Blackfriar: Coal mining struggles to survive despite vital energy role

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WANTED: investors with nerves of steel and very deep pockets. No guarantee of success.

From the administration of surface miner ATH Resources, to this week’s lifesaving restructure of UK Coal, to the planned mothballing of Maltby Colliery by Hargreaves Services, coal mining has proved to be a costly gamble.

Uncertain geology, capital-intensive production, soaring fuel costs, ballooning pension burdens, rising staff costs, heavy debt and the weak price of coal have all colluded to put Britain’s remaining coal mining industry – which once employed millions in the UK – into intensive care.

Doncaster-based ATH Resources was recently forced into administration after its lenders HSBC and Yorkshire Bank sold their £15m debt to turnaround firm Better Capital.

Jon Moulton’s private equity firm is now attempting to manufacture a deal which Better Capital says could see £15m injected into ATH – but in return for less generous terms.

“The model is broken and we need to do it a different way,” said Better Capital chief executive Mark Aldridge.

Shareholders were the losers as the administration means “fewer parties” around the table.

Hargreaves Services plans to close Maltby deep mine with about 550 job losses after hitting geological problems. UK Coal has sealed a deal which gives it a sustainable future, but which hammered shareholders in the process.

The Doncaster-based group finalised an innovative deal – effectively a debt-for-equity swap with its pension funds – which should see investment in its mines and allow the development of its estate of brownfield land.

It has changed its name to Coalfield Resources plc, and will look again at re-opening the Harworth mine near Doncaster.

The company trod dangerously close to insolvency, and Blackfriar suspects without chairman Jonson Cox leading the rescue plan, it would likely have ended that way.

The deal saves about 2,500 jobs and gives the British coal mining industry a fighting chance when coal remains crucial to the country’s energy needs. During the winter, plants such as Drax and Ferrybridge in Yorkshire help coal contribute as much as half of the UK’s electricity.

In 2011, 30 per cent of the UK’s electricity came from coal.

The Government is pinning its hopes on shale gas, but getting domestically fracked gas into the national grid is some way off.

In the mean time, coal is here to stay. But recent history suggests less of that will be dug from pits in Yorkshire, and more shipped into ports such as Hull, Immingham and Hunterston.

AROUND 100 shoppers a day are signing up to a new Facebook campaign to persuade Sheffield City Council to reverse its controversial decision to block a new Next Home store on wasteland next door to Meadowhall. Both sides have convincing arguments.

Next claims that its £10m plan to build the largest Next of its kind would have brought customers to Sheffield and created 125 jobs. The council’s decision to block the plans have infuriated locals.

Next’s chief executive Lord Simon Wolfson claims planning officials worked very hard to persuade Sheffield’s councillors to vote against these new jobs.

“We diligently searched for other suitable sites in and around the city,” he said. “They were too small, too out of the way, too hard get to, had too few parking spaces and some were simply unavailable.”

The council defended its decision saying that Next’s plans to build on land next door to the Meadowhall shopping centre are not in keeping with its aim to revitalise the town centre. It believes that saying yes to Next would have taken more shoppers out of the city centre to Meadowhall.

You can sympathise with both sides.

However the council is cutting off its nose to spite its face. If Next fails with its appeal, it will simply choose another city to build the largest Next Home in the country.

As Lord Wolfson says, preventing Next from building a home furnishings store on the outskirts will do nothing to improve the chances of Next, or anyone else, building a clothing store in the city centre.

He adds that the council’s actions go a long way to explaining “the sorry state of Sheffield city centre’s shopping”.

“For too long Meadowhall has been blamed for the city centre’s failure. It’s a convenient excuse, but I’m afraid it won’t wash,” he said. “Just look at the other great industrial cities of Britain. Manchester built its Arndale Centre extension, despite the presence of a massive out-of-town Trafford Centre. Similarly Leeds, Leicester, Newcastle, Birmingham, Liverpool, Glasgow, Cardiff and Bristol have all transformed their city centres despite their out of town shopping centres.”

Sheffield City Council needs to learn from its mistakes and overrule this narrow-minded decision. It can’t force retailers to invest in the city centre, but it can persuade them to boycott Sheffield altogether.