POLISH COAL MARKET MIDWEEK SUMMARY 32/2016

LW Bogdanka renewed its contract for fuel deliveries with EDF, burning approx. 7m Mt of steam coal per year. Because the French company is trying to dispose its Polish coal assets, the new deal is valid only until the end of next year. Rumors say that Ministry of Energy is trying to convince EDF to stay in Poland as long as it is possible, or at least until one of the energy groups (most probably PGE) will restore its decent cash flow and will be able to purchase the most valuable and strategic power plants. It seems like the government is not thrilled with the idea that some of the EDF-owned power plants will be taken by Chinese (using Czech EPH as an up-front).

The same Ministry also seems not to be worried by autumn decision of European Commission regarding the rescue plan for Kompania Weglowa/Polska Grupa Gornicza in respect to the investors structure (all of them being state owned companies), which is a key point of a subject of acceptable public aid. Last week deputy minister Grzegorz Tobiszowski announced that Polski Holding Weglowy (new entity that will take assets from Katowicki Holding Weglowy) will be pillared by Enea, Weglokoks and “some other state owned company”. Now we’ve learned that this third entity might be TF Silesia, one of the KW/PGG investors, which was supposed to be the main puzzle in forming Nowa Kompania Weglowa last autumn; back then Ministry of Treasury had to back out from this plan because of the EC’s objections. Do they learn anything at all?

Tomasz Rogala, CEO of PGG is convinced, that his company will start making profits soon enough. As the company decided to withdraw from sea freight export (more on new possibilities in Turkey – tomorrow), it now focuses more on domestic market. For the retail customers, the company offers purchasing coal via Internet, with a fixed price for transport in whole country. The real game though is in the mid-size consumers sector, so PGG started to making some serious moves to take back all the heating plants from coal traders. With great interest PGG is following the situation of Russian coal producers with their trading companies located in Poland – SUEK and KTK, the top two coal importers on domestic market.

6 months ago we wrote about an unofficial ultimatum, that all the PGG mines got from Ministry of Energy: either they will restructure on their own and improve their performance by the end of the year, or they will be moved to Mines Restructure Company (SRK). Well, the unofficial just became official, as minister Krzysztof Tchorzewski announced yesterday that Sośnica mine has to deliver positive financial result in January 2017, instead it will go to SRK.

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