Objection of trade unions to further restructuring of Pątnów-Adamów-Konin Power Plant Group 

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The Inter-Company Independent Self-Governing Trade Union of Energy Workers of the Pątnów-Adamów-Konin Power Plant Group has lodged their objection to further restructuring of the company as proposed by the Board. The unionists have appealed to the government who controls 50% of the company shares to 'take a good look at the detrimental malpractice' made by the Elektrim Group who owns nearly 42% of Pątnów-Adamów-Konin Power Plant

Pątnów-Adamów-Konin Power Plant Group (Zespół Elektrowni Pątnów-Adamów-Konin SA, ZE PAK SA) is second largest brown coal energy generation company in Poland, the first is Bełchatów-Opole-Turów Górnictwo i Energetyka, BOT GiE SA holding (PL0411106S). Total power output of the Power Plant Group constitutes 8% of domestic power output and 12% of Polish energy sector’s generated power. Since the beginning of 2000, apart from the three leading power plants in Pątnów, Adamów, and Konin, the Power Plant Group has assembled five other subsidiaries:

• Pątnów II power plant (enterprise in development),

• repair company PAK Serwis sp. z o.o.,

• services company EL-PAK sp. z o.o.,

• real estate management company AS PAK sp. z o.o.,

• transport company TRANS PAK sp. z o.o.

Since autumn 2004, ZE PAK S.A. - one of the five most powerful shareholders, together with the State Treasury - has been controlling 10% of Energy Exchange (Giełda Energii SA) shares.

The process of restructuring began in 1994, when the state enterprise ZE PAK was transformed into a single-shareholder company of the State Treasury, whereas the process of privatization commenced in 1999, when the Elektrim Group became the strategic investor of the company. Due to the fact that the private TV station Polsat owned Elektrim shares, Zygmunt Solorz-Żak became a powerful ZE PAK shareholder. On the grounds of the privatization agreement, the State Treasury sold 20% of its shares to Elektrim Group. The investor undertook to increase the company capital and make a guaranteed investment in the form of Pątnów II power plant of circa EUR 430 million -worth.

The shareholders together with the Board of ZE PAK SA decided to commence the development of Pątnów II power plant using own funds of ZE PAK SA and Elektrim Group and an incurred loan. Unfortunately, in May 2002, bank creditors dissolved the contract, pointing to difficult financial situation of the Elektrim Group. However, the investment managed to be continued for one more year with the utilization of own funds. Simultaneously, Elektrim SA as a party managing the investment made ZE PAK SA accept Alstom SA (the general contractor) guarantee for EUR 35 million and take out a loan for EUR 32 million Embud Sp. z o.o. - a subsidiary of the Elektrim Group. The situation became dangerous when Alstom SA took advantage of the part of the guarantee and obliged ZE PAK SA to repay circa EUR 16 million. In June 2004, ZE PAK SA began to repay the loan incurred with Embud of EUR 32 million. Therefore, ZE PAK ceased settling its environmental liabilities, payables for coal as well as VAT and excise tax liabilities, which totally amounted to PLN 90 million.

In October 2004, the cropping up difficulties were conducive to setting up of the Inter-unionist Protest Committee of ZE PAK SA. A month later, the representatives of the Committee participated in the meeting of the Wielkopolskie Voivodeship Commission of Social Dialogue (Wojewódzka Komisja Dialogu Społecznego, WKDS) (PL0502105F), which was for the most part devoted to the situation in the Power Plant Group. The unionists argued then that the problems of ZE PAK SA originated in 'the ineptitude of the State Treasury and poor finances of the Elektrim Group'. The participants of the WKDS meeting elaborated a common standpoint on the progress in transformation processes of ZE PAK, in particular the development of Pątnów II power plant. The above document envisaged the renegotiations of the privatization agreement and, what is more, the restoration of 'the State Treasury’s full control'.

Further hindrances cropped up in August 2005, when Polish Investments (Inwestycje Polskie), the company owned by Z. Solorz-Żak, acquired from the Elektrim Group shares in Embud that in turn had stake in ZE PAK SA. In consequence, the owner of Polsat took over the control of PAK from Elektrim. This aggravated the conflict with trade unions and resulted in unclear statements of the government representatives. In September 2005, the deputy minister of the outgoing cabinet of Marek Belka claimed that he would like to reinforce the role of the State Treasury in ZE PAK SA. Also in September, Z. Solorz-Żak announced that he would not sell newly-acquired shares. The situation achieved partial stability in the second half of the October 2005 after granting the first tranche of credit for ZE PAK SA by: WestLB AG, London Branch, European Bank for Reconstruction and Developement, EBRD, Bank Pekao SA, BRE Bank SA, and Export Development Canada.

One of the key liabilities towards creditors is the continuation of the restructuring of the Power Plant Group, including the restructuring of employment. The representatives of the trade unions operating in ZE PAK SA claim that the organizational changes will be based on dismissals with concurrent creation of 'highly paid positions'. In order to prevent the above situation, they submitted a letter to the Board in which they announced that they would widely publicize the issue and enter into co-operation with the newly-elected members of the Parliament. Moreover, they expected the new government to revise the privatization agreement, with special consideration given to 'the detrimental malpractice made by the Elektrim Group with regard to ZE PAK SA and the region'.

In view of their difficult situation, ZE PAK SA unionists hope that the Law and Justice Party (Prawo i Sprawiedliwość, PiS), which won the parliamentary elections, will keep its promise. Moreover, due to the fact that the new President, Lech Kaczyński, emphasized the importance of 'Poland based on solidarity' in his electoral campaign one can speculate that he will probably give his support to the above cause (PL0510101N). The above actions on the one hand reflect care for the company, on the other though they are the first in the history attempt at the enforcement of promises the political parties made during their electoral campaigns (PL0510103F). In this sense, the complicated situation of ZE PAK SA constitutes part of the politicization of the social dialogue in Poland (PL0507105F).

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