PiS quiet on rescue plan as Polish coal mine losses rocket

By bne IntelliNews November 3, 2015

bne IntelliNews -

Poland’s beleaguered coal mining sector posted a cumulative loss of PLN1.67bn (€390mn) in the first three quarters of the year, data from the Industrial Development Agency ARP showed on November 3. 

The result illustrates the depths into which the troubled industry is falling, as low market prices expose the inefficiency of Polish production. The loss is more than triple the PLN531.9mn the coal mines had lost at the same point in 2014. However, a rescue - let alone a systemic solution - looks anything but easy, with the government-in-waiting saying little on the topic thus far.

The painful losses will only fuel further calls for the reform of the ailing industry. However, the outgoing centre-right Civic Platform (PO) failed outright to make any change in its eight years in power. In the last months of its two terms, as losses have mounted, it made a half-hearted effort to restructure the industry, but that ended up as a stuttering push to bail the mines out.

The central element of the strategy was to save Poland’s largest miner Kompania Weglowa by pushing the country's listed state-controlled utilities to invest in the industry. That plan remains incomlete. 

The populist PiS administration that will replace PO is highly unlikely to do anything to anger the country's 100,000 or so miners, but remains somewhat tight-lipped on how it plans to deal with the issue. 

Miners unions enjoy a history of pressing governments into meeting their demands. Meanwhile, PiS stressed in campaigning that it would seek to re-negotiate EU environmental limits limiting the use of coal.

Since winning the October 25 election, PiS has said only that it will mull “extinguishing” some mines in which coal deposits are expected to run out shortly. In real terms, however, the new government will have the same limited options as its predecessor.

"There are three options: restructuring, which PiS is unlikely to do; keeping the sector alive somehow – which increases the danger of an eventual uncontrollable bankruptcy; and integrating mining with the energy sector," Zbigniew Porczyk at DM Trigon told bne IntelliNews in late September.

The state-controlled energy companies could be the most likely option therefore. In October, power utility Tauron took over one mine culled from KW after the PO government sacked the management. Warsaw is currently filled with state company executives expected to be replaced by PiS appointees.

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