Gov't to reshuffle KGHM's board

The government this week is expected to initiate wholesale management changes at KGHM Polska Miedź, the giant copper mining and telecoms concern, when it makes new appointments to the firm's supervisory board, according to company officials and analysts.

"If it is going to happen, it will be sooner rather than later," said Wojciech Marciniak KGHM investor relations director, of the expected management reshuffle.

The changes have been expected since the Democratic Left Alliance (SLD) won September's elections and new Treasury Minister Wiesław Kaczmarek signaled that, in his opinion, state-controlled companies had been poorly run under the previous government.

"A new government would like to replace members of the supervisory board appointed by the previous government," said Michał Mierzwa, an analyst with Erste Bank. "As a consequence we should expect changes in the management board also."

Once the government, which called the supervisory board meeting for this week, makes the new appointments, a new management structure can be in place before Christmas, Mierzwa said, indicating that legal requirements prevent a faster switch.

The treasury, which owns about 44% of KGHM's stock and controls another 5% through Powszechna Kasa Oszczźdności Bank Polski (PKO BP), appoints five of the firm's nine supervisory board members. International investors select one representative and company employees three. The supervisory board in turn selects the company's executives.

The supervisory positions have been reworked at each turn of treasury ministers during the last year. Marek Wierzbowski, who represents holders of global depositary receipts (GDR) traded on the London Stock Exchange, last week said the outcome of the pending meeting is still uncertain. "I don't know what the changes are going to be," Wierzbowski said. "Usually they have an impact, but we don't know in what direction."

Despite the uncertainty, it appears that company President Marian Krzemiński's days are numbered as he comes under fire from unions and the government.

At a treasury press conference last week, Kaczmarek criticized the now defunct Solidarity Election Action (AWS) government for appointing local AWS people to run the Lubin-based company. Kaczmarek has not publicly revealed his exact plans. Several candidates have been rumored and one former chief executive has openly lobbied for the job, but treasury press office employee Agnieszka Dłuska said that proposed changes would not be officially revealed until the supervisory board meets.

Once in place, new managers will face numerous challenges at the financially strapped company as they look to restructure and institute major cost cutting in mining operations, decide how to deal with telecommunications assets and determine a course for privatizing a 10% stake in the firm.

"After the change in the management, I expect the new management to present a new strategy," Mierzwa said.

Jeff Sparshott