AGM Statement and Trading Update

RNS Number : 9780F

UK Coal PLC

22 June 2012

 



22 June 2012

UK COAL PLC

("UK COAL")

AGM Statement and Trading Update

Speaking at today's Annual General Meeting, UK Coal Chairman Jonson Cox set out the progress made in 2011 and 2012 on the Company's Recovery plan.

Mr Cox reminded shareholders that at the end of 2010 the Company was in an extremely poor position: inappropriate levels of debt, an ever increasing pension deficit and significant operating challenges.  To address this, the new Board designed and implemented a Recovery Plan with the full support of its principal banking partner. Overall, good progress was made on the Plan in 2011.

Subsequently, on 27^th April 2012, UK Coal announced its plans to restructure the business to isolate the operating and financial risk of each deep mine from the Group as a whole and address the funding and debt structure of the Group.  This restructuring of the balance sheet and corporate structure requires compromise and support from each of the Group`s economic stakeholders. 

The Company's proposal to the Pension Fund has been that it should seek entry for its defined benefit schemes, at least in part, into the Pension Protection Fund.  The proposal required the support of the Company's generator customers in restructuring contracts and the support of the Company's principal banking partner in varying its security arrangements.  The plan also needed the support of the Coal Authority and the raising of funding sufficient to secure the release, over time, of the undeveloped value in the substantial brownfield property portfolio for stakeholders.

We are pleased to report that our banks, generator customers and the Coal Authority have responded positively to our proposals and the Company believes that appropriate agreements could be reached, subject to all parties playing their part.

Discussions with the Pension Fund and Pensions Regulator have also made considerable progress. While they have confirmed agreement in principle for UK Coal's operational restructuring, the discussions are now exploring an alternative package of short and medium-term financial measures which do not involve a compromise of members' benefits. These measures could adequately contribute to stability and financial headroom in UK Coal whilst also allowing realisation of the inherent value in the mines and undeveloped property portfolio.  Further work is needed over the coming weeks to explore the implications for the Company and its economic stakeholders.

During the restructuring discussions, the Company continues to focus on business performance.  The first quarter output from all mining operations was 1.4 million tonnes, reflecting previously reported difficulties at Daw Mill, which is continuing with the challenging recovery of the 32's face.  Since the end of March, production has recovered in line with expectations.  Following the fall in market prices, as reported in our announcement on 11 May 2012, coal prices remain at a low level representing a further challenge to the performance of the mines and all mines have been set additional efficiency targets.  During Q2, 2012 two new surface mine sites, Butterwell and Lodge House Extension, will have become operational.

UK Coal has also issued a separate announcement today, confirming that it has entered into a contract, conditional on shareholder approval, for the sale of Harworth Power (Generation) Limited to Red Rose Infrastructure Limited, for a cash consideration of £20.0 million.   

In conclusion, Jonson Cox thanked all stakeholders for their co-operation to date but added that there remained much to achieve in order to deliver a viable restructuring.

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Enquiries

Analysts and investors

Jonson Cox                                                         Chairman, UK Coal                                          Tel: [phone]

David Brocksom                                               Group Finance Director, UK Coal              Tel: [phone]

Media

Anthony Cardew / Emma Crawshaw        Cardew Group                                                  Tel: [phone]

Andrew Mackintosh                                       Director of Communications, UK Coal    Tel: [phone]

Notes to Editors

UK COAL is a mining, property and power company employing c.2,500 people with its headquarters at Harworth Park, Harworth, near Doncaster, South Yorkshire.

Britain's biggest producer of coal, UK COAL operates three deep mines in the Midlands and Yorkshire, and surface mines in the North East, the North West and the Midlands.  Over 90% of the total annual output is sold to generate around 5% of Britain's electricity requirements.

The Group owns around 30,000 acres of land and other property. Harworth Estates, the property arm of the business, currently has plans to develop 85 sites covering a developable area of more than 4,000 acres, creating opportunities for building around 30,000 homes and 32 million square feet of business space over the next decade.

For more information, please go to:  www.ukcoal.com

 

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