Loss-making UK Coal reveals restructuring plan

The Doncaster-based group said the deep overhaul has been agreed in principle with parties including its pension funds, the Pensions Regulator, Lloyds Banking Group, Barclays, customers, the Department for Energy and Climate Change and the Coal Authority. It now needs the backing of shareholders.

UK Coal owes its banks and power generator customers a combined £138.3m. Its pension schemes also have a deficit of £430m.

“The debt and the pension fund deficit combined rule out the possibility of shareholders receiving any return from their equity in the company until these issues are addressed,” it said.

The restructuring would see each of its three operational deep mines separated into individual legal entities, and the mines paying at least £30m of cash annually into the pension funds from 2014.

Pension trustees would also invest £30m into the group’s Harworth Estates property business, which has about 30,000 acres of under-developed former mining land.

Pension trustees will receive a direct stake of 75.1 per cent in the property business, with existing shareholders receiving 24.9 per cent.

In effect a debt-for-equity swap, UK Coal said this means “shareholders’ principal continuing economic interest in the group will be a minority stake in the long-term development potential of its property assets”.

UK Coal said the restructuring will effectively mean £90m of support going into the company up to the end of 2015.

Chairman Jonson Cox said: “UK Coal’s board believes that a restructuring creates a sustainable platform, allowing us to continue to produce coal to supply power stations and get full value from the property portfolio for the group.”

He added: “With the improving prospects of a successful restructuring we aim to exploit safely the economic potential of this company for all its stakeholders.”

UK Coal posted a loss before tax of £20.6m for the first six months, compared with a profit of £22.1m for the same period a year earlier.

First-half revenue fell 23 per cent to £198.3m.

Total production fell 19.5 per cent to 3.3 million tonnes, whereas average sales price rose three per cent to £2.43 per gigajoule.