Exclusive: COVID-19 pushes Poland to accelerate exit from ailing coal - sources

Agnieszka Barteczko
FILE PHOTO: General view of Wujek Coal Mine is seen during sunset in Katowice

By Agnieszka Barteczko

WARSAW (Reuters) - Poland, the European Union's biggest hard coal producer, is considering closing at least three mines in coming months as the coronavirus pandemic forces it to accelerate its exit from the sector, according to sources familiar with the matter.

Poland, the only EU member to refuse to pledge to become climate neutral by 2050, has long had a close relationship with coal, which has historically been a pillar of its economy. However the sector has often been loss-making in recent years, even as the state has sought to financially prop it up.

The closures being looked at by the government include the Wujek mine, three industry sources told Reuters, declining to be named. Wujek was the site of one of the bloodiest protests during communist rule and is a symbol of the nation's ties to coal.

The State Assets Ministry, which supervises the coal industry, did not respond to a Reuters request for comment.

In the past five years the government has merged several mines and also gradually closed a handful. It has been reluctant to move more quickly, mindful of violent protests by miners that have taken place in the past.

But the sources said the COVID-19 outbreak had changed the strategic thinking within the conservative Law and Justice (PiS) government as it struggles to allocate state funds to support an economy reeling from lockdown.

"The crisis triggered by the coronavirus pandemic will cost huge amounts of money. From the point of view of public finances, we cannot afford further financing of coal mining," a government source told Reuters, speaking on condition of anonymity.


RESCUE PACKAGE

The closures being considered would affect at least two mines owned by PGG, Poland's biggest coal group, including Wujek, according to the three industry sources. They would also affect one or more mines owned by state-run utility Tauron, two of the sources said.

Overall, the closures could lead to the loss of thousands of jobs, two sources said. It is likely to be announced after a presidential election, expected to take place in late June, they added.

PGG declined to comment while Tauron did not respond to a Reuters request for comment.

PGG said in April that it could incur a quarterly loss of 700 million zlotys ($178.25 million) if it does not take any action to ease the impact of coronavirus pandemic.

The PGG mines would likely be taken over in the third quarter by state company SRK, which would gradually wind them down if the plan goes ahead, according to the sources. Poland may try to partly finance the restructuring with money from the new EU Just Transition Fund, which is aimed at helping wean the bloc off fossil fuels, the people said.

PGG has eight mines in total at present, and Tauron has three, while other companies own a handful.

Poland has announced one of the biggest rescue packages in Europe, in terms of direct government spending versus gross domestic product, in the hope of resuscitating sectors such as trade and manufacturing, which PiS believes are needed to prop up the economy in the long term.

($1 = 3.9270 zlotys)



(Additional reporting by Wojciech Zurawski and Anna Koper; Editing by Pravin Char)