Polish utilities set to begin separating coal from other assets in 2021

WARSAW (Reuters) - Polish state-run utilities will next year start separating coal assets from the rest of their business, which should make it easier to raise financing for green projects as banks shun fossil fuels, a deputy assets minister said.

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Poland generates more than 70% of its electricity from coal and is the only European Union state that has refused to pledge climate neutrality by 2050.

But as burning coal has become costly and deters banks from providing financing, Polish utilities are having to switch to renewable energy.

Poland's biggest energy group the state-run PGE PGE.WA produces power mostly from coal and faces huge costs to invest in offshore wind. It has called for its coal assets to be separated from the rest of its business to help it raise cash.

The State Assets Ministry, which oversees energy, including coal, wants a detailed plan for the industry revamp by the end of this year.

“The separation of coal-based generation assets from energy groups has been decided to enable financing of other projects. We want the process to start next year,” Sobon told Reuters.

Ways to do that are being discussed. They include the kind of reorganisation seen in Germany, where energy giants RWE RWEG.DE and EON EONGn.DE split their businesses.

Sobon represented the government in talks with unions at Poland’s biggest coal group PGG, which ended in an initial agreement that assumes gradual closure of PGG mines by 2049.

But the plan hangs on European Commission approval of aid for Polish mines, which critics say is unlikely.

“We will start talks with the Commission in the coming days. We want to show the Commission how we would like to put this form of state aid in the appropriate legal framework,” Sobon said.

If Poland fails to get approval, Sobon said the government may have to resort to abrupt actions, such as closures without offering miners alternative work at the risk of social unrest.

Sobon said discussions on the future of Poland's other coal groups, including Tauron TPE.WA and Bogdanka will start within days.

“The only thing I can say at the moment is that Bogdanka will be the last place where thermal coal will be mined in Poland,” Sobon said.

Reporting by Agnieszka Barteczko; editing by Barbara Lewis