UK Coal enters administration but saves 2,000 jobs

UK COAL said today it had completed a restructuring plan that will save 2,000 jobs.

The business, whose future had been threatened by the devastating fire that closed the Daw Mill deep mine in Warwickshire in March as well as a major pensions deficit, has gone into administration as part of the restructuring process.

As part of the restructuring process,120 of the remaining Daw Mill employees have been switched to other pits while 350 have been made redundant.

Production of coal from Daw Mill represented around a third of UK Coal’s revenue and the forced closure of the mine had threatened the on-going viability of UK Coal Operations’ remaining two deep mines and six surface mines.

Both UK Coal Mine Holdings and UK Coal Operations have today gone into administration with David Kelly, Rob Hebenton and Ian Green from PwC appointed administrators following an application by the directors. Graham Newton and Paul Bates of BDO were also appointed joint administrators of Mining Services.

The administrators have separated out the viable operations of the group and agreed a compromise with major creditors, including the Industry Wide Pension Funds, which will see the pension schemes transfer to the Pension Protection Fund.

The viable mining operations have been successfully restructured and their assets will now be held in individual companies owned by a new business which will operate as UK Coal Production.

Kevin McCullough, chief executive of UK Coal, said: “Today is very much a day of mixed emotions, but this is the best outcome that it was possible to achieve.

“Entering administration and the subsequent restructuring was the only way we could preserve any of the business and while I’m delighted we’ve saved 2,000 jobs, we’ve also had to make some very difficult decisions.

“I’m pleased that we managed to transfer 120 of our Daw Mill colleagues to our other mines following the fire. Our thoughts today also rest with the 350 colleagues who will now, regrettably, be made redundant as a result of Daw Mill closing.

“I’d like to thank everyone that has helped us reach this position, which would not have been possible without the support of the Pension Protection Fund, our customers, suppliers, all parts of Government, our employees and their families and trade unions.

“It means that this country can still produce coal on a reasonable scale. It may be a small industry, but when 40% of our energy still comes from coal it makes absolute sense to use as much British coal as possible to help keep energy bills from being even higher.

“Along with all of my colleagues, I look forward to working with our customers and suppliers as we rebuild the business following the disastrous fire.”

UK Coal has worked closely with the Pension Protection Fund and, with its advisers, has developed a plan which secures 2,000 jobs and provides protection on accrued benefits for employees. As well as retaining their jobs by transferring to the new company, the 2,000 employees will retain the same terms and conditions.

The new company will be owned by UK Coal Mining Holdings – a new parent company to the group.  The Pension Protection Fund will not own the new company. Instead, the Pension Protection Fund’s interest in the new company will consist of a series of debt instruments. It is the intention that a new Employee Benefit Trust will run the new business.

Ultimately, the restructuring will result in the disclaiming of the Daw Mill mine which will see its remaining coal deposits transferring to the Coal Authority in due course.

Around 50% of the current workforce are members of a defined contribution pension scheme and their contributions will not be affected by this administration and restructuring.

UK Coal originally finalised a restructure last December which saw the creation of two divisions covering mining and property with the company renamed Coalfield Resources.

Control of the mining division was handed to a new “employee benefit trust” although Coalfield Resources retained a 90% stake in the economic rights.

The company retained ownership of 24.9% of the property division, Harworth Estates, with the remainder passed to pension funds in return for a £30m cash injection and their support for the mining business.

The latest restructuring was forced by the fire which closed Daw Mill in March.