Polish government to push power companies to merge with struggling coal mines

By bne IntelliNews December 6, 2015

The Polish government will set up a new company to replace troubled coal miner Kompania Weglowa during the first six months of 2016, deputy energy minister claimed on December 4. However, similarly to the previous cabinet, the new government has little option but to press the country's power giants to save the ailing coal companies via mergers.

The ruling party Law and Justice (PiS) is facing the same issues in the state-controlled Polish coal industry that the previous government - and so many before it - have failed to solve. The powerful mining unions have seen off all efforts to restructure the inefficient industry.

However, with the coal market at new lows, the country's mines are struggling to cope. That saw them fall to a loss of PLN1.7bn (€390mn) in the first three quarters of the year, according to Industrial Development Agency (ARP). At the same time, Poland generates some 90% of its power from coal-fired power plants. PiS, which returned to power after the election in October, has promised it will restore mining to a solid financial footing without closures or job losses.

“We would like to continue building of the [KW’s successor] Nowa Kompania Weglowa [NKW]. Of course we would like to do so in connection with the power sector,” Deputy Energy Minister Grzegorz Tobiszowski told PAP on December 5.

The government wants to see new stakeholders for NKW as soon as possible, and the listed state-controlled power companies are very much in the firing line. “[Mining] has to be merged with the electricity sector,” Prime Minister Beata Szydlo said on December 4.

Poland’s power companies – PGE, Enea, and Energa in particular - spent much of 2015 resisting pressure from the previous government to get involved. That's not least because getting financing for coal-fired power plants is becoming problematic, PGE CFO Magdalena Bartos told Platts on December 4.

However, PiS is in the midst of a largescale changing of the guard at the companies controlled by the treasury. The utilities are amongst those that are likely to see new management.

The government also announced on December 4 a new programme to buy stockpiled coal from the mining companies via the Material Reserves Agency. However, it offered little details about the volumes or timing.

A total of 5.9mn tonnes of coal was stockpiled by Polish coal mining companies at the end of October, about 10% of annual output, according to ARP. The full load could be worth about PLN1.5bn at current prices. Local media have cited experts calling the programme "short-sighted financial engineering".

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