UK Coal Production Ltd

Michael Fallon Excerpts

Thursday 10th April 2014 Written Statements

[The Minister of State, Department for Business, Innovation and Skills (Michael Fallon)]

I want to update the House on matters concerning UK Coal Production Ltd.

The directors of UK Coal Production Ltd (UK Coal) approached the Government at the end of January 2014 to report that they were concerned that, due to a combination of an unfavourable coal price, exchange rates and other factors, the viability of the business was potentially in doubt.

On 21 March a private sector-led consortium submitted proposals to Government for a managed closure of the operational deep mines by autumn 2015 and the sale of the surface mining business. The proposals require funding from a number of parties, including Government, to provide the liquidity necessary to enable the managed closure. The proposal involves the Government contributing an interest-bearing loan of £10 million alongside additional contributions from other parties.

The taxpayer would face significant losses and liabilities in the event of an immediate insolvency of UK Coal, principally relating to redundancy and unpaid tax liabilities. Considering this, the taxpayer is better served by supporting a managed closure of the mines. The proposal is for the Government to invest alongside private sector organisations, including an experienced coal operator. This provides reassurance on the deliverability of the closure plan and therefore the repayment of the Government loan. However, deep coal mining remains an inherently risky business. There is no value-for-money case for a level of investment that would keep the deep mines open beyond this managed wind-down period to autumn 2015. Private sector investors who wish to put in the substantial investment that would be needed to maintain the mines beyond autumn 2015 without Government support remain free to do so.

It is the Government’s intention, in principle, to participate in the private sector-led consortium created to avoid the immediate insolvency of UK Coal. This participation is conditional on negotiation of final terms that provide adequate protection to taxpayers, and the Government securing assurance that all parties (including trade unions) are committed to successful delivery of the closure plan.

The Jobcentre Plus rapid response service will be made available to help support the employees into new employment, and to arrange re-training where needed.

I should also like to acknowledge the ongoing support the company is receiving from its work force, customers, suppliers and creditors during this challenging period.