Poland forces state-controlled companies to pay into mining bailout fund

By bne IntelliNews July 22, 2015

bne IntelliNews -


Poland has pushed at least three large state-controlled companies into contributing to the fund that will be used to bail out the struggling coalmining industry, according to reports on July 22. 

Under pressure from Warsaw, copper and silver miner KGHM, power utility PGE, and chemicals company Azoty will all put capital into new state investment fund FIPP, unnamed sources claimed to Reuters. While the government claims the fund will be used for an array of purposes in the future, its raison d'etre is to plough PLN1.5bn into a rescue of state coal mine holding Kompania Weglowa (KW) by August.

The news will alarm minority shareholders in Poland's state-controlled companies. All three of the companies said to have signed up are listed. Having previously been earmarked to lead the effort, PGE and its fellow utilities have been fighting to avoid being roped into the rescue, which comes as Poland's inefficient mines sink in the midst of weak European markets and cheap imports.

Following what a source described as "arm-twisting" from the government, the companies will put capital into FIPP to move the fund’s capitalisation closer to the planned amount of PLN6bn (€1.45bn). State development bank BGK and state investment vehicle PIR have committed PLN1.6bn already. FIPP will become a major sharholder in KW. 

Poland's other powerful state-controlled firms are also in the government's cross hairs. PZU’s CEO went on record on July 22 to say the company will not get involved in coalmining in any form. However, utilities Enea and Tauron are like on top of the list of candidates in Warsaw. Reuters reports that oil refiner PKN Orlen is also being pushed.

The high profile fuss is unlikely to do much for Poland's investment climate. State-controlled companies, and the utilities in particular, have long fought government pressure to take part in politically-led programmes such as raising the country's energy security, which they say are not in their economic interests. 

However, with the ruling Civic Platform (PO) facing a tough looking fight ahead of elections in the autumn, it can't afford to allow the mining industry - which employs 100,000 - to buckle.

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