Winter requiem for the death of France's King Coal

Winter requiem for the death of France's King Coal

17th December 2007

by Paul Betts, Financial Times

Later this week, the French government will publish a decree putting the final nail in the coffin of the country’s 300-year-old coal industry. In its heyday, the industry employed 300,000 people and became the engine of the country’s industrial revolution.

It has been the bedrock of the French political left and it is not altogether coincidental that its steady decline over the past three decades has also tracked the decline and virtual disappearance of the Communist Party as a political force in France.

The irony is that the government decree that will on January 1 dissolve the Charbonnages de France – the state company that absorbed all the country’s coalmining assets when the industry was nationalised in 1946 – comes at a time of booming world demand for coal. Indeed, since France started turning its back on coal in the 1960s, world demand has more than doubled.

It is expected to grow by more than 50 per cent in the next 30 years, largely to fuel the world’s voracious appetite for electricity.

France dug its last block of domestic coal in 2004 but continues to import about 20m tonnes a year.

For King Coal the writing was on the wall when General de Gaulle decided to launch the country’s nuclear energy programme. Today this accounts for as much as 80 per cent of French electricity needs. In the 1960s coal also faced increasing competition from another alternative domestic source – the large Lacq gas field in Aquitaine, where production has now come to an end.

At its height in 1958 Charbonnages de France produced nearly 60m tonnes of coal a year. But already it was coming under pressure not just because of the challenges from nuclear power and gas but also from cheaper coal from Australia and South Africa. The victory of the Socialist François Mitterrand in the 1981 presidential election and the constitution of the so-called union of the left between Socialists and Communists gave the French coal industry the illusion of a revival. Soon, however, it became obvious that the industry could only survive thanks to government subsidies. These have averaged €1bn ($1.44bn) a year for the past three decades.

After closing down its last pits Charbonnages de France has been largely engaged in helping depressed former coal regions reindustrialise and finding new jobs for its workforce. A new structure will be set up to sell off its remaining assets – the biggest being a 16 per cent stake in the Snet electricity generation company now controlled by Endesa.

The Spanish company’s new controlling shareholders – Italy’s Enel and Spain’s Acciona – are to transfer their Snet stake to Eon as part of the compromise negotiated with the German utility to end the two-year battle for Endesa. Given the scramble for French electricity assets the 16 per cent stake should fetch a good price. But it is scant consolation for bringing down the curtain on a centuries-old industry.