Poland plans deeper role for state energy companies in bid to strengthen coal industry

By bne IntelliNews September 5, 2016

Poland will retain state control over its struggling coal-mining sector via mergers and consolidation with the state-controlled energy sector, local media reported on September 5, based on a leaked government report.

The report outlines the future of the industry in Poland until 2030. Since taking power in November, the Law and Justice (PiS) party has earmarked coal mining as one of the central elements of its broader energy and economic policy. However, that has largely been at the expense of the country's listed state-controlled energy companies.

The report shows the role of the state in the coal sector will be retained, with the government planning the merger of coalmines and “vertical capital integration” with energy companies, Gazeta Prawna claims. Poland has already pushed the energy companies it controls to invest in new mining group PGG, which was established as a rescue vehicle for indebted and loss making Kompania Weglowa, Europe’s largest coal producer.

Poland will also seek to take advantage of coalmine closures in neighbouring Germany and the Czech Republic via a bid to sell Polish coal on those markets. Wary of the European Union’s drive to curb emissions from the power sector – which in practice means limiting the use of coal – the report says investments will be made in clean coal technologies.

"The programme’s main goal is to create the conditions for fostering a profitable, effective, and modern coal mining sector that will rely on knowledge and innovations … so as to ensure Poland’s energy security and competitiveness of the national economy," the report states. "To achieve [that goal] it is necessary to carry out a radical reform of the mining sector," it continues, according to the newspaper.

The report does not mention liquidation of any coalmines, however. Recent hints by government officials that the least profitable coalmines may have to close down were immediately criticised by the sector’s powerful unions. The report states unions in mining are a problem because of their negative approach to reform plans.

Meanwhile, the bid to pull state-controlled energy companies further into the sector, which has been making huge losses due to weak markets and inefficiency, is only likely to further dent share prices.

 

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