Coal sector in a hole

“Even the worst coal mines in the US are three times more productive than the average productivity of Polish coal mines,” according to a report into Polish mining by the Warsaw Institute of Economics (WISE).

The report suggests that employment in the sector will need to more than halve over the next five years or the majority of Polish mines will cease to exist.

“A review of revenues from coal sales and costs of excavation from the last 10 years indicate that the current problem of the Polish coal sector is the growing average cost of excavation,” the report "Quo vadis? Prospects for the development of the coal mining sector in Poland" notes.

The report also notes that the sector failed to use the period of prosperity before 2012, after which global prices began to fall, to invest in new technologies or restructure employment.

The most negative impact is seen in the case of Kompania Węglowa (KW), the report argues. KW is now being restructured by the government and will be sold off. The report notes that even during the period of high coal prices, KW’s EBIT [a measures of a company’s financial health - ed] did not exceed five percent, with coal mine Bogdanka’s figure by comparison 20 percent.

The restructured state-owned KW will need another PLN 2 billion in capital by the end of June 2016, CEO Krzysztof Sedzikowski said in March. "I'm not yet able to say which investors will provide the financing, we're in talks," he said at the time.

KW had just received PLN 350 million of advanced payment for four of its best performing mines sold to a newly created unit of coal exporter Weglokoks in the course of the restructuring process.

Coal mining in Poland produced 144 million metric tons of coal in 2012, 55 percent of primary energy consumption and 75 percent of electrical generation. Poland is the second-largest coal-mining country in Europe, after Germany, and the ninth-largest coal producer in the world. (jh)