WARSAW (IntelliNews) -- Jastrzębska Spółka Węglowa (JSW), Poland’s largest listed coalminer, is potentially interested in an acquisition of the Czech Republic’s New World Resources (LSE:NWR), a company director told IntelliNews/Capitol Intel.

JSW is not, however, sure of support for such a move from the state, its controlling shareholder with a 55.17% stake, the source said. 

NWR needs a capital injection of at least CZK 3bn (EUR 109m), if it is to avoid bankruptcy, Czech minister of trade, Jan Mladek, was quoted as saying Monday. BXR, the investment vehicle of Czech magnate Zdenek Balaka, has said it is ready to pump such a sum into the business on the condition of a change in the NWR’s ownership structure.

At present, BXR holds a 63.58% stake in NWR. The troubled company is headquartered in the Netherlands and listed in London, Prague and Warsaw.

For JSW, any deal would be a considerable challenge, given NWR’s poor results and debt pile, the source said. NWR posted a EUR 466m net loss in the fourth quarter of 2013, a figure that includes a EUR 407m asset writedown.

Its net debt amounted to EUR 625m. In addition, JSW expects tough market conditions to endure for several quarters, which argues against acquisitions at the present time.

On the other hand, the difficult market offers an opportunity to snap up assets on the cheap, while JSW has the potential to take on significantly more debt. Moreover, JSW, Europe’s largest coking-coal producer, is keen to diversify into higher-quality coal. Poland’s economy ministry torpedoed plans by JSW’s management to make a bid for Bogdanka, a smaller Warsaw-listed miner, in 2012, when NWR made an unsuccessful bid for the company, a ministry source said.

The ministry continues to harbour doubts that acquisitions are the most effective way to spend the state-owned company’s cash, especially in the current market conditions. But the question of a bid for NWR has not yet come up and would be given due consideration by the ministry.

One difference with Bogdanka, which had undergone a successful privatisation, is that an acquisition of NWR by JSW would not amount to a re-nationalisation of a Polish company, the source added. Nevertheless, a large acquisition may prove problematic at a time when JSW does not rule out cutting capital expenditures in case of continued challenging market conditions, the ministry source said.

JSW is already in talks to acquire the Knurów-Szczygłowice mine in Poland, a deal priced in the hundreds of millions of zloty, the ministry source said. The NWR deal would not be much larger, though would mean taking on a large amount of debt. NWR shares traded on 8 April at 25% above their February low, giving the company market capitalisation of GBP 105m (EUR 127m). JSW plans capex of PLN 2.170bn (EUR 520m) in 2014, up 23% over the previous year. Chief Executive Jarosław Zagórski said it would be a challenge for JSW to replicate last year’s financial performance, when the company posted earnings before interest, tax, deterioration and amortisation (EBITDA) of PLN 1bn (EUR 240m).

by Aleksander Nowacki in Warsaw