Svalbard coal firm needs new bailout

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Store Norske, the coal company that once dominated economic activity on Norway’s Arctic island group of Svalbard, claims that it’s once again teetering on the verge of bankruptcy. It’s seeking another major bailout from its owner, the Norwegian state.

Coal mining operations on Svalbard are shut down except here at the Gruve 7 mine outside Longyearbyen. PHOTO:

Newspaper Dagens Næringsliv (DN) reported that Store Norske Spitsbergen Grubekompani, a wholly owned coal mining subsidiary of Store Norske Kullkompani, has no capital and needs another NOK 600 million (USD 72 million). The looming request for a new bailout comes in addition to the NOK 500 million received in 2015, another NOK 194 million last year and NOK 144 this year. Store Norske’s costs have been cut in half, since it had to shut down coal operations at least temporarily at its Svea and Lunckefjell mines on Svalbard, but it also costs to keep the mines in “pause” mode.

Coal mining remains highly controversial in the Arctic, for climate and environmental reasons, but the local population still uses coal for its own heating and power needs. The state government also remains keen to maintain that population and business activity on Svalbard for strategic and defense reasons. Store Norske traditionally was Svalbard’s largest employer, but now that’s increasingly being taken over by tourism.

Right now only limited coal mining is underway at the mine known as Gruve 7, outside Longyearbyen. “If we’re to start up mining again (at Svea and Lunckefjell as well, beyond Gruve 7), it looks like we’ll need capital of around NOK 600 million,” Wenche Ravlo, CEO of Store Norske Spitsbergen Grubekompani (SNSG), told DN. The company will also need money if it does not reopen those mines, as it tries to restructure itself and launch new actitivites.

“The consequence will be that there’s no basis for further operations, and the company can go bankrupt,” intoned Store Norske’s new annual report. Ravlo stressed that a bankruptcy would only apply to the company (SNSG) in charge of Svea and Lunckefjell. Operations at Gruve 7 are still supposed to continue, to keep some life going in Svalbard’s depressed coal industry and serve its own needs, but they would then likely be spun off into its own company, Ravlo said.

There was no immediate comment from the Norwegian government’s ministry in charge of business and trade, which as owner of Store Norske remains responsible for the company’s financing. The state has, all told, backed Store Norske with a total of NOK 838 million just over the past three years. It may feel compelled to continue forking money over to Store Norske, to avoid more job losses in important Arctic territory. A new assessment of Svalbard’s future is expected in Parliament this fall. Berglund

  • richard albert

    I don’t think job loss is what is going to drive the decision(s). Although readership is well informed, a quick review may be appropriate. Svalbard is unique in that it is not a ‘territory’ or ‘protectorate’ or other conventional satrap of some nation. It is governed under a 1920 treaty giving Norway ‘sovereignty’ but allowing all nations signing said treaty, to do business there and to exploit its natural resources. To the best of my information this treaty is still “open”; North Korea (sic) signed on in 2016.
    In order for non-Norsk diplomats, functionaries, potentates, and such lot to visit, they are to seek permission of the Norwegian Governor. Much like a Governor-General in Britspeak.
    Just after we were there, about a year ago, US Secretary of State John Kerry swooped in to “assess climate change” – anyway, that was the wheeze. Fooled nobody. About a year earlier, Russian Deputy Prime Minister Dmitry Rogozin, still redolent of some shabby dealings in Ukraine, stopped by, without a by-your-leave from the Guv. The wheels of diplomacy, like those of justice, grind slow; but exceedingly fine. A ‘kazatsky’, followed by some Kerry Dancing.
    So Gruve 7, which may produce 140,000 tonnes of coal per year, (Turkey is the smallest significant producer with around seventy millions of tonnes) will groove on, not because of coal, not for jobs, but because with Putin on the rampage, Norway will just pay up.