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Power of the Pole

Election landslide by Civic Platform could free up Polish coal reserves

By Victor Velek
Staff Writer, The Prague Post
October 24th, 2007 issue

COURTESY PHOTO
ČTK/AP Chairman Donald Tusk celebrates his party's victory Oct. 21.
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RENÉ JAKL/The Prague Post Resistance to further excavation at sites like Litvínov, north Bohemia, may prompt interest in Polish coal.
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Voting for a “better life for everyone,” the Poles have sent a promising sign to businesses eyeing their energy sector.
In closely observed elections Oct. 21, Poland’s voters gave a decisive no to the conservative ruling government of Jaroslaw Kaczynski, voting into power the center-right Civic Platform party of Donald Tusk with a landslide victory. Prime Minister Kaczynski, who stirred controversy both home and abroad with his anti-communist campaigns and assertive foreign policy, is heading for opposition.
Not only is the change in Poland’s leadership likely to bring a more Eurocentric diplomacy and pragmatic relationship toward Russia, it could also open up new business vistas.
“The Civic Platform won the elections under the heading ‘Poland deserves an economic miracle,’” said Maria Staszkiewicz, a political analyst with the Association for International Affairs (AMO). To achieve this goal, the new government plans public finance reforms and rationalization of state spending, with privatizations serving as additional state income, she added.  
“The tendency will be to find another source of financing in the energy and coal sectors by gradual privatization,” Staszkiewicz noted.
With a large state-controlled energy sector and liberal government open to the prospect of privatization, Poland could become an even more attractive target for multinational businesses, including Czech companies.
Already with Kaczynski at the helm of the government, preparations had begun to privatize Silesia, a coal mine in south Poland owned by Kompania Weglowa, Poland’s largest coal miner.
If sold, Silesia would be the first Polish mine ever passed to private hands. The company is expected to ask more than 110 million zlotys (814 million Kč/$42 million) for the mine, according to the Polish press.
New World Resources (NWR), the parent company of the Czech Republic’s largest coal-mining company, OKD, is among the companies ready to place a bid.
“New World Resources is interested in the Silesia mine,” said Jiří Polák, adviser to Zdeněk Bakala, a Czech-born financier who controls NWR through a web of Cyprus-based investment firms.
Poland seems to be an obvious option for the further expansion of NWR’s mining activities, as coal production in the Czech Republic is more costly than in Poland due to limited coal deposits and a strong opposition to expanding territorial mining limits.
“NWR has a strategic, long-term interest in working with the Polish coal industry,” said NWR spokesman Joe Cook, adding that the firm’s interest is independent of any elections.
Apart from the Silesia mine, NWR has other irons in the fire in Poland. The company signed an agreement with Jastrzebska Spolka Weglowa Oct. 17, a Polish state-owned mining company, on the future joint development of coal deposits close to the Czech border and NWR’s existing mines.
The success of a possible bid for the Silesia mine and the political turnover in Poland will not affect NWR’s initial public offering (IPO), Polák said. Bakala has repeatedly announced that NWR would soon make an IPO, placing up to one-third of its stock on bourses in Prague and London. However, the company will not comment on the IPO’s timing and expected yields.
The Czech power giant ČEZ is also eyeing the closely-tied energy and coal mining sectors in Poland. Although the company will not take part in the Silesia privatization, it plans to expand one of its two coal-fired plants in the country.
Mine lives
Although a number of Polish cabinets have planned the privatization of the country’s coal mines, their intentions have been killed by strong opposition from the trade unions, which fear leaving the bosom of government largess. However, Poland’s coal mining industry has slimmed down in the last decade, with the number of employees dropping from more than 400,000 to about 120,000, which could reduce the unions’ influence.
Although Kaczynski’s government had planned to further restructure the mining industry, including the floatation of a minority share of Kompania Weglowa on the stock exchange, privatizations were far from its priority, according to businesspeople observing the Polish energy sector.
“The government rather wanted to consolidate the energy sector and ensure the security of its power supplies by making Poland less dependent on Russia,” said a businessman at a large energy corporation who asked to remain anonymous.
Despite the fact that Civic Platform presents itself as an economically liberal party open to privatizations and economic reforms, some businesses are skeptical about whether more privatizations could follow Silesia.
“Rhetoric is one thing, reality is another,” said the energy executive. “No matter what [government] was in power and what it claimed about the privatization of coal mines, nothing has really changed, as the mines are still state-owned.”
There is another reason why the privatization of the Polish coal mining has been so protracted, explained several other businesspeople: The industry is charged with special national significance.
“Coal mining is a subject of national pride,” said the head of a coal trading company based in north Moravia. “It’s not on the margin of public interest, like in the Czech Republic.”

Victor Velek can be reached at vvelek@praguepost.com


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