(Minews) - Poland’s Economy Ministry wants PGE SA and two other state-controlled power utilities to buy mines from Kompania Weglowa SA to help save the European Union’s biggest coal producer from a possible collapse.
State-owned trader Weglokoks SA agreed to take over four mines from Kompania and the government is in talks to prompt its biggest utilities, which also include Tauron Polska Energia SA and Enea SA, to help the country’s third-largest employer, Deputy Economy Minister Tomasz Tomczykiewicz told reporters in Warsaw today. The Treasury Ministry, which oversees utilities, and Tomczykiewicz himself distanced themselves from the plan.
“We are discussing the second stage of its restructuring, which will envisage the consolidation of coal assets with the power industry,” Tomczykiewicz said earlier today. “We want PGE, Tauron and Enea to be involved” in taking over some coal mines, he said.
Kompania, which produces a quarter of the EU’s coal output and half of Poland’s, has struggled to survive as prices fall amid sluggish economic growth while production costs remain high. Kompania needs to cut its workforce by more than a third while sustaining its 30 million-ton output to avoid collapse, Chief Executive Officer Miroslaw Taras said on Aug. 28.
Spreading Losses
Kompania’s restructuring plan sent by its management “doesn’t envisage selling mines to utilities,” Agnieszka Jablonska-Twarog, a spokeswoman for the Treasury Ministry said on her Twitter Inc. account, citing Deputy Treasury Minister Rafal Baniak. Kompania prepared its plan at the start of August.
Tomczykiewicz said on Twitter later that the information on utilities buying mines is an “overinterpretation” of his words.
PGE, which fell as much as 4.7 percent, pared losses and dropped 1.4 percent at 3:55 p.m. in Warsaw after the Treasury’s comments. Tauron and Enea, which plunged as much as 5 percent and 4 percent respectively, also pared declines. Lubelski Wegiel Bogdanka SA, the main supplier of coal to Enea, earlier fell 5.1 percent to a one-year low, and was down 2.8 percent.
Poland wants to curb profit-seeking at state-controlled utilities to rescue Kompania and bolster the mining industry, according to government plans in May. Kompania posted a loss of about 1 billion zloty ($308 million) on coal sales last year while net income at PGE, the country’s biggest power producer, rose 14 percent to 4.1 billion zloty.
“It seems like the government wants to spread the mines’ losses among utilities,” Andrzej Knigawka, head of equity research at ING Securities SA in Warsaw, said by phone today. “Such a plan is purely politically driven.”
No Talks
Coking coal producer JSW SA in April acquired Kompania’s Knurow-Szczyglowice mine for 1.49 billion zloty, while Tauron bought out Kompania’s stake in a mining venture for 310 million zloty in December.
“Today’s information is a hard-sell for utilities,” Knigawka said. “Investors still remember JSW overpaying for Kompania’s mine. Now this case may be repeated, undermining investors’ trust completely.”
Tauron may consider buying Kompania’s Boleslaw Smialy mine, Chief Executive Officer Dariusz Lubera said last week. The utility, which wants to boost the share of its own fuel in generation to 70 percent from 40 percent, isn’t in talks with about buying “specific” mines, spokeswoman Magdalena Rusinek said in an e-mailed response to Bloomberg News questions.
PGE isn’t in any process to buy a mine, spokesman Maciej Szczepaniuk said by phone today.
Enea isn’t analyzing any potential mining acquisitions, spokesman Slawomir Krenczyk said in an e-mailed response to questions from Bloomberg News. The company is obliged to buy coal from Bogdanka, which supplies 70 percent of its needs.
