David Kelly, Robert Hebenton, and Ian Green of PwC have been appointed joint administrators of UK Coal Operations Ltd, which has been restructured in a complex deal involving the Pension Protection Fund (PPF) to secure 2000 jobs.
UK Coal is Britain's largest coal mining business. It generates 6% of the nation's electricity by supplying Drax in North Yorkshire and three other power stations in Nottinghamshire and is viewed as an important element in the government's strategy for energy security. The company has experienced long term financial problems, and was badly affected by a serious fire at the Daw Mill mine in February this year.
Under the restructuring deal, the majority of the company's business and assets pass to a new company called UK Coal Production Ltd and its trading subsidiaries, which include UK Coal Kellingley Ltd, UK Coal Thoresby Ltd and UK Coal Surface Mines Ltd.
The administrators say the move will save around 2,000 jobs across the whole group, including 120 former Daw Mill miners, but there will be around 360 job losses at Daw Mill.
As part of the restructuring the administrators have agreed a compromise with major creditors, including the defined benefit pension schemes and the PPF, which they say will protect around 1,500 company jobs and secure on-going production. Over 400 jobs will also be preserved as part of the wider restructuring under a separate insolvency process.
UK Coal Production Ltd and its trading subsidiaries will not be owned by the PPF, but the PPF will retain economic benefit through substitute debt instruments. Negotiations are on-going for the sale of the interests of the shares of UK Coal Mining Holdings Ltd, a new holding company for UK Coal Production Ltd and its trading subsidiaries, to an Employee Benefits Trust.
David Kelly, joint administrator and PwC partner, said the deal represented the best outcome for the creditors who would have lost virtually everything if operations had ceased trading.
'The impact of the Daw Mill fire could not have been predicted and led to major losses for UK Coal. Since then, the management team and key stakeholders have been working to find a solution to save the business, and this would not have been possible without the support of the PPF, customers, suppliers, all parts of government, unions, employees and their families,' Kelly said.
PPF executive director for financial risk, Martin Clarke, described the plan as 'innovative' and said it had been clear from the outset that UK Coal's pension scheme, which has 7000 members, would come into the PPF because of the size of its deficit.
'The agreement also means that we will receive regular payments from the company which we expect to produce a higher return in the long run than if the company had simply been allowed to collapse into insolvency. This is good news both for our members and our levy payers,' Clarke said.
