Member Article

UK Coal Operations enter administration

UK Coal Operations Limited have entered into administration with a restructuring process that aims to save nearly 2,000 jobs across the group, but will lose 350.

The company operates surface mines near Crook in County Durham, Butterwell in Northumberland as well as deep mines at Kellingley Colliery in Yorksire and Harworth Colliery near Doncaster.

Administrators from PwC were appointed by Birmingham High Court and immediately negotiated a compromise with major creditors including the Pension Protection Fund (PPF) to secure on-going production.

The company got into trouble following a massive underground fire at its Warwickshire mine, Daw Mill Colliery.

Production of coal from Daw Mill represented around a third of UK Coal’s revenue and the forced closure as a result of the fire threw the company into jeopardy.

PwC administrators said the company and its trading subsidiaries will not be owned by the PPF, but the PPF will retain economic benefit through substitute debt instruments.

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.”

Negotiations are now underway for the sale of the interests of the shares of UK Coal Mining Holdings Limited to a new holding company for UK Coal Production Limited and its trading subsidiaries to an Employee Benefits Trust.

David Kelly, joint administrator and PwC partner, said: “Despite the intense pressures that the Companies have been under following the catastrophic fire at Daw Mill in February 2013 and the confirmation of the Daw Mill mine closure in March 2013, 2,000 jobs have been preserved by the restructuring including 120 former Daw Mill miners, which also guarantees continued supply of electricity to the UK and keeps the lights on.

“The impact of the Daw Mill fire could not have been predicted and led to major losses for UK Coal. Since then, the management team and key stakeholders have been working to find a solution to save the business, and this would not have been possible without the support of the Pension Protection Fund, customers, suppliers, all parts of government, unions, employees and their families.

“This deal represents the best outcome for the creditors who would have lost virtually everything if operations had ceased trading.”

This was posted in Bdaily's Members' News section by Tom Keighley .