Deal reached to save Polish coal industry

05 May 2016, Week 17 Issue 808

After months of tense negotiations, a deal has been struck aimed at rescuing Poland’s beleaguered coal industry.

Poland’s largest utilities and several state-run investment firms have agreed to invest some US$620 million into the newly created Polish Mining Group, or PGG, a spinoff company that is taking over the assets of struggling Polish state-owned coal miner Kompania Weglowa (KW).

PGE, Energa and PGNiG are each putting up 500 million zloty (US$ 0130million). In addition, several state-run funds will pump another 900 million zloty (US$235 million) into PGG.

The deal was signed on April 26 at a ceremony in Katowice attended by Prime Minister Beata Szydlo and Energy Minister Kryzsztof Tchorzewski of the ruling Law and Justice Party.

“Breakthrough day for Polish mining,” Szydlo tweeted afterward, according to local media reports. “Agreement signed. PGG starts work.”

The deal was part of a plan spearheaded by Law and Justice to save Poland’s coal industry, which has been devastated by tumbling global coal prices.

Under the plan, the newly capitalised Polish Mining Group will take over 11 mines owned by KW, the largest coal miner in the European Union with 50,000 employees.

In March, PGE, Energa and PGNiG submitted preliminary bids for stakes in the Polish Mining Group. In exchange, the utilities demanded a raft of assurances, including that the company would be profitable and that the investments would not be considered as state aid and thus risk violating EU regulations.

According to the Polish Mining Group’s business plan, the company and its mines are supposed to be in the black by the end of next year. The company is also expected to improve productivity and efficiency.

A major sticking point in the negotiations has been Poland’s powerful miners unions, which expressed outrage at talk of trimming their generous compensation packages, especially after Law and Justice pledged before last year’s elections to save the coal industry without cutbacks.

However, trade unions at KW reached a deal with management last month.

 

Edited by

Richard Lockhart

Editor

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