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INTERVIEW-Polish coal miner struggles to meet demand after investment cut
September 26, 2017 / 1:40 PM / 3 months ago

INTERVIEW-Polish coal miner struggles to meet demand after investment cut

* Challenge is to restore production capacity-CEO

* State-run miner saved from collapse last year

* CEO expects full-year net profit

By Agnieszka Barteczko and Anna Koper

WARSAW, Sept 26 (Reuters) - Polish state coal-mining group PGG, saved from bankruptcy last year, is struggling to meet demand for coal from its major clients after cost-cutting led to lower investment, its chief executive told Reuters.

“Now the biggest challenge for us is to restore resources and production capacities after a difficult period when we had to cut costs significantly,” Tomasz Rogala, CEO of the biggest coal miner in the European Union, said in an interview.

State-controlled PGG, previously known as Kompania Weglowa, avoided collapse last year thanks to financial support from state-run listed utilities PGE, PGNiG and Energa.

Earlier this year, PGG took over another troubled coal mining firm KHW, also with the help of the utilities.

Thanks to continued restructuring and a rebound in coal prices, PGG has swung into profit this year, but the company reduced its 2017 coal production target in July by 2 million tonnes to about 32 million tonnes.

Local media reported earlier this year that PGG may miss its 2017 production target and be forced to import coal from Russia as it had not invested enough.

Rogala declined to comment on 2017 production figures.

“We want the output this year to be the highest, but I am not able to present the exact figure. The situation at PGG is stable,” he said.

PGG is negotiating new long-term contracts on coal deliveries that would be binding from 2018, he said.

“Our goal is to sell as much coal as possible on the basis of long-term contracts, signed for an indefinite period with a two-year termination notice,” he said.

PGG’s net profit was 8 million zlotys ($2.21 million) in the first half of the year compared to a 500 million zloty loss a year earlier. Rogala expects a net profit for the whole of 2017.

He denied media reports that PGG’s mines could be taken over by its biggest clients - the state-run utilities.

FRICTION

Poland’s dependence on coal has led to friction between the European Union, which wants to slash greenhouse gas emissions to combat global warming, and the Polish government, which sees the EU’s drive as a menace to its coal-powered energy industry.

Rogala accepted that demand for coal in Poland will likely fall in future, although he predicted coal would remain the major source of electricity production in Poland for at least 30 years.

“We cannot ignore the trends dominating Europe, which indicate the need to reduce carbon emissions and the increasing importance of renewables,” he said.

“This is why I would expect that in future the demand for coal will be smaller and we will have to adjust to it,” he said.

Poland produces more than 60 million tonnes of hard coal a year, around 1 percent of global coal output, according to PGG.

Poland generates most of its electricity from burning coal and lignite and the Law and Justice party (PiS) won an election in 2015 on promises to rescue the troubled coal mining industry and protect jobs in the sector.

More recently, the energy minister has signalled a slight shift in policy, saying Poland would not build large coal-fuelled power plants after 2024 when it finishes all those that are now scheduled or under construction. ($1 = 3.6260 zlotys) (Writing by Agnieszka Barteczko, editing by Gwladys Fouche and Adrian Croft)

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