When It Rains It Pours as Ailing Top EU Miner Stung by Virus

(Bloomberg) -- For Polish coal producer PGG SA, the coronavirus outbreak couldn't have come at a worse moment.

After posting a heavy loss last year as renewables keep pushing out coal as a source of electricity generation, the warm winter only aggravated the situation. Then, the spreading pandemic and the subsequent lockdown slashed power consumption in the European Union's largest eastern economy by 10% and further reduced demand for the dirty fuel.

Now, the state-owned company had to halt production in three of its 14 mines until May 10 after more than 200 of its employees were tested positive for the virus and 1,200 more are under quarantine.

To help weather the crisis, PGG's management proposed to cut weekly working hours and salaries, while pledging to refrain from layoffs as it's required to do so in order to seek subsidies from the state coronavirus relief package. Without the plan, the miner is set to lose over 700 million zloty ($167 million) in the next three months after incurring a 427 million-zloty loss last year, Chief Executive Officer Tomasz Rogala warned.

Muddy Waters

The unions have quickly stricken down the idea, arguing the pandemic is just the management's and the government's excuse to shut mines, instead of introducing a long-term plan for the industry, which has been in a permanent crisis since the end of communism. Coal still accounts for more than 70% of the country's electricity generation.

“The actions right now look like an alibi for the decision makers,” Dominik Kolorz, regional head of the Solidarity union, said last week.

According to Kolorz, it's been known already long before the pandemic that the situation is “very difficult and nothing was done about it.” Nevertheless, he admits there's a need for a deeper restructuring within the industry and talks on the matter should continue.

PGG's coal output is set to decline below 29 million tons this year from 30 million in 2019.

Poland's Top Power Producer Sees Exit From Coal in 25 Years

Historically, the unions have always held the upper hand when dealing with various governments due to their strong political support in the southern region of Silesia. They are now the only labor organizations in the country publicly opposing cost-cutting measures amid the pandemic.

The upcoming presidential election, due to take place later this month, may prove to be as persuasive a bargaining chip as it's been in the past.

“I understand that there were parliamentary elections last year and everybody had to pretend PGG is the land of milk and honey, but there was no milk nor honey, only muddy waters,” Kolorz said.

For PGG CEO Rogala there is no time for such discussions.

“The focus should be now on surviving, not on negotiations,” he told Radio eM last week.