THE UK government said yesterday that it will give a £10m loan to UK Coal to help finance a managed closure of two of its mines over the next 18 months.
“The taxpayer would face significant losses and liabilities in the event of an immediate insolvency of UK Coal, principally relating to redundancy and unpaid tax liabilities,” said energy minister Michael Fallon in a statement.
It emerged last week that the country’s largest coal producer was consulting on plans to shut Kellingley in Yorkshire, and Thoresby in Nottinghamshire, because they were no longer “financially viable”.
If the two coal mines close, it would leave just Hatfield colliery in South Yorkshire as the UK’s last remaining deep pit mine. The closures will affect an estimated 1,300 workers.
The government’s backing will be part of a private sector-led consortium’s investment, so that UK Coal can carry out a managed closure of its deep mines by Autumn 2015.
“Negotiations are well underway between a variety of stakeholders including Hargreaves Services, Harworth Estates, the Department of Energy and Climate Change, the Department for Business, Innovation and Skills, the Pension Protection Fund and the combined mining trade unions,” said UK Coal in a statement.
Hargreaves Services and Harworth Estates are expected to invest £5m each, in conjunction with the government’s £10m.
UK Coal has struggled with rising costs, hefty pension liabilities and strong competition from cheaper imports. A low international coal price has hit the company hard, triggered by an influx of US coal on the market because of the shale gas revolution there. Most coal is traded in dollars, so the continuing strong pound has also impacted UK Coal’s balance sheet.
“Regrettably, the historically low international coal price and a strong pound mean our costs are too high to sustain an ongoing business and this is the only option available,” said chief executive Kevin McCullough.