Poland Enlists State-Run Companies to Save Biggest EU Coal Miner

  • PGE, Energa, PGNiG unit analyzing investment in new company
  • Government pressured to announce plan before Oct. 25 election

Poland unveiled a plan on Wednesday to save the European Union’s biggest coal producer by restructuring its mining assets with the help of stakes in state-run companies and potential involvement of government-controlled utilities.

Prime Minister Ewa Kopacz’s government trails the opposition in opinion polls before a Oct. 25 general election. It had to announce a plan to save the loss-making industry by Sept. 30 as part of a deal it reached with with trade unions in January to halt protests. Polish coal producers are struggling with high legacy costs, many inherited from the pre-1989 communist era, as the price of the fuel tumbled to the lowest in at least eight years.

Poland’s first- and third-largest power producers, PGE SA and Energa SA, expressed initial interest in buying stakes in TF Silesia, the state-owned company that will take over 11 mines from the EU’s top coal producer Kompania Weglowa SA. The Termika unit of the country’s biggest gas company, PGNiG SA, is analyzing its options. Before the utilities decide on whether to invest, Silesia will receive 1.4 billion zloty ($369 million) of stakes in state-controlled companies that can be used as collateral to gain bank financing and help keep mines open.

“Only strong utilities integrated with coal production have a chance to develop” in these “difficult conditions on energy and commodity markets,” Treasury Minister Andrzej Czerwinski said in an e-mailed statement. Transferring stakes in companies including PGE, PGNiG and insurer PZU SA, to TF Silesia will buy the investors time to work out the company’s final ownership structure, he said.

Coal Dependence

Poland’s coal industry, whose fuel produces 90 percent of the country’s electricity, suffered a 1.45 billion zloty loss in first half of 2015, according to data on the Economy Ministry’s website. The poll-leading opposition party Law & Justice, supported by the country’s biggest trade union Solidarity, said that Kopacz has failed the industry and promised keep Poland dependent on the dirty energy source for decades to come.

PGE shares rose 0.8 percent to 13.48 zloty in Warsaw on Wednesday, the highest this week, while PGNiG advanced 0.3 percent and Energa dropped 0.2 percent.

“For today, it’s good news for the listed companies, that none of them will directly take over Kompania Weglowa,” Pawel Puchalski, an analyst at Bank Zachodni WBK SA, said by phone from Warsaw. “Still, there is risk of negative newsflow when business relations between the investors and Silesia are ironed out.”

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