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Spain coal firms say cannot afford to pay wages

Source: Reuters - Fri 10th Sep 2010

Spanish coal firms which have not paid miners for two months have acute cash flow problems as they have not sold coal since the government stopped buying in February to build stockpiles, an industry leader said on Friday.

About 35 percent of Spain's roughly 7,400 miners say they have gone without pay, which has prompted a two-week-old strike, road blocks and underground sit-ins in two mines.

The Spanish coal industry receives government aid as it struggles to compete with cheaper and higher quality imports. The government and industry say domestic coal is needed to reduce Spain's heavy dependence on imported gas and coal.

"No business can withstand going for more than six months without turnover" Victorino Alonso, head of coal producers' group Carbunion told a business conference.

Alonso said some coal producers were too indebted to pay taxes and social security contributions to the government, as well as wages to miners.

"We're not paying anything. We have no liquidity" he said.

On Thursday, the Industry Ministry charged two mining companies, including one owned by Alonso, with breaking a pact in which they pledged to pay wages in return for government aid.


Alonso said the coal industry urgently needed a government decree passed in February to take effect, which would encourage utilities to burn domestic rather than imported coal but which has repeatedly failed to obtain European Union approval.

"The problem is to do with burning coal again, and to approve the decree" he said. "It is essential to build up stockpiles again until the decree is approved."

Unions have charged coal firms with withholding wages and taxes in order to put pressure on the government to pass the decree, but have also called for the government to resume buying domestic coal to build up stockpiles.

Spanish utilities burned much more coal than usual in August, according to data from national grid operator REE which traders say forced wholesale power prices up to 19-month highs.

"All of our plants have been using imports" Alonso said, referring to Spain's coal-fired power stations, which are all in mining regions.

Trade Ministry data for imports in August are not yet available. Imports in 2009 were 17 million tonnes, with South Africa the main supplier.

Spanish environmentalists have criticised government aid for coal, which they say would be better spent on renewable energy sources, in which Spain has recently become a major producer.

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