Czech industry minister claims hard coal mining likely to end by 2022

By bne IntelliNews January 6, 2016

Hard coal mining in the east of the Czech Republic is likely to be shut down by 2022, Industry Minister Jan Mladek said on January 5, as Prague continues to barter over the future of the only such miner in the country.

The comments come as the ministry is locked in negotiations with OKD over its future. A unit of cash-strapped New World Resources (NWR), the company - controlled by controversial oligarch Zdenek Bakala - has said it may run out of cash this year unless it secures new financing.

NWR has already said it will likely have to close at least one mine. The company's four facilities: Karvina, CSM, Darkov and Paskov, employ 13,000 people in the east of the country. 

Last year the government managed to persuade NWR to keep the loss-making Paskov open until the end of 2017, in return for CZK600mn (€22mn) in state aid. That deal collapsed late last year. The government and representatives of NWR are due to meet on January 14, but Mladek - who has said the government is ready to help support the workers but not shareholders - said Paskov now looks certain to close by the end of this year, with the loss of 1,800 jobs.

The remaining mines are likely to be gradually closed over the next seven years or so. “The future of the whole of OKD is not clear and we would like to see some kind of soft landing, gradual closing of the mines,” Mladek said, according to Reuters. “The region must prepare itself for life after coal. (Which) will happen probably in 2022 at the latest."

NWR has estimated the costs of mine closures and layoffs at €85mn-€100mn. The company is still struggling despite pushing through a financial restructuring last summer due to an insupportable debt burden. That followed three years of losses caused by depressed global coal prices and high operating costs.

In December, the miner reportedly asked for €150mn in government aid. However, the government is unlikely to agree to any deal that would bail out Bakala, who is hugely unpopular across the country. The minister said the government's relations with NWR could improve if bondholders took greater control of the firm.

“There’s a clear structure of the current owners, but the problem is that they apparently pledged their share to the bondholders who can become owners in the future,” he said, according to Bloomberg. “We’re not sure when it will happen and we need to discuss their commitment with them.”

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