Poland’s new government of Law and Justice (PiS) plans to push state-controlled power group PGE to take over ailing coal miner Kompania Weglowa (KW), local media reported on November 23.

Poland’s largely state-owned coal mining industry is on its knees due to low market pricing and poor production efficiency. The previous Civic Platform (PO) government attempted to save key company KW by pushing the country's state-controlled energy giants - all of which are publicly listed - to invest in the struggling company, but the plan's many versions all failed.

PiS strongly criticised PO for that during the campaign ahead of the October 25 election, but has since remained largely quiet on how it now plans to dig the miners out of their hole. The new government finds itself facing a similar situation to many of its predecessors, which have failed to restructure Poland's massive coal industry due to opposition from powerful unions.

The administration clearly has little choice but to try again to force state-controlled energy companies into a rescue, as losses continue to grow. PiS, however, is going to scrap the previous government’s final plan, in which KW assets were to be taken over by state fund TF Silesia, newspaper Rzeczpospolita reports, citing unnamed sources. PGE will instead be pushed to take over KW.

“The new government is lacking the will to carry out a real restructuring of the mining sector. [So] the most recent idea is for PGE to take over KW and create an energy and fuel conglomerate,” an advisor to the process told Rzeczpospolita.

“The strategy is to cover up the mining’s [poor results] with results of energy companies, but this is not going to be good for investors counting on predictability of profit and dividend payout,” another source told the newspaper.

Should the strategy be adopted officially, it will put renewed pressure on PGE and its stock, as well as plans for huge investment in new generation capacity. The country's biggest power producer has repeatedly stated its scepticism about getting involved in the coal sector. However, other large state-controlled companies – including power producer Energa and gas utility PGNiG – have reportedly said a firm “no” to being pushed to take over KW.

Such opposition may not bode well for the management teams. In October, the PO government sacked the management at Tauron to facilitate its takeover of a mine culled from KW. PiS is already reported to be mulling a wide ranging cull at companies controlled by the treasury, as is standard practice in Poland when the political guard changes.