Poland to resuscitate coal for energy security on Ukraine crisis - PM

Warsaw (Platts)--7 May 2014 650 am EDT/1050 GMT

The Polish government plans to resuscitate the coal industry as the backbone of the country's energy security, with the aid of state support, following events in Ukraine, Prime Minister Donald Tusk said Wednesday.

"Energy security and responsibility for the community means the need to skillfully delineate between chasing profits and the rehabilitation, not only of Polish coal, but the rehabilitation of people who work hard everyday, so that we transform the slogan of energy security into practical action,' Tusk told the European Economic Congress in Katowice.

He said that in the light of the Ukrainian crisis Poland would build its own energy independence through the use of "state tools, the possibility of state financing and organization."

"Energy security must have some costs...A fundamental part of energy security, mining and the power sector, demands state help and support," he added.

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Poland has Europe's largest hard coal reserves and the fuel, together with lignite, produces about 90% of the country's electricity.

But Kompania Weglowa (KW), Poland's and Europe's largest hard coal miner, is facing tough economic times due to imports of cheaper coal and resulting lower demand from the power sector.

The state-owned Katowice-based company currently has about 5 million mt of unsold coal stockpiled. Last year its coal sales fell by about Zloty 1 billion ($331 million) from 2012 and the company has continued to make losses so far this year.

KW has strong labor union representation and management has failed to push through restructuring, unlike at other Polish coal miners, especially the privately-owned Lubelski Wegiel Bogdanka.

The former CEO of Bogdanka, Miroslaw Taras, has recently been appointed head of KW. Last month the Economy Minister Janusz Piechocinski said KW should cease production at unprofitable mines because of competition from cheaper non-European imports.

Tusk met coal sector management and labor unions in Katowice on Wednesday. He said afterwards: "Power generators cannot reap huge profits, while mines fail."

He said the government would compile a report on the Polish coal trade and study why Polish utilities buy imported coal. Last year the average spot Russian and AP12 coal price was about Zloty 9.70/GJ and Zloty 10.3/GJ respectively, compared to the average price of Polish coal of Zloty 11.60/GJ.

Tusk said the investigation would determine why Polish coal was less competitive than some imports and whether tax regulations were being abused. In February, KW which employs 55,000 workers including 41,800 miners, approved a restructuring plan, broadly opposed by unions, designed to bring Zloty 1.2 billion in savings by 2020.

On Tuesday the company resumed production at nine of its 15 mines following an eight-day work stoppage imposed to reduce costs.

--Adam Easton,
--Edited by Jeremy Lovell,

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