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Brussels, 22 June 2005

European Commission approves “coal package” authorising restructuring plans for the Polish, German and Hungarian coal industry until 2010

The European Commission decided today to authorise the restructuring plans for the Polish, German and Hungarian coal industry, considering that the plans presented by the three governments are in line with European rules on state aid for the coal industry and are compatible with the proper functioning of the common market. Andris Piebalgs Commissioner for energy declared: “The domestic coal production in the European Union contributes to our security of energy supply. Today’s approval of three restructuring plans covering the period until 2010 allows mining companies and Member States governments to put their medium term energy strategy on stable ground.”

Poland’s coal industry on the way to economic viability after important debt reduction

Poland has launched an ambitious restructuring program for its coal mines, which foresees the cancellation of an important part of the inherited liabilities, the close-down of unprofitable mines, a reduction of the work force through early retirement and retraining, and the privatisation of the still state-owned mines.

For the years 2004 to 2006, Poland intends to spend 6.2 billion Polish Zloty (€1.4 billion) in restructing its coal industry. Out of this, the Commission considers that 18 million Polish Zloty do not constitute state aid, as they are paid out to a public entity in charge of administrating the close-down of mines, which does not perform an economic activity. The remainder of the aid is compatible with the common market, as it serves for financing inherited liabilities[1].

For the years 2007 to 2010, the Polish state plans to reduce its support to the coal industry to 160 million Polish Zloty per year, supporting mainly so-called initial investments[2].

Poland counts currently 40 coal mines, with an annual production of around 100 million tons of coal per year.

German coal industry continues restructuring process

The Commission having already approved the state aid to the German coal industry for the years 2004 and 2005, Germany has notified a restructuring plan covering the years 2006 to 2010. Overall, it intends to grant €12 billion to its currently 10 coal mines, out of which four are scheduled for closure by 2010. The plan foresees €22 million aid for the reduction of activity[3], €8.6 billion aid for financing current coal production, and €3.5 billion aid for financing inherited liabilities.

Germany produced 27 million tons of coal in 2004; until 2010, the production will be reduced to 18.5 million tons.

Hungary: limited use of coal for electricity production

Hungary has closed down most of its coal mines since 1989; today, there remain one big open-cast mine serving the Matra power plant, one important underground mine serving the Vertes power plant, and six minor open cast mines serving local markets. Open cast production in Hungary is economically viable; the underground mine serving the Vertes power plant, on the contrary, is in need of state aid for current production[4]. Hungary intends to grant a total aid for the years 2004 to 2010 of HUF 64.3 billion (€255 million). The yearly aid amounts are digressive, falling from HUF 12 billion (€47 million) in 2004 to HUF 6.9 billion (€27.4 billion) in 2010. The Commission considers that the proposed aid is compatible with the common market.

Coal production and State aid in the European Union

Currently, eight of the 25 Member states of the European Union produce coal: besides Poland, Germany and Hungary, the list includes Great Britain, Spain, Czech Republic, Slovakia and Greece (lignite). France closed its last mine in 2004. Only countries intending to grant aid under Article 5 of the Coal Regulation need to notify restructuring plans to the European Commission. These restructuring plans contain a detailed planning for the period 2003 to 2010, and serve the Commission as a basis for approving the annual aid payments of the Member states.

Besides Poland, Germany and Hungary, Spain is the only other country granting aid under Article 5 of the Coal Regulation. The Commission is currently investigating Spain’s restructuring plan for the years 2003 to 2005.

The Czech Republic and Slovakia only grant aid to their coal industry for financing inherited liabilities under Article 7; Great Britain is giving initial investment aid, which has been approved by the Commission in 2003.

The Coal Regulation expires on 31 December 2010; the Commission will present a mid-term review of the Regulation and its application the latest on 31 December 2006.

[1] Article 7 of Council Regulation (EC) No 1407/2002 of 23 July 2002 on State aid to the coal industry, OJ L.205, 2.8.2002

[2] Article 5 § 2

[3] Article 4

[4] Art. 5 § 3

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