Czech PM backs aid for coal mine in row with coalition partner

Reuters News
Posted: Apr 04, 2014 7:29 AM

PRAGUE (Reuters) - Czech Prime Minister Bohuslav Sobotka said on Friday the government must act to avoid a social crisis in the northeast of the country, where a planned coal mine closure threatens to put thousands out of work.

The center-left government has considered plans to provide 1.1 billion crowns ($54.96 million) in aid to keep a coal mine owned by struggling miner OKD, a unit of New World Resources, in operation until 2016, instead of letting it close at the end of this year as planned by the owner.

Sobotka's backing for aid to the region highlights a deepening conflict with the junior coalition partner, the centrist ANO movement of Finance Minister Andrej Babis, who has rejected any government support.

"I must reject the approach of our coalition partner that we should not get involved in the situation and leave it to market forces," Sobotka told a news conference.

NWR has said it would close the Paskov mine near the city of Ostrava, cutting more than 2,000 jobs at the end of this year, unless there is an agreement with the government on continuing operations. The government fears a further 6,000 people would lose work due to knock-on effects.

Sobotka was finance minister in 2004 when the government sold its minority stake in the mine to its managers, who soon after sold it to investors including financier Zdenek Bakala. The group floated the firm under the NWR name in 2008.

Opposition politicians have criticised the deal, saying the state sold its stake too cheaply. Sobotka has repeatedly denied any wrongdoing in the case.

Babis repeated his opposition to government aid on Friday.

"We have said we would make savings, and I have a fundamental problem with the fact that Mr. Sobotka wants to give Mr. Bakala a billion crowns," Babis told Czech Television, adding Bakala should put new money into the loss-making mine.

A spokesman for Bakala quoted the investor as saying it made no sense to put money into a mine without a viable future. NWR has another three mines in operation.

The firm has been hit by a drop in global hard coal prices, as well as rising shipments of U.S. coal to Europe which make NWR's operations in its deep shafts unprofitable.

The company is in the process of exploring options to restructure its capital, which would almost certainly include a haircut for bondholders and the dilution of shareholders.

(Reporting by Jan Lopatka, editing by David Evans)