UK Coal restructuring secures mining operations and 2,000 jobs

Following the closure of the Daw Mill deep mine in March 2013 due to a fire, the ongoing viability of UK Coal Operations’ remaining two deep mines and six surface mines was questioned. However, UK Coal has indicated a way to move forward for the remaining mines and 2,000 employees.

Daw Mill represented around a third of UK Coal’s revenue and as a result of the problems associated with the fire, both UK Coal Mine Holdings Ltd (UKCMHL) and UK Coal Operations Ltd (UKCOL) have both entered administration. David Kelly, Rob Hebenton and Ian Green from PwC have been appointed administrators of the companies by Birmingham High Court and Graham Newton and Paul Bates of BDO LLP have been appointed Joint Administrators of Mining Services.

The administrators have separated out the viable operations of the group and agreed a compromise with major creditors, including the Industry Wide Pensions Funds, which will see the pension schemes transfer to the Pension Protection Fund in due course. The viable mining operations have been successfully restructured and their assets will now be held in individual companies owned by a new business which will operate as UK Coal Production.

Kevin McCullough, Chief Executive of UK Coal, stated “Today is very much a day of mixed emotions, but this is the best outcome that it was possible to achieve. Entering administration and the subsequent restructuring was the only way we could preserve any of the business and while I’m delighted we’ve saved 2,000 jobs, we’ve also had to make some very difficult decisions.

“I’m pleased that we managed to transfer 120 of our Daw Mill colleagues to our other mines following the fire.  Our thoughts today also rest with the 350 colleagues who will now, regrettably, be made redundant as a result of Daw Mill closing.

“I’d like to thank everyone that has helped us reach this position, which would not have been possible without the support of the Pension Protection Fund, our customers, suppliers, all parts of Government, our employees and their families and trade unions.   It means that this country can still produce coal on a reasonable scale.  It may be a small industry, but when 40% of our energy still comes from coal it makes absolute sense to use as much British coal as possible to help keep energy bills from being even higher.

“Along with all of my colleagues, I look forward to working with our customers and suppliers as we rebuild the business following the disastrous fire.”

UK Coal along with the Pension Protection Fund and other advisers has secured 2,000 jobs and provided protection on accrued benefits for employees, ensuring that with the jobs transferring to the new company, they will still retain the same terms and conditions.

The new company will be owned by UK Coal Mining Holdings, a new parent company to the group and the Pension Protection Fund’s interest in the new company will consist of a series of debt instruments.  It is the intention that a new Employee Benefit Trust will run the new business and the Daw Mill mine will see its remaining coal deposit transferred to the Coal Authority.

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