Endgame plays out over fate of OKD mining company
The endgame now appears to be playing out for the Czech Republic’s biggest hard coal mining company, OKD. Key shareholders have warned that if there is no deal fast with the government then insolvency procedures might be started as soon as the end of the week. Meanwhile, the government appears to be taking a tough line against a deal with those calling the shots at the mining company.
OKD, the biggest and last major hard coal mining company in the Czech Republic, is clearly approaching a decisive crossroads. The company still employs just under 10,000 workers and is the biggest employer in the Moravia-Silesia region. And there are thousands of other jobs linked to the mining company.
But hopes for a soft landing scenario between current owners and the government that would keep the mines going for a few more years appear to be fading fast.
Relations between government and owner of the mining company, New World Resources, or rather the group of core shareholders there who have the most at stake under a previous salvage operation, the so-called Ad Hoc Group, have seriously soured in the last days.
Minister of Industry and Trade Jan Mládek was blunt at the start of the week saying that the government would be stupid to accept an agreement to buy up the mining company for just under 4.0 billion crowns. He added that it’s current face value is far lower than that.
Within hours New World Resources warned that it could be forced to press for insolvency procedures by the end of Friday and the closure of the mines unless a new cash injection is ensured or a rescue deal with the government is sealed.
The OKD situation was due to be discussed by the government on Wednesday with minister Mládek later scheduled to meet president Miloš Zeman to talk about it. The president has been talking up the possibility of nationalization.
Roman Pařík is spokesman for the Ad Hoc Group and he echoed the mining company’s warning that an unmanaged insolvency could be a social and economic time bomb for the region.
“It means that mining could end easily and, also, if it were done in the wrong way methane would concentrate in the mines and water and in a few weeks it will be impossible to send anyone into the mines to maintain the mining machinery and to mine the coal. It is totally different from when you are closing a factory for cars, or pens, or something like that.”
And he warns that the nationalization that is being discussed could send exactly the wrong signals to international investors.
“It’s really bad news for investors and foreign investors who are in the Czech Republic or want to come here. It will also affect the rating of the Czech Republic and will result in pressure on the Czech crown. We see that if it is in this way then we are coming back to the Communist era of the mid-1950s and, unfortunately, on the table there are two possible solutions which don’t need nationalization or insolvency, but we didn’t get any answer from the Czech government.”