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Lubelski Węgiel
Lubelski Węgiel Bogdanka S.A.

ENEA Wytwarzanie terminates coal supply agreement with LW Bogdanka S.A.

Monday, 2015-08-24

Bogdanka, 24 August 2015

 



ENEA WYTWARZANIE TERMINATES COAL SUPPLY AGREEMENT WITH LW BOGDANKA S.A.

Zbigniew Stopa, President of the Management Board of LW Bogdanka S.A., comments:

The course of this year’s price negotiations with ENEA was the same as in previous years. In accordance with the long-standing practice, the last round was planned for October. In previous years, an agreement on the prices for the following year was usually reached in the fourth quarter. Therefore, the termination surprised us.

In our opinion, we have always shown great flexibility in negotiating. As a private company, we cannot afford, for obvious reasons, to sell coal below the cost of its production. Therefore, we are unable to accept as a basis for negotiations the prices offered by the coal companies subsidised by the state, which are often significantly lower not only than the production costs of these companies, but even than the production costs of LW Bogdanka, which are the lowest in the Polish market. In a normally functioning market, we are the obvious-choice supplier for power plants in our area due to the high costs of transporting coal.

Given our long-term agreement with ENEA, we are open to resume the talks and seek agreement. We believe that a compromise is possible.

It should be noted that we also have a contract with ENEA for the supply of coal for the new 1,075 MW power unit which is expected to be commissioned in the fourth quarter of 2017. The volume of supply is anticipated at approx. 2 million tonnes of coal per year (compared to the over 3 million tonnes currently supplied to ENEA). I estimate that the two-year notice period of the current agreement will allow us to replace the more than 1 million tonne of lost volume in case we do not come to an agreement.

We have recently expanded, and are continuing to expand, the sales force and are actively looking for new customers, also among smaller companies. We are in talks with customers both in Poland and abroad.

I cannot imagine that the current situation in the Polish market persists much longer, provided that the government’s announcement that Nowa Kompania Węglowa will be profitable from 2017 turns out to be true. With the prices currently offered by KW, it is not possible to carry on a profitable business. There is also no real possibility of reducing the production costs in a single year. The productivity per employee in Bogdanka is three times higher than in KW S.A. and this gap cannot be bridged over a short time and without significant financial outlays.

 

For further information please contact:

Magda Kołodziejczyk, M+G
phone: +48 22 416 01 02, +48 501 16 88 07
e-mail: magda.kolodziejczyk@mplusg.com.pl  
 



LW BOGDANKA – HIGHLIGHTS

Lubelski Węgiel Bogdanka S.A. is the most modern and one of the largest hard coal mines in Poland.
In 2014, production of Bogdanka’s commercial coal amounted to 9.19 million tonnes.

LW BOGDANKA conducts primarily mining operations with respect to extraction, agglomeration and sale of hard coal.

First and foremost, the BOGDANKA coal mine supplies industrial customers based in eastern and north-eastern Poland. Customer market is stable and sales are conducted mostly on the basis of long-term agreements. The major directions of sale of commercial coal from LW BOGDANKA are commercial and industrial power sectors.  

The Company stands out in the industry with regard to its financial results, efficiency of hard coal extraction and investment plans. The LW Bogdanka Group employs approx. 5,600 staff.


For further information visit: www.bogdanka.eu
 

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