Facts on the government's agreement with miners

The agreements with miners of 17 January 2015 paved the way to transforming the coal sector into a profitable and stable business. Despite the continuing decline of coal prices, over the past nine months mining companies have implemented significant corrective and optimising measures. Efforts made by the companies' managements, their employees and the government have made it possible to create a robust foundation for the construction of strong fuel and energy corporations that will be able to provide stable supplies of power at stable prices and to compete on the regional power market. We present a summary of the government's activities in the mining sector.

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Coal is and for a few next decades will be the basis of Poland's electric power system. The consistent restructuring process of companies in this sector and the ongoing corrective processes have brought tangible results.  Mining is becoming increasingly market-driven and competitive. All 17 points of the January agreement have been or are being implemented. Particular mines and companies have undertaken corrective actions, the Act on the functioning of hard coal mining has been amended, and the Brzeszcze, Makoszowy and Centrum mines have been transferred to Spółka Restrukturyzacji Kopalń. The Bobrek and Piekary mines have been taken over by Węglokoks Kraj. Additionally, the management of Kompania Węglowa did not resort to disciplinary measures against miners who protested in January.

My plan for the mining sector, apart from restructuring companies, focuses on integrating mines with the energy sector, boosting coal demand and comprehensive development of the region in line with the aims of the Programme for Silesia. I am convinced that its implementation offers a real opportunity to make mining market-driven, secure stable energy prices for years to come and develop Silesia, said Treasury Minister Andrzej Czerwiński.

Effects of corrective actions in particular mining companies

Katowicki Holding Węglowy

The recovery plan for Katowicki Holding Węglowy (KHW) was prepared in February 2015. So far KHW has transferred parts of the Mysłowice and Boże Dary units to Spółka Restrukturyzacji Kopalń. Work organisation has been improved and backfill excavation in KWK Wujek has been terminated. The company started transporting personnel by conveyor belts, which made it possible to increase working time by 1.5 to 2 hours per day. The management has been increasing revenues from utilising methane. Employment has been reduced by 2,300 people. Some 20 percent less office staff will work in the company by the end of the year compared to the beginning of the year. A voluntary redundancy scheme has been launched. The company has started selling off its non-productive assets and launched debt restructuring. Outsourcing has been reduced as well.

The restructuring policy will make it possible to generate ca. PLN 540 million in annual savings from 2016.  In September, KHW posted PLN 12 million in net profit. The forecast result for October is PLN 65 million. KHW’s financial liquidity is not threatened. According to forecasts, the EBITDA result (earnings before interest, tax, depreciation and amortisation) will amount to plus PLN 597 million as of end-2015.

Over the whole 2015, employment in KHW will be reduced by 2,500 people, or over 15 percent, while keeping extraction at the 2014 level (ca. 10.5 million tonnes). One of the most important assumptions of the programme was to improve efficiency. In 2014, it amounted to 667 tonnes per employee. Today, despite employment reduction, KHW extracts the same amount of coal as in 2014 (ca. 10.5 million tonnes), but efficiency has increased to 702 tonnes per employee. In 2016, the figure should rise to more than 750 tonnes and in 2020 – to 868 tonnes. The company is also focusing on the best quality coal which is also the most expensive.

Jastrzębska Spółka Węglowa

A restructuring programme has been developed at Jastrzębska Spółka Węglowa that defines the required actions in the area of production, trade, purchases and finance as well as human resources management. On 16 September 2015 the JSW management board and representative union organizations signed an agreement on limiting some employee benefits. Starting from 2016, the payment of the 14th salary and the coal benefit will be suspended, while the so-called St. Barbara Reward will no longer be applicable to administrative staff and those who had their job contract terminated during the financial year. The estimated total result of reducing labour costs in 2016-2018 as a consequence of the agreement will amount to ca. PLN 2 billion.

Kompania Węglowa

Kompania Węglowa has introduced corrective processes in most of its mines. This has resulted in better economic and work efficiency, increased extraction and improvement in the quality of the extracted commodity. The cost of mining a tonne of coal has dropped to PLN 230 from ca. PLN 300 in January 2015. On 30 September 2015 the Council of Ministers has decided to transfer 100 percent of Kompania Węglowa shares to Towarzystwo Finansowe Silesia. The Polish Energy Group PGE and Energa, among others, have started analyses of the project and expressed interest in carrying out a joint undertaking. Analyses are also conducted by PGNiG Termika, a subsidiary of the PGNiG capital group.

In accordance with the January agreement, the Brzeszcze mine has found an investor. On 19 October 2015, Tauron signed an initial binding agreement on the purchase of KWK Brzeszcze. The transaction will be completed by the end of the year.

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