | 2022 |
| 2-ethylhexanoic acid unit | 120,000 | 2,108 | 2,108 | Enabling the production of 20,000 tonnes of 2-EHA per year. | 2024 |
| Grupa Azoty S.A. | |||||
| Concentrated Nitric Acid Plant II (with a capacity of 40,000 t/a) | 57,100 | 53,555 (after August 2022) | 15,763 | Construction of Concentrated Nitric Acid Plant II – the project involves the construction of a second, stand-alone nitric acid concentration plant based on the existing, operating plant using a technology for obtaining nitric acid with a concentration of at least 98.5% of HNO3 from technical-grade nitric acid with a concentration of 50–61% based on the extraction rectification process using magnesium nitrate as a dehydration agent. | December 2022 |
2 The project budget translated into PLN at the PLN/USD mid exchange rate assumed in the project financial model. The project budget approved by corporate bodies is USD 1,837,998 thousand.
Polimery Police is one of the largest projects in the Polish and European chemical industry, which fulfils the requirements of the strategy for a climate neutral circular economy and ensures decarbonisation of plastics throughout their entire life cycle. It will help diversify the Group’s business, improving Poland’s position among plastics manufacturers and strengthening its independence in terms of energy and raw material supplies. Its purpose is to build propylene and polypropylene units with auxiliary systems and associated infrastructure, as well as to construct a port terminal with feedstock storage facilities. Polypropylene is a chemical compound that can be used in the chemical, pharmaceutical, textile, food, packaging, electronics and automotive industries.
The start of commercial operation is scheduled for 2023. In 2021, the project was 83.23% complete. A vast majority of the equipment and apparatus are on the construction site, which means the approaching completion of the procurement phase. This significant progress is due to the effective process of procurement of equipment and apparatus (long-lead items). 95% of large-scale equipment and apparatus had been delivered by the end of 2021, and the stage of completion of the procurement phase was 97.98%.
Work included the installation of propylene tanks, distillation columns, reactors, compressors, a continuous catalyst regeneration module, a residual gas compressor, blending silos and two PP reactors which will be used to produce homopolymers and copolymers. In addition, 60 polypropylene storage silos were assembled.
As regards the terminal construction project, two propane tanks and one ethylene tank were covered. Work to install inner shells of the tanks was completed. The construction of a pumping station, transformer station and the main terminal building was continued.
In September 2021, the Police County Building Inspection Office issued the first operation permit (out of the required 22), concerning the 110 kV power grid and optic fibre network project.
