September 30, 2015 / 2:57 PM / 4 years ago

UPDATE 1-Poland wants its energy groups to help restructure coal mining

WARSAW, Sept 30 (Reuters) - Poland wants to include two state-controlled utilities and its largest gas distributor in saving Europe’s largest coal miner, Poland’s Kompania Weglowa (KW,from the brink of bankruptcy in an election year.

“This is the first step towards a safe inclusion of outside investors into the group and creating the so-called Nowa Kompania Weglowa,” the treasury, which oversees state assets, said in a statement.

According to the ministry, state-controlled energy producers PGE and Energa, as well as state gas group PGNiG were looking into investing in mine sector restructuring, of which Kompania Weglowa is the main part.

KW, struggling to stay afloat amid falling coal prices, supplies around half of the coal burnt in Polish power stations and its collapse could prove a threat to Poland’s electricity system, the ministry said.

It employs around 40,000 people in 11 mines in the politically significant Silesia region, making the group too big to fail before the general election set for Oct.25.

Since the start of the year, the ruling coalition - set for defeat in the October ballot - has struggled to come up with a plan for the coal mining industry, struggling with high employment and costs.

The scheme included having three fully state-owned groups, including TF Silesia, control KW. The treasury withdrew from the plan after the European Commission signalled it would launch a probe due to illegal public aid..

Now, the miner - already stripped of four loss-making mines set aside for deeper restructuring - is to be transferred to a state investment fund TF Silesia. PGE, Energa and PGNiG are seen as potential co-investors.

“In these conditions only strong groups... integrating all elements of the value chain, will have a chance to grow,” the treasury said in a statement.

The ministry hopes that including PGE, Energa and PGNiG - state-controlled, but not fully state-owned, would remove the chance of a probe.

“We’ve been working a legal form minimising the threat of unwarranted state aid,” treasury minister Andrzej Czerwinski said. “This programme warrants that. It would not be injecting capital, but maintaining liquidity.”

The Polish government earlier this month approved a plan to transfer part of its stakes in PGNiG, PGE and state insurer PZU into TF Silesia to use as collateral to raise cash for Kompania Weglowa.

The miner needs around 1.5 billion zlotys ($395 million) of capital from new investors, with 800 million needed by the end of this year. ($1 = 3.7966 zlotys) (Reporting by Adrian Krajewski and Jakub Iglewski, editing by William Hardy)

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