Poland has gained the crucial nod from the powerful mining unions on its plans to merge state coal giant PGG with peer KHW, the energy minister announced on March 1.

The merger is the next step in Poland’s strategy to transform the long-ailing sector into a profitable segment of economy that will also play a fundamental role in providing energy security. Poland derives the vast majority of its power from coal-fired power plants.

Poland originally planned to engineer the transformation of KHW in a similar fashion to PGG. The holding, Europe's largest coal miner, was capitalised by a number of state-controlled energy companies as it was built by bailing out and restructuring state-owned Kompania Weglowa. However, Warsaw became wary that KHW, after receiving new capital, would face potentially harmful competition from the larger PGG. 

The suggestion of a merger came from KHW’s creditors – a group of five Polish banks that expected the miner to face problems servicing its debt if it remained an independent entity – also played a role.

Unions have now agreed to the merger, after receiving promises that no jobs will be lost as a result. Poland's mining unions have faced down every single government that has sought to restructure the industry over the past 27 years.

The agreement of the unions is an important step towards completing the plan, deputy Energy Minister Grzegorz Tobiszowski told a news conference, according to PAP. “We have the agreement, which will open the next stage of the process,” Tobiszowski said.

He added that talks with investors are under way. It is estimated that the new entity will need around PLN1.1bn (€260mn) in fresh capital. State-controlled companies Weglokoks, Enea, and TF Silesia are tipped to provide PLN700mn. State-controlled oil company PKN Orlen is reported in the frame to provide the rest of the cash.