November 10, 2015 / 2:57 PM / 4 years ago

Poland may seek temporary output reduction at some mines

* Merging power producers an option

* Coal mines restructuring plan expected in months

* Fresh capital needed for coal mines

By Agnieszka Barteczko

WARSAW, Nov 10 (Reuters) - Poland could temporarily cut output at several mines over the next four to five years to take surplus coal off the market as the industry deals with record low prices, a member of Poland’s newly elected Law and Justice party said.

Consolidating state-owned power producers could be considered as a next step as the government seeks first to prop up the struggling coal mining sector, Grzegorz Tobiszowski, responsible for coal issues, told Reuters.

The conservative Law and Justice party (PiS), which won parliamentary elections last month, would consider merging the country’s biggest power firms - PGE, Tauron, Enea and Energa, he added.

“Personally I think Poland needs one big power company,” Tobiszowski said, adding this would likely face scrutiny from the EU over anti-monopoly regulations. “If this turns out difficult, we will be working on the formula of two groups”.

He added that the government was unlikely to work on this by the end of next year.

Poland’s outgoing government had sought to bail out the European Union’s biggest coal mining firm Kompania Weglowa (KW) but ultimately failed to find investors.

Eastern Europe’s biggest economy generates nearly all its electricity from coal but low prices have hit the coal mining sector hard and left the incoming government with the task of figuring out how to revive the mining industry.

“We want to identify the most promising mines,” Tobiszowski said. “But we will face the need to withdraw some coal volumes from the market.”

“This is why we consider to scale some mines down to keep them ready to re-start when prices rebound.”

Poland has three major coal mine companies - KW, KHW and JSW.

PiS has so far been looking closely at KW mines and Tobiszowski said that three or four of them with the highest costs and lowest demand might face reduced output at a minimum level until coal prices rebound.

The production decline would mean lower employment but miners would be shifted to other mines rather than face layoffs, Tobiszowski added.

“We definitely do not want any lay-offs,” he said. “We will approach the trade unions with concrete proposals. We want to offer a well-prepared protective programme.”

New capital for the struggling mines could also come from power producers and chemical groups as part of the restructuring plan, Tobiszowski said

EU’s biggest coking coal producer JSW will need financial support to avoid collapse but before receiving any funds the company needs to come up with a solid restructuring plan, he added.

Poland produces 72.5 million tonnes annually and experts say that taking around 6 million tonnes of excess would help boost prices — the amount Tobiszowski said would need to be reduced. (Additional reporting by Pawel Sobczak and Marcin Goettig, Editing by Michael Kahn)

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