Coal news and updates

Thousands of Polish coal miners have ended protests after the government backed away from its plans to close four mines and reached a compromise agreement with labor unions on Saturday about the restructuring of Europe's largest hard coal miner Kompania Weglowa (KW).

 

Several thousand miners from three state-controlled mining companies had been staging both underground and overground protests following a government announcement earlier this month that it planned to close four of KW's most loss-making mines in an attempt to stave off imminent bankruptcy.

 

The Katowice-based company, which employs 49,000 workers in its 14 mines, has run up huge losses due to falling coal prices and demand from its main power sector customers combined with rising production costs.

 

Under the rescue plan, the government planned to close four mines which employ 11,000 workers, and to sell another, Piekary, to the state-owned coal trader Weglokoks.

 

The remaining nine mines were to be transferred to a new special purpose vehicle, provisionally called New KW, which initially was to be capitalized by Weglokoks.

 

In the second stage some of the country's state-controlled power companies were to invest in New KW to return the company to profitability.

 

Under Saturday's agreement, the government agreed not to close the four mines. Instead, 10 of KW's 14 mines will be operated by New KW.

 

Of the remaining four, the government agreed to divide up Bobrek-Centrum and Sosnica-Makoszowy and keep the more prospective parts, Bobrek and Sosnica in operation.

 

Bobrek will now be sold to Weglokoks while Sosnica will be operated by New KW.

 

The remaining collieries, Piekary, Brzeszcze, Centrum and Makoszowy will be transferred to the state-owned company SRK, for restructuring and eventual sale.

 

According to union leaders, there are already new investors willing to take over these collieries.

 

On Friday the country's second-largest power company, Tauron, which almost exclusively uses thermal coal as feedstock for its plants, said it is interested in taking over the Brzeszcze mine from SRK once it has been restructured.

 

Under the agreement, miners will also keep their current salaries for one year and administrative staff will be given more incentives to take redundancy.

 

The government will also apply to the European Commission for EU funds for the mining sector.

 

Analysts say the compromise was reached to prevent the union protests escalating into a threatened general strike because the government faces parliamentary elections this autumn.

 

However, some market participants are skeptical the compromise will allow for the return of a viable KW. In the first 11 months of 2014, KW made losses of Zloty 1.1 billion ($294 million) and its debts rose to Zloty 4.2 billion.

 

"The signed agreement staves off social unrest for the government for a certain time," Janusz Steinhoff, a former economy minister, told reporters on Sunday.

 

"However, the program which was negotiated with the unions absolutely does not give a guarantee of a profitable KW," he added.

 

 

Source: Platts