WARSAW/KATOWICE (Reuters) - State-run Polish utility Tauron may sell some of its loss-making coal mines to try to improve its financial situation, three sources familiar with the matter said.
Tauron is the most indebted of Poland’s energy groups and faces costs related to a cap on electricity prices, putting pressure on its ability to sustain the mines.
Maintaining the coal industry has been one of the main industrial policies of Poland’s ruling nationalists, the Law and Justice party.
Tauron’s mining business consists of three coal mines in the south of Poland - Janina, Sobieski and Brzeszcze - the latter located in the home town of Beata Szydlo, Poland’s former PiS prime minister.
“Tauron wants to get rid of the mining business,” one of the sources told Reuters, adding the plan would most likely not include the Brzeszcze mine, which Tauron took over in 2015.
The sources said Tauron may hope to sell some of its mines to state-run companies in the coal industry, such as the biggest coal miner PGG, coking coal producer JSW or coal trader Weglokoks, which are in better financial shape.
“In the strategy we are working on, there will be room for optional solutions regarding the mining segment,” Tauron’s Chief Executive Filip Grzegorczyk told Reuters earlier this week when asked whether Tauron planned to sell some of its mines.
Coal output at Tauron’s mining unit fell to 5 million tonnes last year from 6.45 million a year earlier, while the business’s operating loss increased to more than 1 billion zlotys ($262 million)from 211 million in 2017. The group’s net profit fell to 205 million zlotys from 1.38 billion in 2017.
Tauron’s total debt amounted to almost 11 billion zlotys at the end of last year compared with its current market capitalization of 2.95 billion zlotys.
The loss-making coal mining unit adds to the problems Tauron and its peers are facing with electricity prices.
Last year, wholesale power prices in Poland, which generates most of its electricity from coal, jumped following a surge in the cost of CO2 emissions and in coal prices.
To prevent a jump in prices for households, which are normally set by the market regulator, parliament adopted a law capping the price at the level seen in mid 2018. It also introduced an industry price cap and proposed compensation for utilities to cover the difference, but it still has to ensure the plans don’t violate European Union rules on state aid.
In the meantime, analysts say the utilities are booking losses on selling electricity at the lower, capped price.
Reporting by Agnieszka Barteczko and Wojciech Zurawski; Editing by Mark Potter