Up to 2,000 jobs at risk after UK Coal Operations hit by £300m losses and ‘disastrous’ Daw Mill mine fire
Britain’s largest coal miner, UK Coal, is fighting for survival as it grapples with the consequences of the devastating fire that closed its biggest colliery.
The firm refused to deny reports that it is seeking voluntary liquidation, which would allow parts of the business to continue trading, in order to avoid enforced liquidation and a full shutdown. Following the blaze at the Daw Mill colliery in March the company lost £100m of equipment, £160m of coal and ran up £35m in costs, making further restructuring inevitable.
UK Coal said this week that it is holding talks “with a wide range of interested parties” over the future of its last two deep mines – Kellingsley in North Yorkshire and Thoresby in Nottinghamshire – as well as six open-cast mines in north and central England. The company produced 7.3m tonnes of coal in 2011, helping generate 5% of the UK’s electricity.
Kevin McCullough, chief executive of UK Coal Mine Holdings, said: “Our main focus has been on preserving 2,000 jobs and securing the future of UK coal mining. Our remaining mines have been performing well since the fire at Daw Mill and we continue to work closely with our employees, government, pension funds, the Pensions Regulator, suppliers and customers. We remain positive that we have an underlying profitable business.”
“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.” Company spokesmen did not respond to further questions.
The company announced the closure of Daw Mill in north Warwickshire with the loss of 650 jobs in March after the worst coal-mining fire in 30 years.
The fire was the latest blow to the industry following Hargreaves Services’s decision last year to mothball the Maltby mine near Rotherham with the loss of 500 jobs.
Voluntary liquidation would allow a subsidiary to run the firm’s surviving mines but could pass on the company’s £540m pension deficit to the UK Pension Protection Fund, which would force losses on some of the company’s 6,800 savers. If UK Coal fell into insolvency the workforce could see 10% of the value wiped off their pensions. The Pension Protection Fund pays 90% of a pension’s value to workers yet to reach retirement age, but usually pays out 100% to existing retirees and those with long-term health problems.
UK Coal has been grappling with its pension deficit for years and recently spun off its less-risky property business, Harworth Estates, to help solve the problem in a move that won the approval of the Pensions Regulator.
“At £540m this would be one of the very largest hits for the PPF, since it opened in 2006,” said John Ralfe, an independent pensions consultant. “This would wipe out half [PPF’s] surplus.” The PPF reported reserves of £1.06bn in 2012. “Last year’s convoluted restructuring, approved by the Pensions Regulator, only managed to paper over the cracks. The devastating pit fire has brought things to a head very quickly, but with UK Coal’s pension problems things were never going to end well.”
A spokeswoman at the Pension Protection Fund said it was monitoring ongoing developments and liaising with other parties including the pension scheme and the Pensions Regulator.
Chris Kitchen, secretary of the National Union of Mineworkers, said it was disappointed that the government had not done more to help UK Coal, following a promise from former energy minister John Hayes in March that “the government will do all it can … to protect the interests of [the Daw Mill] workers”.
The NUM wants the government to grant closure aid to Daw Mill, which would allow mine workers to keep an enhanced redundancy package worth £12,000 more than the statutory minimum. “The minister made a statement that they wanted to help. There is a route that is open to them. But it involves the government spending money.”
A spokesman at the Department for Energy and Climate Change said the government was helping Daw Mill workers find jobs through “full mobilisation of a job centre rapid response process”.