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bne July 2017 Special focus I 41
there is little to indicate that so far. Renewables are stalled, while plans for Poland’s first nuclear power plant are still at too early a stage to discuss the likelihood of the project.
For now, however, thanks to the govern- ment’s efforts and to the relatively good situation on the coal market, the key companies – PGG and Warsaw-listed JSW – could boast improved results in the first quarter.
PGG posted a net profit of just over PLN59mn (€14mn) in the first quarter on the back of reduced costs, improved efficiency, and offloading superfluous assets to the state-owned restructuring vehicle SRK. The company managed to post positive results in spite of coal price trending down in the first quarter after China upped its domestic production, reducing demand and flattening prices.
JSW fared much better. The company produces coking coal for the steel industry. Unlike coal that PGG extracts for power generation, coking coal is
much less replaceable and as the global economy is accelerating, the price of coking coal rises accordingly. With the price of JSW’s coking coal surged 162% y/y in the first quarter, the company posted an operational profit of just over PLN1bn.
The PiS government wants to reinforce the position of coal in Poland not just because it still is the dominant energy source in Central Europe’s largest econ- omy. The industry that employs some 85,000 people could, if stirred the wrong way, threaten political stability in next to no time. Warsaw’s putting a brake on the development of renewable energy’s most vibrant segment – wind power – was seen as an attempt to rid coal of a rival branch negatively affecting demand.
But Polish miners still appear unprepared for the likely shape of the coal market in the near to mid-term,
and have yet to undertake any radical operational restructuring. Overmanning is still rife. For example, state coalmines produce around 600 tonnes of coal per
employee, versus 1,000-1,500 tonnes in privatised mines in Silesia and Bogdanka.
A taste of what is to come can be found, paradoxically, in a report by the state audit body NIK on the state of the mining sector in 2007-2015. The report said that Poland did not take advantage of a good situation on the coal market in the early 2010s, which led to rapid deterioration of miners’ standing after 2012, when sentiment soured.
Today, Polish miners are turning in profits again, talking about huge invest- ments, and seem to disregard the signals of diminishing demand.
“The worsening of the sentiment that began in 2012 exposed the biggest producers’ inability to run business profitably and a total lack of preparation for a drop in the price of coal and in demand,” NIK said in the conclusion
to the report that may well constitute a peek into the near future of Polish mining.
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