12 November, 2016

Czech Arca Capital complains to EU over Poland's mining subsidies

Czech private equity group Arca Capital has filed a complaint to the European Commission over Poland’s subsidies for state-controlled hard coal mines, Arca said on Wednesday.

Poland’s mining industry has long been favoured by politicians as it employs nearly 90 000 miners who are willing to take to the streets when jobs or benefits are under threat.

The coal industry worldwide has been under pressure for years due to falling prices hit by the economic crisis.

That trend has reversed in recent months, however, largely due to an unexpected move by China, the world’s biggest consumer of coal, to slash its coal production.

Arca said it acted on behalf of the Czech miner OKD in which it has an indirect ownership. Arca, controlled by investor Pavol Krupa, has a 3.4% stake in New World Resources, a company that owns OKD.

OKD has been in insolvency since May and is looking for a strategic partner to extend and gradually close down operations. NWR shareholders will vote on NWR liquidation on November 3.

Arca said the support in question was given mainly to Kompania Weglowa, Spolka Restrukturyzacji Kopaln and Polska Grupa Gornicza.

“The measures of the Polish government give unfair advantage to state-owned mines, the majority of which is highly ineffective due to outdated technologies and low labour productivity,” Arca said in a release.

The Polish Ministry of Economy declined to comment.

Arca said that according to its calculations, the support has surpassed €1-billion.

The Polish pro-coal PiS party won an election last year in part on promises to rescue the mining industry, which employs workers mostly in three state-run groups – JSW, PGG and KHW.

But despite the huge funds the industry has already received it is difficult for PiS to keep all the mines afloat because of the extent of the restructuring required and a state budget strained by social spending.

Since the start of 2015 seven mines employing almost 8,000 people were transferred to SRK, a state-run firm whose task is to close the mines.

SRK has said it is expected to receive 1.045-billion zlotys from the state budget this year to cover the cost of closing mines, compared to 693.5-million in 2015.

Polish WISE think-tank estimated in a 2014 report published by Greenpeace that Poland’s coal sector received an equivalent of 69-billion zlotys in various forms of subsidies and debt cuts from the state over the years 1990-2012.
source: m.miningweekly.com