Warsaw Reportedly Planning To Cut Up To 15% Of Coal Mines

By BNE IntelliNews

The Polish government is planning to close around 15% of the country’s coal mines as part of its rescue strategy for the struggling sector, local media reported on January 5.

According to an unconfirmed report by Dziennik Gazeta Prawna, the government plan – which was originally meant to have been released before the end of 2014 – will recommend closing down four or five of the country’s 30 or so state-owned mines. A similar number of mines will be transferred to the Coal Restructuring Company (SRK), which will be responsible for making these facilities profitable.

The plan stipulates laying off up to 5,000 miners, the newspaper reports, who will be offered  voluntary redundancy. The costs of the shut downs will not exceed PLN2bn (€460mn), which will be born by the state budget. Kompania Weglowa – the main struggler, which owns owns 14 mines – is out of cash and unable to borrow.

The sector has been ailing for the last few years, on the back of falling coal prices and competition from cheap imports from Russia. In the first three quarters of 2014 the sector reported losses of more than PLN500mn (€120mn).

Coal is a political hot potato in Poland because the industry still employs 100,000. In an election year, with the ruling Civic Platform (PO) facing tough competition from the opposition, any government decision that adds to the country’s high unemployment numbers will be very risky. The government has fought hard in Brussels against EU enviromental programmes that would limit coal use.

Way down in the hole

Listed state-controlled utilities and coal traders, as well as development bank BGK and state development funds, have all been lined up to help dig the miners out of their hole.

“The rescue plan needs to be carried out simultaneously in many areas,” said Wojciech Kowalczyk, the man charged by the government with crafting the rescue, said on December 9, according to PAP. “We cannot wait any longer, we must act, and that is what the government is doing.”

Regardless of Warsaw’s attempts to cap the effects on the politically sensitive sector, analysts suggest there’s little chance of averting a major drop in production, because investment has already been cut back.

“We still believe that, no matter what the final restructuring proposition for the sector is, the most probable scenario is a decline of the coal supply by approx[imately] 20%, due to the long period of virtually no CAPEX,” writes Tomasz Duda at Erste Group.

Courtesy of BNE

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