The party most likely to lead Poland's new government following parliamentary elections on Sunday, Law and Justice (PiS), plans to consolidate the country's power and fuel sectors to save its struggling coal industry.
"It will be necessary to put out the fire because probably there won't be enough money to pay (miner's) salaries," Beata Szydlo, PiS' candidate for prime minister told the daily Gazeta Polska Wednesday.
"Then introduce systematic changes. Merging (mines) with the power companies is a good direction here, although it must be done prudently and sensibly," she added.
Poland's state-owned coal sector employs about 100,000 people and its labor unions carry significant political weight.
The state companies are struggling against falling coal prices and demand combined with rising production and labor costs.
The largest of the companies, Kompania Weglowa (KW), needs to find about Zloty 700 million (about $183 million) to stay afloat until the end of the first quarter of next year.
Part of the problem is that global coal prices are in freefall amid slowing demand from China, European coal front-year contracts dropping some 40% from September last year to just $47/mt, its lowest level since at least 2007, Platts data shows.
In the same period Polish thermal coal prices have fallen 7.5% to Zloty 217.16/mt (about $56.80/mt) while the average unit production cost in Poland's coal mines in the first half of this year was Zloty 304.45/mt.
As yet, no private investors willing to save KW have been found, so it's likely the state-controlled utilities PGE, Tauron, Enea and Energa, as well as PGNiG Termika, the power arm of natural gas company PGNiG, will be used to prop up the miner.
Assistance may take the form of purchasing capital stakes in KW or perhaps concluding long-term feedstock supply contracts with the miner.
POWER FLOWS FROM GERMANY
Further state assistance for the coal industry could lead to higher wholesale power prices, because the utilities would price some of their investments into wholesale energy products.
In January 2014 Polish spot baseload prices, averaging about Zloty 150/MWh ($39.22/MWh) overtook their equivalent prices in Germany after the transmission system operator PSE began subsidizing generators for keeping old hard coal-fired capacity in storage. That trend has remained in force since.
Cheaper German electricity saw Poland become a net importer of power last year by 2,167 GWh after being a net exporter in 2013.
But so far this year it has imported just 125 GWh more than it exported, mainly in August, when a heatwave and drought led to the imposition of power restrictions on large industrial customers.
Some PiS officials have indicated they would halt German electricity imports to protect the domestic coal sector.
A PiS government could also reverse the current administration's pledge to stop building any new coal plant following the completion of construction of almost 6 GW of mostly coal-fired capacity by 2020.
Pawel Szalamacha, a PiS MP and former deputy Treasury Minister, who is tipped to take a top economic ministerial post in the next government, cited the failure to go ahead with an investment to build a new hard coal-fired unit at Energa's Ostroleka plant as an example of bad management at the state controlled utilities in a recent interview with the magazine Wprost.
PiS plans to create a Ministry of Energy to supervise the utilities and manage climate and energy policy.
Szalamacha said the ministry would be responsible, "first of all for the functioning of coal in the Polish energy sector."
NEW NUCLEAR PROGRAM
The ministry would also be responsible for power sector transmission investments and the implementation of the country's nuclear program.
Poland has approved a policy to build 6 GW of nuclear capacity in two plants but the original deadline for the first unit has slipped from 2020 to 2029.
"We will need more energy in several years. Domestic power plants cannot meet this demand, so we have room for at least two nuclear units in Poland," Szalamacha said.
Support for renewable energy under a PiS-led government is less likely because in opposition the party tabled a resolution calling for a moratorium on the construction of large wind farms due to what it called their adverse impact on the landscape.
LNG TERMINAL LESSENS DEPENDENCE ON RUSSIAN GAS
In terms of the natural gas sector a PiS-led government would likely seek to continue to diversify Poland's supplies and loosen its dependence on Russian imports.
Increased interconnector capacity and the construction of a 5 Bcm/year liquefied natural gas terminal means Poland could already be independent from Russian supplies if it chose to be.
PiS politicians strongly oppose Nord Stream 2 and Piotr Wozniak, the economy minister under the previous PiS-led government, has called for a return to the Baltic Pipe project that would bring Norwegian gas to Poland via a pipeline from Denmark.
