Energy UK Coal
threatens to close five pits
May 9, 2006 - Daily Telegraph London
Author(s): Christopher Hope Industry Editor
THE much-hyped renaissance of the British coal industry could be
about to come to a shuddering halt unless power companies pay more for
their fuel, UK Coal has warned.
Britain's biggest coal producer is threatening to close five of its
seven pits and cut 1,500 jobs unless it can force through price rises
with major customers like Eon, Drax and lectricit de France. Pits that
could close in the "near future'' are Thoresby, Welbeck and Kellingley,
in addition to Harworth and Rossington, accounting for 233m tonnes of
coal reserves, it warns in a submission to the Government's energy
review.
Despite the much-trumpeted return of coal - with prices doubling in
the past two years - UK Coal has been unable to take advantage of these
rises because it is locked into long-term contracts.
Talks with customers have started, the outcome of which is vital to
ensure the continued viability of the British coal industry.
The firm says 300m tonnes of coal can be recovered from its remaining
seven deep mines. However, unless it can find new financing, five will
close, with the loss of 1,500 jobs. UK Coal complains that generators
have adopted a policy of only buying indigenous coal if it is priced at
or below the international price of coal - which it claims costs the
industry pounds 100m a year.
Generators are typically willing to pay 40p a gigajoule (equal to
pounds 9.60 a tonne) more for foreign coal than they are paying for coal
mined on the doorsteps of power stations that are burning it, it says.
The submission, which will be published on the Department of Trade
and Industry's website this week, adds: "UK Coal states that action must
now be taken to preserve the security of deep-mined coal supply for the
longer term by reviewing these pricing assumptions and adopting new
contractual arrangements.''
UK Coal is understood to be pushing for 40pc rises in the price it
can charge for its coal. One source said: "Someone must decide do they
want these power sources on their doorstep for the next 20 years or do
they want them to be closed in the next three to four years.''
Soaring gas prices have meant that the UK has become increasingly
reliant on coal for its power - in recent months, 50pc of Britain's
electricity generation has come from coal.
The submission urges ministers to recognise that "public policy for
security of energy supply and affordable electricity must take priority
over the short-term commercial interests of individual generators''.
UK Coal's submission is one of several hundred to the energy review
team at the DTI. Energy minister Malcolm Wicks will make his
recommendation to Prime Minister Tony Blair by July.
Drax said: "The company will continue to source its coal in the most
commercially sensible way.'' A source added: "It is a marketplace and
you can buy coal from wherever you want to.''
An Eon spokesman added: "We get our coal from a variety of sources
when we take a look at our coal requirements.''
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