Poland is one of Europe's biggest producers of coal and relies on the fuel for around 70% of its electricity production but under pressure from the European Union, it has encouraged more investment in low emission sources.

At the end of May 2021, the state assets ministry said it would take over coal assets from its utilities, including PGE Polska Grupa Energetyczna, Enea and Tauron Polska Energia in the second or third quarter of 2022, and then transfer them to a new state-owned company.

Under the conditional deal announced on Wednesday, Energa, PGNiG, PGE and Enea will each sell all of their shares in PGG to the state for a zloty.

"This is one of the steps leading to separation of coal assets from energy companies and realisation of conditions set in the social contract on coal mining" Ministry of State Assets spokesperson Karol Manys told Reuters.

The social agreement seeks to ensure the country's energy security and protect mine workers as Warsaw gradually phases out coal.

Ipopema Securities analyst Robert Maj described Wednesday's news as positive, though he said "the process seems to be moving slowly but surely".

Noting that PGG had "never been able to generate positive cash flows in its history", he said "on the other hand, on-going coal price negotiations with the energy sector on their long-term contracts may now gain fresh dynamic with a new owner".

(Reporting by Patrycja Zaras and Mateusz Rabiega; Editing by Alison Williams and Emelia Sithole-Matarise)