Poland’s Tauron reveals plan to buy first struggling coal mine

Polish energy giant Tauron has became the first state-owned utility to reveal plans to snap up one of the country’s struggling coal mines. The government is expected to reveal plans for the three remaining companies, PGE, Enea and Energa, by the end of January.

Several market sources maintain the view that merging energy companies with the coal mining firms would have a bullish impact on wholesale electricity prices, because the cost of any investment would have to be passed on to the wider economy via the wholesale energy market so it could be recouped.

One market participant said any bullish impact on prices would be seen no earlier than next year, because most Polish utilities usually based long-term transactions on annualised contracts.

This meant that any decision to merge mining with energy production would only be visible at the forward market on the price of post-2015 delivery periods.

In a statement released late on Friday, Tauron, Poland’s second largest energy company, revealed its interest in acquiring shares in one of the loss-making mines from coal miner Kompania Weglowa, which would otherwise face closure. Tauron added that any final decision to buy would be based on detailed economic examination of extraction costs.

Tauron put itself forward after the economy ministry released a statement confirming that the four biggest loss-making mines would be closed down while nine others will eventually be merged into one coal company operated by Poland’s largest coal exporter Weglokoks (see EDEM 8 Jan 2015). Tauron is Poland’s second largest electricity producer and burns through 10 million tonnes of coal in its power plants annually.

Neither PGE, Enea nor Energa had commented on their plans by the time of writing.

European funds?

The announcement of closures prompted protests from the miners last week but an agreement between new prime minister Ewa Kopacz and the protesting miners was reached on Saturday.

The ministry will also send an appeal for a fund to the European Commission before the end of February intended to appease the situation.

The struggles of domestic coal miners were highlighted by Kompania Weglowa, Europe’s largest coal miner, in May last year, when it had to stop production for nine days to tackle financial losses. The company was forced to reduce extraction of coal by 400,000 tonnes. But a surplus of some 5m tonnes remained in the market, contributing to the 9m tonnes of total oversupply across the country. Karolina Zagrodna