Billions of zlotys for PGG. The government is taking on a gigantic debt.

• The Polish government is once again allocating billions of zlotys to support the deficit-hit hard coal mining sector.
• The Ministry of Finance issued bonds, the funds from which are to be used to fund the share capital of Polska Grupa Górnicza.
• PGG remains the largest mining company in Europe.

The Polish government is once again spending billions of zlotys to support the loss-making, unsustainable hard coal mining industry. In the latest development, the Finance Minister issued bonds to increase the capital ofPolska Grupa Górnicza (Polish Mining Group) . The bonds are worth 2.78 billion zlotys.

This is a unique form of state debt. The minister doesn't have to find buyers for his bonds at auction ; he simply creates new debt and transfers it free of charge to the mining company. The company can then sell it on the secondary market, raising nearly 2.8 billion złoty. The bonds issued in this way will then have to be redeemed by the minister, who will also have to pay interest on them. However, the minister doesn't have the cash from the bond sale; PGG does. Therefore, the entire cost of this operation falls on the state, and the entire benefit falls on the mining company.

Polska Grupa Górnicza is the largest mining company in Europe and the largest hard coal producer in the European Union.

• For years, the level of employee costs in the company has been so high that it makes it practically impossible to achieve sustainable profitability.
• This only happens temporarily when coal prices on world markets rise significantly for some reason.
• This was the case, for example, in 2022, when coal prices rose due to Russia's attack on Ukraine, and PGG earned over PLN 2 billion.
• However, in 2024 the company was expected to return to losses , which it had forecasted at around PLN 3.6 billion.

Therefore, during periods of deficit, the government subsidizes mines. Coal in Poland is still used on a relatively large scale in power plants. It's possible that importing it from abroad would be cheaper, but this would likely create capacity problems in Polish ports, and it would also displease mining unions, creating a political problem for the government. In the coming years, due to the development of wind and solar energy, as well as plans to build a nuclear power plant, coal's role in the Polish energy sector is expected to decline to virtually zero. For now, however, the sector still consumes billions of zlotys annually.