Poland finally seals agreement with miners on coal industry rescue

By bne IntelliNews April 20, 2016

Poland has finally thrashed out an agreement with mining unions on conditions of employment in the new state-owned mining group PGG, the energy ministry announced on April 20. The deal appears to have removed the final major obstacle to Warsaw's rescue plan for the coal industry.

Getting the powerful mining unions to agree to a scheme to reduce bonuses to cut costs at PGG was key to creating the group on the basis of assets of ailing miner Kompania Weglowa. Warsaw is pushing to complete a rescue of the country's massive coal industry, which is foundering due to weak markets and inefficiency, that was launched at the start of 2015 by the previous government.

Contrary to earlier rhetoric, the unions have now agreed to a freeze on the traditional “14th salary” bonus for the next two years. The break through is just in time. PGG has to be created by end of the month under a deadline given KW by banks BZ WBK, Alior, BGK, PKO BP, and BNP Paribas.

The creditors have demanded that the new company be formed by the end of April or they will call for early redemption of debt totaling about PLN1bn (€230mn). Once PGG has been created, state-controlled PKO will team up with insurer PZU to buy into the group, the government said recently. The move to pull the two listed financial companies into the effort to save KW will be preceded by conversion of the debt held by the group of five banks.

State-controlled utilities PGE and Energa, as well as gas company PGNiG, are expected to put PLN1.5bn into PGG after resisting for over a year. The government claims it expects the new company to become “financially self-sufficient” in 2017.

 

 

 

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