Nerves rising as Warsaw hunts cash for Polish coal rescue

By bne IntelliNews July 17, 2015

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Poland's Kompania Weglowa (KW) desperately needs to find investors by the end of August if Warsaw's rescue plan for the coal sector is to go through, Krzysztof Sedzikowski, CEO of the struggling state-owned coal miner, said on July 16. The warning comes as Warsaw continues to try to push state companies into the fray.

KW is the focus of a state drive to rescue the Polish coal industry, which is struggling in the face of weak markets and inefficiency. Under the plan, the holding's worst-performing coalmines will be taken over by a special state vehicle known as SRK, which is expected to sell them on after the restructuring process has been completed. The remaining 11 assets will go into a new holding, Nowa Kompania Weglowa (NKW). 

The overall cost of the restructuring - forced by the powerful mining unions in January after the government had previously sought to close the worst performing mines - is pitched at PLN2.3bn. Investors are expected to inject PLN1.5bn into NKW, but the large state-controlled utilities that were earmarked by Warsaw to provide most of the cash are unwilling. 

"Investors have to step in to make this project work and to enable us to keep on restructuring," Sedzikowski told a press conference according to PAP. He added that "a very intensive process" of due diligence is currently underway and is going "at a fast pace," offering hope that NKW will indeed be ready to go next month. 

"NKW has to be created by the end of August, because if it's not, the mining restructuring plan will not be possible at all," Sedzikowski added according to Reuters. 

The CEO spoke as he presented KW's first half results. The miner posted PLN240.4mn EBITDA, PLN21mn above the plan. Coal inventories fell to around 3mn tonnes, 18% below expectations. 

While the results are much better than planned, and bring the group closer to its 2017 targets of PLN2bn EBITDA, the CEO stressed that a capital injection must come by the end of August to secure liquidity needs. 

Holding the baby

With the utilities still apparently holding out, Warsaw and KW are clearly growing nervous. So far, only Tauron has agreed to take part, having agreed to buy the Brzeszcze coal mine, together with a financial partner, in May. PGE, Enea and Energa - much to the relief of minority shareholders no doubt - have steered clear, disappointing government expectations that they would also buy directly into KW assets. 

Treasury Minister Andrzej Czerwinski insisted on July 13 that all the utilities "will" contribute to the effort, and confirmed plans to launch NKW by mid-August. However, state investment fund PIR now appears to have been left holding the baby, and is now set to become the major shareholder in NKW, according to the latest plan.

Last week, the finance ministry announced that state-owned companies have "expressed their interest" in participating in a private equity fund - FIPP - created by PIR. FIPP will invest in NKW as well as in other industrial enterprises, it said.

"A plan for a fund was drawn up, which will be created by energy companies and other financial entities, which have been tasked to present ... a way of obtaining cash capital necessary to maintain continuity in the mines," Czerwinski told a parliamentary treasury committee sitting on July 8. He has previously rubbished media reports saying state-run energy companies are unwilling to get involved.

However, all the signs suggest they're anything but keen. Poland's largest power company, PGE, which has often clashed with the ruling Civic Platform over political pressure on investments, is reported to have suggested it could chuck telecom arm Exatel into the pot

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