Poland mine rescue plan attacked by unions

By bne IntelliNews January 8, 2015

Wojciech Kość in Warsaw -

 

The Polish government has defied expectations that it would not dare to do anything about the unprofitable coalmining sector a few months before the general elections. The new plan for the sector’s key company is out, but the tough part – getting coal’s powerful unions to agree to it – lies ahead.

On January 7, the government decided that the unprofitable coal giant Kompania Węglowa (KW), Europe’s largest coal producer, will be liquidated and its healthier assets will be moved to a new company at a cost of PLN 2.3 billion (€534 million) in 2015 and 2016.

The plan boils down to dividing KW’s assets into three groups.

The first group will be nine coal mines that the government assessed could still be profitable. They will be moved to a new special purpose vehicle (SPV), owned by state coal exporting company Weglokoks. This move will, according to the government, create a new strong company able to “compete on the European coal market”.

The second group consists of four coalmines that the government deemed no longer viable. These coalmines will be transferred to another SPV for closure, which has angered coal trade unions.

The third group is non-core assets that will be sold or liquidated.

The four coalmines that will be closed currently employ about 11,000 people. The government proposes that 6,000 of them will get new jobs in the new healthy entity, while the remaining 5,000 could take advantage of various protection programmes, including leaving the job for a one-off payment equal to up to 24 monthly salaries.

The final step of the plan would be to merge the new entity with the Polish energy sector, although no details were given about the merger.

The decision ends months of speculation about the future of the troubled KW. The government said it had no choice but to liquidate KW or it would spiral into “uncontrolled bankruptcy”, even as soon as by the end of January.

Prime Minister Ewa Kopacz told the press that the new entity, to which the viable coal mines will be moved to, will be strong enough to attract investment from the Polish energy sector, which is about 80% reliant on coal for energy generation.

“This process will lead to consolidation of the energy sector with our mining industry,” Kopacz said, as reported by PAP. She did not say, however, which energy companies will invest in the new entity.

According to data presented by the government today, KW has been losing PLN 200 million (€46 million) a month recently in its operations, representing between PLN 42-66 (€9-15) per tonne of extracted coal. KW’s loss for the 11 months of 2014 stands at PLN 1.1 billion (€255 million). The company had debts of PLN 4.2 billion (€975 million) as at the end of November.

The plan now has to be approved by the parliament, but a much more difficult challenge will be to get the mining unions to agree to it. Union leaders were quick to make it clear on January 7 that the plan is not what they expected.

“No-one has saved any company by liquidating it,” said Wacław Czerkawski, deputy head of the Miners Trade Union (ZZG), as quoted by industry website wnp.pl. “This plan will not change the situation one iota because it will meet a firm ‘No’ from unions and miners themselves,” he added.

The government’s plenipotentiary for the reform of the mining sector is scheduled to meet the trade unions on January 9.

 

 

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