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Czech PM backs aid for coal mine

World Coal,

Amid a row with his coalition partner, the Czech Prime Minister, Bohuslav Sobotka, has said that the government must look to prevent a social crisis developing in the northeast of the country, where a planned coal mine closure threatens to put thousands out of work.

The centre-left government has considered plans to provide 1.1 billion crowns (US$ 54.96 million) in aid to keep a coal mine owned by struggling miner OKD – a unit of New World Resources (NWR) – in operation until 2016, instead of letting the mine close at the end of 2014, as planned by the owner.

NWR has said it would close the Paskov coal mine near the city of Ostrava, cutting more than 2000 jobs at the end of this year, unless there is an agreement with the government on continuing operations. The government fears a further 6000 people would lose work due to knock-on effects.

Sobotka’s willingness to offer government aid highlights a deepening conflict within the Czech government between the prime minister and the junior, centrist coalition partner, ANO. Finance minister Andrej Babis, deputy prime minister and the second richest man in the Czech Republic, has rejected calls for government support to the ailing coal mine, and called on ANO member to do the same.

Babis has criticised the relationship between Sobotka and Zdenek Bakala, who bought the Paskov coal mine from the government along with other investors in 2004. “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.

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 Zdenek Bakala. The group floated the firm under the NWR name in 2008.

The deal has been criticised by many commentators who suggest the government sold its stake in the mine too cheaply.  Sobotka has repeatedly denied any wrongdoing during the deal.

In a news conference, Sobotka hit back at his rival’s stance, telling reporters: “I must reject the approach of our coalition partner that we should not get involved in the situation and leave it to market forces.”

Meanwhile, NWR 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.

The firm has been hit by a drop in global hard coal prices, as well as rising shipments of US coal to Europe, which make NWR's operations in its deep shafts unprofitable. The company has another three mines in operations as well as the Paskov mine. 

Edited from various sources by Sam Dodson

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