President of PGG: We have a problem with diagnosing the demand for coal

Luc Williams

President Pietraszek was asked during the ECE about the company's situation, among others. in the context of the problem of dumps encountered by the current management of PGG. The head of the largest coal company in the European Union confirmed that there is a problem with dumps, although it is not only a problem of PGG – it also affects a large part of the energy sector. “I would like to reassure you right away that we do not plan to send miners to rest periods – I am referring here to the publications that have appeared recently,” he said.

“We try to adapt our production to the market situation”

“We are trying, also partly based on what I read in the media, to adapt our production to the market situation. We have already reduced the parameters of the Technical and Economic Plan, we are analyzing the situation in terms of further adjustments – and thus we are reducing production so as to flexibly adjust what we extract to what we can sell,” he said.

He pointed out that the company is trying to solve the problem of offices that are currently 85 percent full. dumps, including working on the quality of the coal sold by mixing coal components from various mines and thus providing the same recipients with goods with better parameters.

“We also want to be three steps ahead and are preparing for some crisis situation by providing places where, if we do not fit in our dumps, we will be able to redirect coal to external dumps,” added the president of PGG.

Referring to the problem of low and constantly falling efficiency at PGG, Pietraszek said that the crews do not need to be convinced to increase efficiency. However, he noted that the thermal coal mining industry operates in cooperation or coexistence with the energy industry. “And there must be some kind of positive calibration between these sectors,” he said.

“We are now trying to find a point on which we can base ourselves, on which we will stand in order to start taking economics into account even more actively in everything that is happening in mining. However, we have a small problem with diagnosing the demand for coal for the energy sector,” Pietraszek emphasized.

“Costs, which have increased largely independently of us, have an impact on our situation”

Pietraszek referred to the PSE study, which – as he noted – determined that in 2034 there would be a need for 10 million tons of steam coal for the professional power industry. At the same time, the verse above states that if there are delays related to the development of offshore or nuclear energy, at least 9 million tons more coal will be needed in 10 years.

“This is a very important difference related to the planning of our work for the development of mines and preparatory work. I also believe that assuming that import will somehow simply fill the gap does not solve the problem. So a base in the form of a common formula to determine the calibration of this level (demand – PAP) is something that is extremely crucial for various processes, including the efficiency parameter,” noted the president of PGG.

When asked about the prospects for survival of the Polish Mining Group, President Pietraszek noted that he had been involved in mining from a different perspective than today, since the early 2000s, and he remembered how and why the so-called small coal companies: Rybnicka, Rudzka, Nadwiślańska, and later Kompania Węglowa. “It always repeats itself somewhere,” he admitted.

The head of PGG confirmed that the situation of mining as a sector, not only of the Polish Mining Group, is very difficult.

“The costs, which have increased largely independently of us, have an impact on our situation. Only between 2021 and 2023, energy costs increased by 140%, preparatory work costs increased by over 200%, purchases of various types of infrastructure including equipment leases increased by over 100%; As a result, the eligible cost, which is a key element of our functioning in a short period of time, increased by over 130%. – he calculated.

“I count on great openness on the part of our partners, suppliers and service providers”

“If we combine what is happening on the market, the volume of coal we sell and the price, which is higher compared to what we had in 2018-2019, but lower compared to 2022, we have a large discrepancy between the costs of our activities that increased and revenues that decreased,” he admitted.

He assured that the company does not want to act nervously: among other things, in contact with PSE and customers regarding demand – not even in the perspective of 2034 or 2040 – but to calibrate as accurately as possible for the next 3-5 years, i.e. to plan, also cost-wise, preparatory works and future extraction.

Pietraszek noted that together with the vice-president for finance, Bartosz Kępa, he turns every zloty in this respect to spend it as effectively as possible in relation to the core business. “Regardless of this, I am counting on great openness on the part of our partners, suppliers and service providers: we are talking to them, we will talk to them, because I think there is room for us to buy some things a little cheaper,” he said.

He added that the company is working to perform most of the work with its own resources, thus increasing efficiency, and shifting investment funds to places enabling the best possible efficiency.

In addition, PGG is trying to develop projects related to decarbonization in order to generate revenues, reduce costs and use specialists: methane drainage projects with the economic use of methane, photovoltaics in connection with energy storage or the use of mine water for heat pumps.

“Problem: How, in what schedule, at what pace will we reduce production capacity?”

During Thursday's panel, Pietraszek also referred to the social agreement on hard coal mining concluded in 2021, considering it to be of great value in itself. “Because in fact, probably for the first time, all participants of this market – both the social side, entrepreneurs, and us – are talking about phasing out hard coal mining,” he noted.

“This is a comfort that my predecessors did not have because we pretended and actively distorted reality. Therefore, this social contract imposes on entrepreneurs covered by the support system the obligation of degressivity – reducing production capacity. The problem is how, in what schedule, at what pace, we will reduce these capacities,” he said.

“If we want to do it rationally, the energy market forces behavior. The decline we are seeing compared to last year, the planned mining at PGG in May last year, and what it looks like in the context of the demand for our product now and in the coming year – it is a very big decline,” the head of PGG illustrated.

“It is crucial to measure this and determine to what extent we are guided not only by economic considerations, and to what extent we also remember about the role that does not result directly from our statute, because it is not written in the statute that we are responsible for the energy security of the state, but also we are conscious participants in this market and we maintain production, because – just like with these 200 units (200 megawatt class coal-fired power units – PAP) – there will be a need to use it, and it costs money,” he recalled.

“Defining it in a rational, calm way is key. Once we have this defined, we will be able to plan and carry out the various processes that the industry faces,” declared Leszek Pietraszek.


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