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| Parts of UK Coal may be nationalised after colliery fire closes pit | Parts of UK Coal may be nationalised after colliery fire closes pit |
| (about 1 hour later) | |
| Troubled parts of UK Coal, Britain's largest coal mining business, could return to public ownership under plans being discussed by ministers that would protect some or all of the company's ailing pension scheme. | Troubled parts of UK Coal, Britain's largest coal mining business, could return to public ownership under plans being discussed by ministers that would protect some or all of the company's ailing pension scheme. |
| Ministers are in daily contact with the company and union representatives, acutely aware that a failure of the business would wipe almost £360m off the value of retirement savings for 6,800 pension scheme members and saddle the government-sponsored Pension Protection Fund (PPF) with a £540m bill. | Ministers are in daily contact with the company and union representatives, acutely aware that a failure of the business would wipe almost £360m off the value of retirement savings for 6,800 pension scheme members and saddle the government-sponsored Pension Protection Fund (PPF) with a £540m bill. |
| The future of UK Coal, which runs three of Britain's last remaining deep pits, was plunged into uncertainty in February when a fire broke out causing the closure of its largest deep-pit colliery, Daw Mill in Warwickshire. The underground blaze, which is still burning, has resulted in 650 miners being put out of work and has cost UK Coal £160m in lost coal and a £100m in equipment losses. | The future of UK Coal, which runs three of Britain's last remaining deep pits, was plunged into uncertainty in February when a fire broke out causing the closure of its largest deep-pit colliery, Daw Mill in Warwickshire. The underground blaze, which is still burning, has resulted in 650 miners being put out of work and has cost UK Coal £160m in lost coal and a £100m in equipment losses. |
| Before the fire, Daw Mill supplied 28% of the group's output and about 5% of national energy needs. | Before the fire, Daw Mill supplied 28% of the group's output and about 5% of national energy needs. |
| Discussions in Whitehall are being led by the energy minister, Michael Fallon, who is understood to be working closely with colleagues from the Shareholder Executive, part of the Department of Business, Innovation and Skills, which is already responsible for taxpayer holdings in businesses such as Royal Mail, Channel 4, Eurostar and the Royal Mint. | Discussions in Whitehall are being led by the energy minister, Michael Fallon, who is understood to be working closely with colleagues from the Shareholder Executive, part of the Department of Business, Innovation and Skills, which is already responsible for taxpayer holdings in businesses such as Royal Mail, Channel 4, Eurostar and the Royal Mint. |
| Fallon is exploring whether the Coal Authority, the publicly owned successor body to the National Coal Board, might take over assets or operations linked to Daw Mill in order to allow the rest of UK Coal to escape financial crisis. UK Coal, which employs 6,000 workers, also has deep mines at Kellingley in North Yorkshire and Thoresby in Nottinghamshire as well as six surface mines. | Fallon is exploring whether the Coal Authority, the publicly owned successor body to the National Coal Board, might take over assets or operations linked to Daw Mill in order to allow the rest of UK Coal to escape financial crisis. UK Coal, which employs 6,000 workers, also has deep mines at Kellingley in North Yorkshire and Thoresby in Nottinghamshire as well as six surface mines. |
| Fallon told the Sunday Times: "We are looking at whether the ownership of Daw Mill can be transferred back to the Coal Authority." | Fallon told the Sunday Times: "We are looking at whether the ownership of Daw Mill can be transferred back to the Coal Authority." |
| UK Coal is largely debt-free following a complex restructuring of its parent group Coalfield Resources last year. However, as part of the deal, large pension liabilities from across the group were ringfenced solely within the UK Coal unit, which is committed to a demanding schedule of pension deficit repayments. | UK Coal is largely debt-free following a complex restructuring of its parent group Coalfield Resources last year. However, as part of the deal, large pension liabilities from across the group were ringfenced solely within the UK Coal unit, which is committed to a demanding schedule of pension deficit repayments. |
| It was reported over the weekend that a deal to spin off Daw Mill might involve a transfer of some of UK Coal's pension obligations, though such a move may prove difficult for pensions regulators to sanction. | It was reported over the weekend that a deal to spin off Daw Mill might involve a transfer of some of UK Coal's pension obligations, though such a move may prove difficult for pensions regulators to sanction. |
