Gov't to announce coal sector shake-up
The coal sector looks set to be in for a major shake-up following the results of a report recently commissioned by the Democratic Left Alliance (SLD), Leon Kurczabiński, author of the document, told the Business Journal last week.
Kurczabiński said the proposed changes include the formation of a new holding structure, Polski Wźgiel (PW), that would oversee the government's restructuring and privatization plans for seven coal mines. He said the government would likely announce its strategy for the sector soon.
"At the moment there is little coordination of the restructuring process, with the work of too many agencies overlapping," said Kurczabiński, a senior figure at Katowicki Holding Wźglowy, a Silesian coal mine. "The aim of setting up PW is to find cash from within the sector for restructuring," he said. "All profits will be consolidated into one holding and these will then be reinvested in modernization."
Industry insiders estimate that overhauling the country's coal sector will cost the state budget about zł. 9 billion ($2.2 billion) until 2006, a portion of which will be covered by the European Union (EU). They said the figure could be higher if the mines and government fail to reorganize debt repayment.
Political muscle
Kurczabiński confirmed that setting up PW was a first step toward selling the seven mines and a precursor to privatizing others. He said that despite opposition from some of the mines' management and trade unions, the political will "was strong to push through the sector's restructuring."
Plans could also see the launch of Polski Koncern Wźglowego (PKW), a holding of 35-38 mines, Kurczabiński said. The government is thought to be weighing further options to establish Centralny Zakład Zbytu Wźgla (CZZW) - a merger of coal mine Centrala Zaopatrzenia Wźgiel Wźglozbyt and Wźglokoks, a state-owned coal exporter, to coordinate coal exports under the supervision of PW.
Last year, Kurczabiński and other coal industry leaders approached then-opposition SLD about developing a plan for restructuring the sector. If the group's plans are accepted by the finance, treasury and economy ministries, Poland could see organizational changes in the coal sector introduced before 2002. Economy Ministry officials would not comment on the status of discussions within the government.
Analysts also declined to comment until details of the plan become available. The previous Solidarity Election Action (AWS)-led Cabinet spent two years working on a plan to restructure and privatize the domestic coal sector - changes that never materialized because of strong opposition by mining unions. For its part, the SLD-led government of 1993-1997 came up with 17 different methods for privatizing the sector but settled on none.
Under the current plan, PW would take 100% ownership of seven loss-making, state-owned coal mines: Nadwiślanska, Bytomska, Rudzka, Rybicka, Jastrzźbska, Gliwicka and Katowicki Holding Wźglowy. The government would also liquidate Państwowa Agencja Restrukturyzacji Górnictwa Wźgla Kamiennego (PARG), the sector's watchdog. Until now, the deputy economy minister has been responsible for all strategic decisions in the sector, though with the backing of PARG. The new plan would see the president of PW take direct control of the sector. Unions have already said they are opposed to the idea.
Woeful finances
The majority of Poland's coal mines are in poor financial shape, although the World Bank recently announced it would pump O113 million into the industry this year. Under the current restructuring plan, 115,000 miners, or about one-third of the workforce, should have been laid off between 1998-2002 as production slides by half to about 37 million metric tons a year.
In the first three quarters of this year, the coal sector recorded zł. 266.2 million ($65 million) in net profit, up from zł. 153.4 million ($37.5 million) in the same period last year. Mines earned an average of zł. 6.22 per metric ton of coal sold, nearly triple the figure from 2000. Analysts said the main reason for the improvement was the rescheduling of a chunk of zł. 20.1 billion ($4.9 billion) in sector debt.
Analysts said the year's profits could reach as much as zł. 1 billion ($244 million). However, these figures are not as promising as they look. The Social Insurance Administration (ZUS) has said it will allow all coal mines to delay their employees' social insurance payments this year, but this hides the true state of the mines' finances and postpones the repayments. Mines paid zł. 1.9 billion ($465 million) to ZUS in 2000, zł. 700,000 ($171,000) short of the amount due.
Poland, ranked seventh in the world in coal production, has reserves of 60 billion metric tons, mainly in three basins - Upper Silesian, Lower Silesia and Lublin. Poland receives about 70% of its energy supplies from coal, although this is expected to fall as other sources of energy increase. Almost all of the country's electricity production and heating plants are coal fired.
Joe Harper
