Jobs hope falters as green company hits rocks

Powerfuel plc had already secured 180m from the European Union to develop the world's largest "clean coal" power plant at Hatfield in South Yorkshire, but the company collapsed yesterday after admitting it had failed to secure the further funding needed for the first phase of the scheme – some 635m.

The news calls into question the viability of Yorkshire's long-term ambition to establish a huge carbon capture and storage (CCS) pipeline network stretching from the Aire Valley to the Humber coast, incorporating all the region's major polluters.

The Hatfield plan – which incorporates CCS technology – was supposed to be the first part of this wider Yorkshire scheme, which has the potential to slash the UK's entire carbon emissions by a tenth and create up to 55,000 jobs across the region.

CO2Sense Yorkshire, the green business off-shoot of regional development agency Yorkshire Forward, last night acknowledged the news was a "setback" but said it hoped the Powerfuel project could survive under new ownership.

KPMG, which has been appointed administrators for Powerfuel plc, said it hoped to find a buyer for two businesses owned by the company so the CCS project could still go ahead, but it was unable to confirm whether the European funding already pledged for the scheme was safe.

The Government said last night that the existing workforce at the Hatfield plant would be unaffected by the announcement, which came less than a week after Powerfuel bosses announced that CCS trials would begin there next year.

Barry Dodd, chairman of CO2 Sense Yorkshire, said: "It's not the death knell of the CCS project nor can we say it's the end of the European money because it depends on who comes along and continues the project.

"It's a setback because there will be a delay but it may not be fatal. I'm optimistic someone will come along and pick this project up."

It is believed the collapse of Powerfuel plc – which is 42 per cent owned by coal entrepreneur Richard Budge and 58 per cent owned by Tecalson Investments Ltd, a Russian investment company – was not wholly unexpected as it was having difficulty raising the money it needed through either borrowing or a stock market flotation.

It is the parent company of Powerfuel Mining Ltd, which owns the reopened Hatfield Colliery, and Powerfuel Power Ltd, the power generation company behind the proposed CCS scheme.

Richard Fleming, joint administrator and UK head of restructuring at KPMG, said: "Powerfuel plc boasts the only licence to trial the technology in the UK.

"While the economic environment is still challenging, we are hopeful that we can secure a sale of both companies and will be actively speaking to interested parties from today."

The interested parties could include Mr Budge and Tecalson Investments, though KPMG was unable to confirm whether either had already come forward.

Labour voiced strong support for CCS schemes when in power, pledging public funds to back four pilot projects across the UK, one of which looked certain to be Hatfield.

The coalition Government has also backed CCS but has so far announced funding for only one project, likely to be at Longannet in Fife.

A spokesman for the Department of Energy and Climate Change said it was "disappointed" by the news but hoped a new owner would be found to build on the substantial progress already made.

Technology of the future

CARBON capture and storage (CCS) is an emerging technology through which harmful carbon emissions are collected from power stations and large factories and stored safely underground rather than being released into the atmosphere.

Industry experts believe Yorkshire is ideally placed to benefit from a CCS scheme, due to the region's large number of heavy polluters and close proximity to depleted oil and gas fields in the North Sea, where carbon dioxide could be stored.

Estimates suggest the Hatfield project could cut the UK's entire carbon emissions by 10 per cent.