The dramatic downturn in the fortunes of the UK coal industry continues, with BBC News reporting on both the restoration liability fallout from the collapse of Scottish Coal, and the news that the operating assets of what was UK Coal are expected to be taken over by the state-established Pension Protection Fund. With regard to Scottish Coal, a taskforce has been set up following its collapse tasked to investigate clean-up costs of abandoned open cast mines across central Scotland. For the former UK Coal, expected to enter administration imminently, the move will save jobs and allow the mines to keep operating.
Energy Minister Fergus Ewing was quoted by the BBC as saying progress has been made on the issue of job preservation, with between 300 and 500 jobs being made for the 648 people who were made redundant as a result of Scottish Coal situation due to the planned purchase of assets by Hargreaves Services, itself a major coal mining group. A recent meeting held in East Ayrshire came after concerns about restoration were raised by communities. This follows the news that taxpayers could be left with a bill for as much as £62 million for restoring opencast mines in East Ayrshire. Having gone into liquidation, Scottish Coal has failed to restore 11 of its mines which are now considered a liability as the cost of restoration is greater than the value of the mines; and associated company Aardvark TMC leaving behind a further five open cast mines.
The taskforce includes representatives of affected councils, the Coal Authority, trade unions, the Scottish government, SEPA and the UK government and was told by Hargreaves that its purchase of some of the sites would create 300 jobs in the first three months and around 500 jobs in 12 months. Ewing stated: “The focus of the work of the taskforce is to bring together expertise and tackle issues head on in a pragmatic and realistic way. We heard from a number of representatives today that it is essential that experts need to be engaged with at early stage. Early engagement can mean these sites might mine again in future, be restored as heritage sites or even restored to be used for farming.” Prior to the meeting, Ewing said: “The Office of the Rail Regulator (ORR), who attended the last meeting of the taskforce, faced strong criticism of their proposed increase of rail freight charges. Since the meeting the ORR took into account the impact of the charging regime on the future of the Scottish coal industry. The Scottish government is also working hard to support continued mining operations and the preservation of Scottish jobs, as well as ensuring the responsible restoration of sites.”
The operator of the other major mining group in the UK, formerly known as UK Coal, is expected to enter administration. The PPF is then expected to take on the assets as well as a pensions liability estimated at about £550m. The deal is expected to keep the mines running and save jobs, but lead to a cut in miners’ pensions. There are about 7,000 current and former mine workers whose pensions could be affected, with the Financial Times reporting they face a reduction of 25%. A spokesman for the PPF confirmed that it was “one of a number of parties involved in discussions about the future of operations at UK Coal”, but said it was not able to comment further while discussions were continuing. “Our role is to protect the interests of pension scheme members and minimise any resulting costs to our levy payers,” the spokesman said.
The PPF is responsible for bailing out struggling pension schemes, but does not usually take on the control of the companies backing those pension schemes. It was established by the government 10 years ago, but is funded through a levy on pension funds. John Ralfe, a pensions consultant, described the expected deal with UK Coal as “unprecedented” and told the BBC’s Today programme that the size of the pensions liability was significantly bigger than any other the PPF had handled in its 10-year history. “This is the single biggest hit by a country mile that the pension fund has had,” he said. UK Coal has been suffering significant financial difficulties, and underwent restructuring last year. It suffered a costly fire at the Daw Mill pit in Warwickshire earlier this year. It now operates two deep mines and six surface mines under UK Coal Operations, which is a subsidiary of UK Coal Mine Holdings. It is not clear which business is due to enter administration as part of the rescue deal. Under the plans the pits will continue to operate, safeguarding 2,000 jobs.