The process of saving Poland’s troubled coal miner Kompania Weglowa (KW) will also involve state-owned financial companies as well as energy groups, a government official said on February 8.
KW, the largest coal mining company in Poland and the European Union, has been struggling for years because of the depressed coal market and inefficiency. It is set to be transformed into Polska Grupa Gornicza (PGG) and a number of Poland's state-controlled energy companies are expected to invest in the new entity, according to a government plan. Deputy Energy Minister Grzegorz Tobiszowski told reprorters, however, that the pool of potential investors will be enlarged to include “financial investors,” according to PAP.
The likelihood that the financial sector could be pulled into joining the bailout appeared to go down badly with investors. The shares of the country's biggest bank, PKO, had dropped 1.95% by early afternoon trade in Warsaw; shares in insurance giant PZU fell back 0.96%.
KW finally kicked off talks with potential investors on February 5, although details on which companies are involved were not released. Warsaw has only said that they all hail from Poland.
Like its Civic Platform (PO) predecessor, the current Polish government has ordered the country's large power utilities to lead the coal rescue. The likes of PGE have been resisting for months, but management changes have been implemented at practically all state-owned companies since Law & Justice took power in November.
PGG will be created by May, the deputy minister reiterated, on the basis of coal trader Weglokoks with “other partners ... the power sector and the financial sector,” Tobiszowski said. The official would not elaborate on the list of potential investors.
TF Silesia, a state fund chosen by PO last year to lead the rescue, now appears to be off the hook, however. The fund will have other duties, as "it is incapable of being a serious player in the mining sector, as it has never dealt with it", Tobiszowski said. That said, TF Silesia might be brought back on board if the ongoing deterioration on the coal markets means the business plan on PGG needs further amendments, the official admitted.
Once and if investors commit, KW’s management has claimed it expects PGG to become financially self-sufficient by 2017. That said, the goal will rely on significant cost reductions.
"We have done a lot, but still more is ahead of us," CEO Krzysztof Sedzikowski said on February 5. "We have run out of simple solutions bringing fast results, however, and to reduce costs will be much more difficult now."
That raises the likelihood of renewed confrontation with the country's powerful mining unions. Representing 100,000 or so employed in the industry, the miners have consistently beaten back government attempts to restructure over the years.
The populist PiS promised to save the coal mines as it pushed for power in the elections in October, but there are few realistic solutions to dig the Polish coal industry out of its hole. Failure to take on the unions only threatens increased losses for the utilities and others pushed into the breach, while Warsaw is likely to step up its resistance to EU efforts to trim coal use.