Poland seeks EU approval to fund failing coal mines

19 February 2015 (Last Updated February 19th, 2015 18:30)

Poland is to seek approval from the European Commission for its plan to extend state funding to some loss-making coal mines.

Poland is to seek approval from the European Commission for its plan to extend state funding to some loss-making coal mines.

The slump in coal prices, increase in production costs and sliding demand is affecting the financial health of the coal mines, according to Reuters.

Polish Minister in charge of restructuring the industry Wojciech Kowalczyk was quoted by PAP news agency as saying: "We declared that we will submit the notification application on the aid programme in February."

Kowalczyk had previously said that the country is optimistic about European Commission approval to the state aid proposal.

"Restructuring of the four failing mines is estimated to cost $624m, which could increase by 10% to 20%."

With mounting losses, the country had planned to close some of the loss-making mines run by state-owned company Kompania Weglowa; however, the plan was dropped by the incumbent government following protest from mining workers.

According to EU state aid rules, Poland must gain approval from the European Commission to give state aid to the mines.

Restructuring of the four failing mines is estimated to cost $624m, which could increase by 10% to 20% if the deal is finalised with the mining unions.

Government data shows that Kompania Weglowa recorded losses of about €270m during the January to November 2014 period, and its liabilities have increased to about €1bn.

In January, Kompania Weglowa announced that it will cut jobs, close mines and receive financial support from state-owned power utilities following a rescue plan backed by the government.

As part of the plans to close the four mines, one mine will be sold to coal trader Weglokoks and the remaining nine profitable facilities will be moved to a new holding company.

Weglokoks and state-owned power producers are currently in discussions about the sales of stakes in the new group.