Profile: Jonson Cox

IT took less than a week for Jonson Cox to realise he had hugely underestimated the challenge at UK Coal.

Six days into the job in November 2010, methane gas exploded underground at Kellingley coal mine in West Yorkshire. The call came as Cox was having dinner with the company’s brokers.

“I thought I had done a couple of weeks of due diligence when I took it on,” said Cox. “My due diligence turned out to be woefully light. But you can’t back out. What would it feel like?”

All 218 miners were pulled out safely but production halted as the fire, probably sparked by steel striking sandstone, was extinguished.

“They heard a noise like the popping of champagne corks. Then a reverse flow of air.”

There have been other, darker moments, such as the death of miner Gerry Gibson in 2011, and this weekend’s huge underground blaze at Daw Mill in Warwickshire. No one was injured in the fire, but it threatens the future of the mine.

“You have to believe that this is worth doing,” said Cox, speaking before the Daw Mill fire.

“This was worth doing to try and give these mines not a guaranteed future but a chance.”

Cox has made his name forcing change at businesses which have struggled to make the transition from state-owned to privatised.

And against the odds, UK Coal is emerging from one of the most complex turnarounds in Yorkshire corporate history.

“There were some moments of real nervousness. It was a huge act of faith,” said the 56-year-old chairman. “There were moments where we thought ‘Are we going to get there?’, but we did.”

The biggest remnant of Britain’s once-vast coal industry, the Doncaster-based company was on the ropes when he joined.

Cumulative losses over the prior three years had totalled £270m. It had £242m of debt. It was weighed down by a growing pension burden as current and former miners lived longer. Safety performance was “unacceptable”, production in its highly-unionised pits consistently missed targets and costs were soaring. “This is not for the faint-hearted,” said Cox in February 2011. “There are no guarantees on this.”

Falling coal prices in 2012 compounded the challenge. They have since helped force the closure of Maltby Colliery in South Yorkshire and the collapse of ATH Resources, a Doncaster-based surface miner.

But with so many people with so much to lose, saving UK Coal mattered hugely. Coal is little use as an asset when it’s buried a mile underground.

The deal hinged on finding a way to fund UK Coal’s huge pension liabilities. UK Coal initially tried to dump its £875m retirement burden – representing almost 10,000 members – into the taxpayer-backed Pension Protection Fund. But that was rejected, and instead it opted for a solvent untangling and refinancing of the business.

Cox cajoled, coaxed and forced this through. Starting on a Friday afternoon in December, an army of advisers occupied all 10 offices on the first floor of law firm Nabarro’s Sheffield office. They worked solidly until 6am on the Monday, in time for the opening of the stock market. The deal had 39 steps; Cox signed more than 2,000 documents.

“It’s a pretty small company but what you’ve got is an entire panoply which goes back to when it was 10 times bigger as the National Coal Board.”

Going forward is a slightly less complex mesh of separate companies under the Coalfield Resources plc name.

Effectively a debt-for-equity swap with its pension schemes, shareholders were left with less than a quarter of the group’s brownfield property business.

Earnings from its mines are ring-fenced and will be ploughed into the pension funds.

Bank debt is tied to the property business. A £90m package from the pension funds and its power generator customers, which include north Yorkshire’s Drax and Ferrybridge owner SSE, will support the mining business up to 2015.

Shareholders’ only hope of seeing returns is through its property arm, which is regenerating vast tracts of former mine land. Those returns are a “long way away”, admits Cox.

Meanwhile, Coalfield Resources is still in a precarious position. All the deal gives it is a “fighting chance of survival”.

“This restructuring needs perfect performance by the mines and there’s no guarantee of that. If we have a difficult coal face it will come to a premature end as it would have done,” said Cox.

Continued coal price weakness makes its task even tougher.

But even reaching this point is an achievement. “Everybody recognised that coal has an important place in the economy. 2,500 direct coal jobs and 2,500 in the supply chain is not something anyone is going to discard lightly.” Despite his frank appraisal of the company’s slender survival chances, Cox talks of the miners with respect. “It would be easy to criticise the workforce but it’s important to say how many really good, solid people there are working in the mines.”

He recalls when a heavy chain, which hauls coal from the face, had to be replaced after repeatedly snapping. “They got it done. People were carrying these pieces of chain on their backs. It was a tremendous effort.”

Cox also sees the energy security argument for the heavily polluting industry. He taps on an iPad to demonstrate. “At 16:15 coal was accounting for 43.5 per cent of the country’s electricity.”

It’s an inconvenient truth: in winter Britain leans heavily on its coal-fired capacity, which can respond rapidly to spikes in demand. Dithering on new nuclear perpetuates this reliance.

“Of course we have to de-carbonise. But at the moment we are still very dependent.

“If you could give this industry 10 years, that’s a lot of people reaching retirement.”

UK Coal is the latest in a string of turnarounds by Cox. He was managing director of Yorkshire Water in 1996 after the drought of 1995. “It had lost its way on efficiency. It’s compliance with environmental obligations was at rock bottom. Its reputation with customers was rock bottom. It was bottom of the league of water companies on service.”

Under his stewardship, Yorkshire Water surged to joint leader on service and efficiency.

In 2000 he left when the chief executive decided to diversify Kelda, Yorkshire Water’s parent company, into the US and China.

A short stint as chief operating officer at Railtrack followed, but within weeks the Hatfield train crash happened, killing four people. A job that had initially been about a major change programme to improve train punctuality became something very different.

He joined Anglian Water in early 2004. A ragbag of businesses, it had loss-making operations in 22 countries. When he left in 2010, the company had been transformed.

“If you had a pound in the company at the beginning, it was worth £5.95 on the day I left.”

Cox was last year appointed chair of water regulator Ofwat, allowing him to indulge his interest in regulation and fix the challenge of: “How do you regulate a public service business that’s a monopoly?”

But Cox’s career path has not been an easy one for his family. He is constantly on call, and family life had to adapt to the risk he would be dragged away at short notice. He recalls his son being picked on in the playground when a newspaper story wrongly attributed a hefty bonus to Cox.

“My family have been very supportive. You have to understand it goes with the territory,” he said. “The kids got teased in the primary school, but they understood that this is the sort of business you have got to stand up and be counted and lead, and just hope that you get more things right than you get wrong.”

Jonson Cox Factfile

Title: Chairman, Coalfield Resources (formerly UK Coal)

Date of birth: October 11, 1956

Education: King Edward VI Comprehensive, Totnes, Devon; University of Cambridge, Economics

First job: Selling diesel for Shell in Glasgow

Car driven: Volvo estate

Last book read: The Battle for Spain: The Spanish Civil War, Antony Beevor

Favourite holiday: north west Spain

Film: Brassed Off

Music: Jan Garbarek

Most proud of: Playing a part in businesses that provide a vital service