UK Coal eats into huge debt with £5m sale of agricultural land

The Doncaster-based group, which is trying to cut pension liabilities, bank and customer debt, said it has exchanged contracts to sell about 900 acres of agricultural land, together with associated buildings, to Strawson Group Investments Ltd and George David Strawson and Elizabeth Anne Bisson, the trustees of the Omnivale Limited Special Pension Scheme.

“The proceeds will be used to reduce borrowings and improve the working capital position of the group,” said UK Coal, headed by chairman Jonson Cox.

The country’s biggest coal miner, which owns three operating deep mines, has been selling assets in recent years to reduce debt. During 2011 it sold 10,200 acres of land for £67m.

Its Harworth Estates subsidiary still has around 30,000 acres of land, a relic of the mining industry’s heyday.

As well as sales, Harworth also has plans to develop 85 sites covering more than 4,000 acres. It hopes these will house around 30,000 new homes and 32m square feet of business space over the next decade.

The latest land sale is for £5m in cash, payable on completion, but could rise if planning permission is obtained. The group added it retains the right to mine any potential coal in the ground.

The land had a book value of £6m in December 2011 and generated net rent of £0.1m in 2011.

UK Coal’s increasing pension deficit, a throwback to when the UK’s mining industry employed tens of thousands, had ballooned to £430m by the end of 2011 from about £250m in 2009.

Net debt stood at £154m at the end of March.

Last month UK Coal agreed the £20.3m sale of its Harworth Power arm, which generates electricity from waste methane, to cut debt.

Its planned sale of Harworth Power to Red Rose Infrastructure Ltd is dependent on shareholder approval. The business generates power from methane emitted at Kellingley, Thoresby, Harworth and Stillingfleet mines.

It has 14 gas engines with combined capacity of 26 mega watts. The electricity generated is either used at UK Coal sites or exported to the grid.

In 2011, Harworth Power reported operating profits of £2.4m on revenues of £5.5m. Red Rose is managed by clean energy asset manager Capital Dynamics Clean Energy and Infrastructure.

UK Coal also faces challenges from poor production: first quarter output from its mines totalled just 1.4m tonnes, significantly below the 2.1m tonnes during the same period a year earlier. This reflected tough geology at Daw Mill deep mine in the West Midlands, where production has since recovered.

Falling coal prices are also hampering the company.