AGREEMENT WITH UK COAL PLC

RNS Number : 1630R

Scottish & Southern Energy PLC

27 April 2009

 



AGREEMENT WITH UK COAL PLC

Scottish and Southern Energy plc ('SSE') has agreed binding heads of terms under which it plans to enter into a five-year coal purchase agreement with UK Coal PLC to provide fuel for its Ferrybridge power station. The recent installation of flue gas desulphurisation equipment at the station means the UK's higher sulphur coal can now be used to generate power.

Under the proposed agreement, SSE will buy 3.5 million tonnes of coal between late 2009 and 2015, which should be enough to meet around 15% of the station's coal requirements during that period. This will be sourced from deep mine and surface sites in the UK, including Kellingley Colliery in North Yorkshire.  

The price of the coal will be linked to global coal prices, but with a ceiling and floor to reduce both parties respective price risk.  

To assist with the capital investment required to upgrade coal production at a number of UK Coal sites, SSE has agreed to advance a secured loan to UK Coal, on which SSE will receive interest, to be repaid by 2014.   

Ian Marchant, Chief Executive of SSE, said:

'With its higher sulphur content, the UK's coal has previously been unsuitable for use in SSE's power generation plants. Our investment in equipment to remove emissions of sulphur means we can now make this substantial commitment to an indigenous source of fuel, thereby supporting jobs in the UK's mining industry.'

'We are aiming to reduce the carbon intensity of our power generation by 50% by 2020, but the security of the UK's energy supply will continue to require a role for coal for the foreseeable future. In this context, it makes very good sense to diversify our sources of fuel supply.'

 

END

 

 

AGRBUGDSCXDGGCS