Agreement on Establishment of Polish Mining Group Signed

25.04.2016

After a year of negotiations between various stakeholders, on 19 April 2016 an agreement between the board of Kompania Węglowa and 13 miners’ trade unions was signed, paving the way for the creation of the Polish Mining Group (Polska Grupa Węglowa). This is the final chapter in a long story of financial problems and looming bankruptcy at Kompania Węglowa, the largest coal mining company in Poland and Europe, which produces around 40 million tons of coal every year.

The Polish Mining Group is to start operations on 1 May 2016, taking over 11 coal mines and 4 establishments of Kompania Węglowa together with the entire workforce of approx. 30,000 employees. At the beginning of July 2016, 9 adjacent mines are to be combined into 3 mining complexes consisting of 2-4 mines each, in order to cut operational costs and simplify the corporate structure. The remaining 2 mines will continue their operations independently.

Three major energy companies, PGE, Energa and PGNiG Termika, have already declared their willingness to invest PLN 1.5bn in the Polish Mining Group. The Ministry of Energy also announced that the conversion of Kompania Węglowa’s debt of PLN 0.5bn (out of a total of PLN 1.5bn in bank liabilities) into shares in the company is possible. Węglokoks (a state-owned company based in Katowice, Silesia) is to be another shareholder in the Group, and it has already made a PLN 500 million prepayment to this end.

The agreement could not be signed without the consent of the employees, especially the trade unions, to the planned restructuring. The mining unions recently signed the agreement, accepting a 2-year suspension of their annual bonuses in return for a change in the management approach within the Group. The new collective labour agreement, effective from 2018, is in negotiation.

Once all discussions were finished, the Ministry of Energy announced that the agreement with the trade unions would secure some 100,000 jobs in Silesia and create opportunities to develop coal mining as well as boosting industry in the entire region. Further negotiations with banks are also possible. According to government plans, the remainder of Kompania Węglowa’s debt is to be distributed over at least 7 years.

The funds raised from investors are to be spent on investments and introducing a new style of management in the company. Plans include the exploration of new fields with coal of the highest quality to increase the company’s income, as well as the modernisation of the company’s technology. As a result of the restructuring process, the Polish Mining Group is set to become a large, stable company with a significant share of the European coal market.