Mládek: The situation at Czech OKD is serious, not just about Paskov Mine

According to Industry and Trade Minister Jan Mládek, the situation surrounding mining company OKD is serious, with insolvency proceedings a possibility in the worst case. The jobs of 13,000 employees and other related sectors are at risk. The government and the tripartite council will discuss the situation at Monday's meeting.

On Thursday, Mládek called on loss-making New World Resources (NWR), the owner of mining company OKD, to come up with a new plan after the government rejected the company's request for state support to help it overcome the collapse in coal prices.

The Ministry of Industry and Trade (MPO) on Wednesday postponed talks with NWR after receiving the company's request for assistance and other proposals, but added that it was ready to take measures to save jobs.

„From the government's perspective, the highest priority is, of course, to help the miners, people in the surrounding area and people in the region.“

„The situation is serious. It is no longer just about Paskov Mine. Talks are under way on the whole of OKD… The problem is that they (NWR) submitted an undignified proposal, and that is still a polite description.“
Industry and Trade Minister Jan Mládek

The amount of financial support requested is unknown. Josef Středula, chairman of the Czech-Moravian Confederation of Trade Unions, said NWR had estimated its needs at around EUR 150 million (more than CZK 4 billion), but added that it was up to the company to confirm the figures. NWR did not comment. Trade unions also said that, as part of the rescue plan, the company had requested a 5% pay cut for its employees, which was rejected.

NWR owns OKD, the sole operator of hard coal mines in Czechia, specifically four mines in the Ostrava-Karviná region. The company said it could run out of cash in the third quarter of 2016. It said it could either sell some of its assets or cease operations if it faced a cash shortage and failed to find an alternative solution.

NWR has mapped out a range of options – from an immediate or gradual shutdown, splitting into loss-making and viable companies, merging with other industrial enterprises, or selling individual assets.

NWR has 13,000 employees, while further jobs in related sectors in northern Moravia would also be at risk.

Relations between NWR and the government have long been tense. The company was valued at CZK 131 billion in 2008, when it became a joint-stock company and listed its shares on the London, Warsaw and Prague stock exchanges. The company paid dividends and increased its debt until the fall in coal prices forced it into financial restructuring in 2014. Its market capitalisation has collapsed and is now worth around CZK 860 million.

OKD announced in 2013 that it would close the loss-making mine. NWR and OKD ultimately agreed with the government to operate the mine until 2017 with a state contribution of CZK 600 million. The agreement is likely to cease to apply at the end of the year, as the coal price is likely to fall below the price of USD 110 per tonne agreed in the deal.