| John Ralfe, an independent pensions consultant, said: "Although the devastating fire has brought things to a head very quickly, [last year's] convoluted restructuring – approved by the Pensions Regulator – only managed to paper over the cracks. | John Ralfe, an independent pensions consultant, said: "Although the devastating fire has brought things to a head very quickly, [last year's] convoluted restructuring – approved by the Pensions Regulator – only managed to paper over the cracks. |
| " The regulator has estimated that the PPF would lose £540m if UK Coal's pension scheme was wound up so the government will be bending over backwards to avoid this." | " The regulator has estimated that the PPF would lose £540m if UK Coal's pension scheme was wound up so the government will be bending over backwards to avoid this." |
| Earlier this month, UK Coal was forced to deny claims that it was seeking voluntary liquidation after HM Revenue & Customs turned down a request for a delayed tax payment. Fallon said: "The cross-government response, coordinated by my officials, has ensured that we have been able to respond to the company's needs, and help facilitate its financial position. | Earlier this month, UK Coal was forced to deny claims that it was seeking voluntary liquidation after HM Revenue & Customs turned down a request for a delayed tax payment. Fallon said: "The cross-government response, coordinated by my officials, has ensured that we have been able to respond to the company's needs, and help facilitate its financial position. |
| "Our priority remains to assist the company's efforts to ensure that, as far as possible, the viable parts of the business are maintained and that those who are regrettably likely to be made redundant following the fire at Daw Mill receive appropriate support." | "Our priority remains to assist the company's efforts to ensure that, as far as possible, the viable parts of the business are maintained and that those who are regrettably likely to be made redundant following the fire at Daw Mill receive appropriate support." |
| Miner issues | |
| UK Coal emerged from the privatisation of the coal industry in 1994 when the Tory businessman Richard Budge bought the majority of Britain's still functioning pits from John Major's Conservative government for £815m. | |
| In a deal with RJB Mining, British Coal sold off 16 deep and 18 surface mines, saving around 10,000 jobs, with the company rebranded as UK Coal. It was also given an exemption under EU competition laws over its monopoly status. | |
| However, within one month of the purchase, bosses said it planned to close the Bilsthorpe pit, in Nottinghamshire, and so started a steady decline in the coal industry's fortunes. At present, the business runs two deep mines, the Kellingley and Thoresby collieries – in North Yorkshire and Nottinghamshire respectively, producing 2m and 1.2m tonnes of coal last year – six surface mines in Butterwell and Potland Burn, Northumberland; Huntington Lane, Shropshire; Park Wall North, County Durham; Lodge House, Derbyshire and Minorca, Leicestershire. They produced a combined 2m tonnes last year. | |
| The coal produced generates about 6% of the UK's total power supply, and 16% of all coal used in the UK, with the majority now being imported. | |
| Output is 7.5m tonnes a year with a staff of 2,000. By comparison, a century earlier the UK was producing 300m tonnes annually using 1.25m workers. | |
| Britain still fires 40% of its power plants using coal, although the decline set in during the 1960s when the government started turning to cheaper alternatives such as North Sea oil and gas, and nuclear. | |
| Since privatisation, shares in the listed company hit an all-time high in 1996 of 618p and 558p as recently as the summer of 2008, but are now worth 3.1p. | |
| In recent years UK Coal has been on its knees as it has struggled under the weight of an ever-growing pension deficit, while coal from its mines became depleted and losses started mounting. | |
| Last year the company, which also has a significant property portfolio of industrial sites and homes used by workers, underwent an eight-month restructuring to save the business from collapse. It was renamed Coalfield Resources and the profitable property business and the loss-making mining business were separated. | |
| A fire in February at the Daw Mill deep pit that burnt through £160m-worth of coal and destroyed £100m-worth of equipment has exacerbated the decline. However, bosses still believe the company has a future and that the remaining mines can be successful. | |
| Two weeks ago chief Kevin McCullough, chief executive of UK Coal said: "There will undoubtedly be some difficult decisions as we have had to look at all possible options, but there is a good business here with 2,000 families depending on our workforce and I am confident we will be able to announce more news in the coming days." Simon Neville |