Coal news and updates

The largest coal miner in Britain was rescued last year by the Pension Protection Fund, which preserves the pensions of employees whose companies go bust. But it is on the brink of insolvency again.

 

Hargreaves Services, the only other domestic large scale miner, is also in talks to invest in the business, according to people familiar with the situation. Its proposal to buy UK Coal for £20m was rejected by administrators last year in favour of the PPF rescue.

Hargreaves could not be reached for comment.

In case that bid fails, UK Coal is asking for £10m of government funding to close two of the past three deep pits in Britain and sell off its surface mines. The business, which is burning cash reserves because of the low price of coal internationally, could otherwise become insolvent.

UK Coal, which owns Thoresby in Nottinghamshire and Kellingley in Yorkshire, said that the strong pound and cheap imports had affected its sales. Coal contracts are priced in dollars and shale gas in the US has dislodged coal mined there to the UK, depressing prices.

Kellingley has decades worth of reserves while Thoresby is set to close in 2018.

Without investment, both would shut by late 2015. The business is owned by an employee trust, and the pension funds, after a 2012 restructuring.

UK Coal said: “Talks are taking place between the government and a range of stakeholders. Things are looking positive and we hope to have a resolution within weeks rather than months.”

Chris Kitchen, general secretary of the National Union of Mineworkers, said the state should step in to guarantee the company’s future as the country needed indigenous energy supplies, especially when sanctions were being considered against Russia, source of much coal and gas for the UK.

The PPF was obliged to take on the liabilities of the company pension scheme, with almost 7,000 members, costing around £500m.

At the time of the insolvency in July it accepted a £2.2m payment, a £60m loan note and a promise of future dividends, rather than the £23m it would have received as a creditor.

In a letter to Steve Webb, the pensions minister, in May the PPF said it hoped to recoup £200m. John Ralfe, an independent pensions consultant, said: “UK Coal is a £400m hit for the PPF, its biggest ever loss. Last year’s complex and costly restructuring deal was always just papering over the cracks.”

The PPF said: “Our approach to these discussions, which are proceeding positively, is guided by the best interests of both our levy payers and our members.” It pointed out that its liabilities would still be 107 per cent covered if UK Coal failed, with no need to raise levies.

The government said it was a “commercial” matter but “we are in close contact with the company to ensure that government is kept aware of the challenges they face.”

 

 

Source: http://www.ft.com/