By Patryk Wasilewski And Martin M. Sobczyk
WARSAW--The Polish government said it would close four coal
mines to stave off bankruptcy at Europe's largest coal producer, a
plan that was met with labor-union protests on Thursday.
Several hundred miners stayed underground after their shifts on
Thursday to protest the plan that would see four mines belonging to
Kompania Weglowa SA in the south of Poland closed down and 10
bailed out by state-controlled companies. Kompania Weglowa is owned
by the government and isn't publicly traded.
Coal-rich Poland, which uses the resource for almost all of its
power generation, has for years struggled to put its mining sector
on a solid footing. While Kompania Weglowa's woes have stretched
over most of the past year, global coal prices have been hit hard
recently by the rapid fall in the global price of oil. The low
prices in global markets have meant imports are cheaper than
domestically extracted coal, pushing Kompania Weglowa to the brink
of bankruptcy.
The company posted a loss equivalent to about $110 million for
January through November last year, and the loss it is taking on
every metric ton of coal produced is around $18, government
officials said this week.
A radical restructuring is the only alternative to a bankruptcy,
Prime Minister Ewa Kopacz said on Tuesday. Kompania Weglowa is
projected to post a loss of another $260 million through May even
if it unloads four of its most troubled mines to a special entity
that will liquidate them, the government said.
To prevent an uncontrolled failure of the company that has
49,000 employees, the government wants other companies to save the
most promising coal mines, while some $630 million would be spent
on severance packages over two years.
Coal trader Weglokoks and state-controlled power utilities are
at the heart of the rescue plan for the 10 coal mines the
government wants to save. Weglokoks, supervised directly by the
government, will inject capital into a new company that will
continue to operate the mines. Listed power companies will be given
offers for injecting capital "on market terms," according to the
government.
Poland's biggest power company, PGE Polska Grupa Energetyczna
SA, as well as the second-largest utility, Tauron Polska Energia
SA, declined to comment on the government proposal. Both are
controlled by the Polish government.
A trade union operating in the coal industry said it would
organize large-scale protests, including a general strike, if the
government doesn't drop the plan. Trade unions at another coal
miner, Jastrzebska Spolka Weglowa SA, refused to discuss measures
aimed at cutting costs and benefits, the company said on
Thursday.
Even with the worst-performing mines spun off, the new coal
company taking over from Kompania Weglowa will be in dire need of
restructuring and capital. The new owners will foot the bill and
oversee the necessary changes, with most of the financial burden
likely to go to coal trader Weglokoks and power utility PGE, said
Artur Iwanski, director at PKO BP brokerage.
PGE and Tauron, the two state-controlled utilities in Warsaw's
blue-chip WIG 20, were the only components of the index in the red
on Thursday, with WIG 20 finishing the day 2.3% higher. PGE closed
0.2% lower and Tauron was 0.6% lower.
"For the utilities, the plan is slightly negative," Mr. Iwanski
said, with the acquisition price being the key factor for the
companies' future earnings.
The Polish government said it plans to rush the restructuring
plan through parliament.
It also said it plans to consolidate the power generation sector
into a bigger company that will include PGE and Tauron, as well as
two other state-controlled companies Enea SA and Energa SA.
"The future of energy is competition on a European scale," said
Treasury Minister Wojciech Karpinski, whose ministry supervises the
companies. "Today, Polish energy firms are small compared with the
largest European players. Our goal is to increase the role and
weight of Polish electricity players in the European market."
Poland hopes the economies of scale will enable the new bigger
venture to cut production costs, the government said. The four
companies it plans to tie up together are a product of an earlier
consolidation of regional power distributors.
Write to Patryk Wasilewski at patryk.wasilewski@wsj.com
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