PGG returns to profit thanks to state support

11 May 2017, Week 18 Issue 859

Poland’s largest coal miner PGG expects to generate a profit of 400 million zlotys (US$103 million) this year, reversing a 300 million zloty (US$77.5 million) loss it booked in 2016.

The forecast comes as Warsaw continues to restructure its sprawling state-owned coal industry in an effort to boost efficiency and make it more resilient in the face of low commodity prices. In April, PGG took control of a smaller Polish mining firm, KWH, after winning the approval of coal unions. Under the deal, PGG was left straddled with KWH’s debts, but it also received a 500 million zloty (US$127 million) capital injection from state-owned energy firms PGNiG, PGE and Energa. The three companies gained stakes in PGG last year after bailing out the miner, then known as Kompania Weglowa.

“I expect that this year, PGG will have a 400 million zloty net profit,” PGG CEO Tomasz Rogala told reporters when outlining the firm’s strategy at the European Economic Congress in Katowice, Poland last week. PGG is aiming to achieve earnings before interest, tax, depreciation and amortisation (EBITDA) of 2.8 billion zlotys (US$722 million) by 2030, according to Rogala. He added that the group was hoping to maintain its output at 30 million tpy by that year, and was targeting a 15% fall in production costs to 203 zlotys (US$52.5) per tonne.

Higher coal prices were also cited a reason for the expected surge in PGG’s earnings this year. China, the world’s biggest coal producer, aimed to shut down over 1,000 mines last year to help clean up overcapacity caused by the country’s shift to gas-fired power generation.

Poland generates over 80% of its power from coal, and the mining industry enjoys public support as well as the backing of politically powerful unions. The ruling Law and Justice Party in Warsaw has pledged to revive the ailing sector, challenging EU efforts to reduce usage of the fossil fuel.

In April, Poland rejected a commitment made by fellow EU members to refrain from constructing new coal-fired power plants within the bloc from 2020. The Polish government is aiming to launch the 1-GW Ostroleka C coal-fired electricity station in Mazowieskie by 2023. It will be controlled and operated by Energa and fellow state-run utility Enea.

Joseph Murphy

Edited by

Joseph Murphy

Editor

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