UK Coal restructured and renamed
Company confirms completion of restructuring and change of name to Coalfield Resources plc
UK Coal confirmed this week that restructuring of the business – a process that began on 14 March 2012 and involved a wide range of parties, including customers, pension funds, banks, shareholders, the Coal Authority, the pensions regulator and the Department for Energy and Climate Change – had been completed.
The restructuring process had faced a December deadline, given the threat of a breach in debt covenants, but was completed on schedule and with the outcome in line with that proposed earlier this year.
‘This has been a restructuring of unprecedented scale and complexity for this size of company, dealing with a legacy structure that was inherited on the privatization of British Coal in 1994,’ said chairman Jonson Cox (pictured). ‘I’m delighted that we’ve succeeded in completing it. Without it, it was almost certain that the coal mines would have been unable to trade beyond the first quarter of 2013.’
Under the restructuring, UK Coal have been renamed Coalfield Resources plc and the company’s operations have been restructured into two separate businesses comprising the Mining Division (under UK Coal Mine Holdings Ltd) and the Property Division (under Harworth Estates Property Group Ltd).
Control of the Mining Division has passed to a newly established Employee Benefit Trust (EBT) which holds shares representing 67% of the voting rights and 10% of the economic rights in Mine Holdings for the benefit of current and future employees of the Mining Division.
The company retains 90% of the economic rights and 33% of the voting rights in Mine Holdings, but the company’s and EBT’s shareholding both rank behind the debt to the pension funds. The company also owns 24.9% of Harworth Estates, with 75.1% having passed to the pension funds in return for a £30 million cash injection and their support to the mines.
Jonson Cox continued: ‘The restructuring has helped to safeguard 2,500 highly skilled and well-paid jobs, a skilled supply chain, and created a funding plan for the £450 million pension deficit that UK Coal have been burdened with. Without this restructuring, the costs would have fallen by now to the British taxpayer and the Pension Protection Fund.’
According to Mr Cox, the support provided has given a final chance to the mining business, mine management and the workforce, to adopt the changes needed to ensure safe, reliable and efficient production for the next five to 10 years.
‘While we have successfully reduced deep-mine manpower costs by 12.5%, and started to change working practices, our inherited cost structure still remains too high and labour productivity too low,’ he said. ‘All surplus cash flow from the mines will go to fund pension deficit for the foreseeable future. I hope this will assist our workforce in supporting further change.
‘On the property front, our successful sales programme of the last two years has enabled us to halve the Group’s bank debt, in turn allowing this restructuring to proceed. We now look forward to achieving the medium- and long-term realization of value from the portfolio, for the benefit of shareholders and the pension funds.’
As a result of the restructuring, a number of changes have been made to the board of directors. Among the changes, Gareth Williams has stepped down as a director of the company to take on the role of managing director of Mine Holdings in the short term, but will leave the group on 28 February 2013.
Kevin McCullough, currently chief operating officer of RWE npower, will join as chief executive of Mine Holdings early in 2013, and Stephen Hutchinson, formerly finance director for the Bridon Group, will become finance director for Mine Holdings.
Coalfield Resources are the largest producers of coal in the UK. They operate three deep mines that produce more than 5.5 million tonnes a year, and several surface mines that produce around 1.8 million tonnes annually. In total, the company provides the UK with around 5% of its energy needs.
