UK Coal's Financial Problems and the Minorca Appli

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MOPG's 70th Press Release describes the contents of our Briefing Note "UK Coal plc and the Financial Risks Associated with the Minorca Application". This Note discuss the likely hood of financial risks arising from UK Coal gaining planning permission. The report argues that these risks arise as a consequence of the present financial circumstances UK Coal plc finds itself in, plus the possible consequences arising from the restructuring now underway at UK Coal plc for working the Minorca Opencast site

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MOPG PR 70 10/8/10

 

Are there fatal financial flaws in UK Coal’s Minorca Application?

When such a prestigious body as The Economist Intelligence Unit (EIU) expresses major concerns about the financial health of a company, then all parties that have dealings with the said company should take note. The purpose of our latest Briefing Note “UK Coal plc and the Financial Risks Associated with the Minorca Application”  is to alert all parties considering UK Coal’s Minorca Surface Mine Application that concerns over UK Coal plc‘s  financial health were expressed by the EIU in its Industry Briefing Report “UK coal: the Pits” issued on May 11th 2010. This report indicated the then dire financial circumstances surrounding UK Coal.  These summaries just give a flavour of what is quoted in MOPG’s Briefing Note:

  • ·        In 2009 pre tax losses of £129m exceed the predicted losses of £115m.
  • ·        In 2009 UK Coal’s debts grew to £182m, pushing its debt-to–equity ratio above 100%.
  • ·        Between January and March 2010 the Company continued to haemorrhage cash, losing around £17m a month according to estimates from bank analysists
  • ·        One conclusion was that cut throat price competition amongst coal suppliers left UK Coal plc at a fatal commercial disadvantage

  • ·        The other was that UK Coal’s property portfolio should buy it some breathing space, but its longer-term future, like the UK coal industry’s looks far less certain.

UK Coal has since published preliminary figures for the first six months of this year and these are included in the Briefing Note. This indicates that in addition to its bank borrowings UK Coal plc has had to borrow an additional £77m, £67m from generating companies and £10m from its major shareholder Peel Holdings. As a consequence the Company’s net debt had risen from the £181m reported for December 2009 to £255m by the end of June 2010. To play down its levels of debt it planned to sell a third of its land bank.

It may be because of its very difficult financial circumstance that UK Coal plc announced its plans to restructure the business on July 26th 2010. MOPG argue, in the Briefing Note, why they believe that this restructuring exercise poses significant financial risks if the Minorca Surface Mine Application is approved, leading to an outcome which is

“ .......the very antithesis of the spirit of what planning law and mineral planning guidance policy seeks to prevent, such as planning blight, destruction of a landscape and non restoration of land may be caused if planning permission is granted.”

Further evidence that this is a possibility with this Company is provided in the Briefing Note

“The restructuring story is one that is already familiar to those who have followed the history of UK Coal plc since the inception of A F Budge Mining. This history reveals that in 1992, A F Budge Mining underwent a similar restructuring exercise which may just about to be repeated. This restructuring of A F Budge Mining had disastrous results for the residents of Sheffield

·        In 1990 A F Budge Mining, as then contractor to the British Coal Corporation were given a £60m contract to extract 1.1m tonnes of opencast coal.

·        As part of the conditions granted to work the site A F Budge agreed to build an Airport and this proved to be a very influential inducement that helped the British Coal Corporation gain planning permission.

·        Restructuring of A F Budge occurred in 1992, once the opencasting had started. RJB Mining, the direct forerunner of UK Coal plc was created and the profitable opencast contract was transferred to this new company

·        A F Budge, with many debts and few assets was left responsible for building the Airport. By the end of 1992 A F Budge went bankrupt.”

As this extract from the Briefing Note indicates, this “restructuring exercise” may put at risk what is being offered as part of the Minorca Surface Mine Application’s benefits for the restoration of The Ashby Canal.

In addition the Briefing Note identifies another three potential financial risks: lack of land restoration, no community fund and no possibility of correcting any damage done to The River Mease Special Area of Conservation. The issue of The River Mease SAC will be one of the issues discussed by John Craven in his “John Craven Investigates Opencast Mining “ part of the BBC 1 Counrtyfile Programme to be broadcast this Sunday. Because of these risks MOPG asks that this application should be rejected by all consultees.

However, if planning permission is granted, then MOPG proposes a set of conditions which seeks to safeguard not only the interests of local residents but also the interest of those seeking to restore the Ashby Canal. An additional recommendation has been made regarding The River Mease SAC. MOPG asks that all consultees also pass on these recommendations to Leicestershire County Council.

These arguments will be drawn to the attention of all consultees where ever possible, starting with Measham Parish Councillors who are due to discuss a new set of submission documents from UK Coal plc at their Measham Parish Council meeting this Thursday in St Lawrence’s Church Hall, High St. Measham starting at 7.00 pm.

The Briefing Note D2 Note “UK Coal plc and the Financial Risks Associated with the Minorca Application”  can be downloaded from http://www.leicestershirevillages.com/measham/minorca-protest.html, look down the page and click on MOPG: Briefing Notes Series

Steve Leary for MOPG said

“Before people get over excited at what has been put on the table by UK Coal in support of their Application, people should wake up and smell the aroma peculating out of the coffee cup on the table. Given the financial state the Company is in plus the opportunity the restructuring exercise provides for the creation on the one hand of a viable company endowed with assets and on the other of a company loaded with debts, means that this coffee may smell either fresh or stale. Our problem is that, as yet, we do not know what the smell will be. All we know is that last time this Company restructured, it left a stale smell around Sheffield for a long time. That is why we consider there to be a fatal financial flaws in this Application. This time we are pre warned unlike the people in Sheffield. In our opinion the financial risks are too great and the Application should be rejected.”

 

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FOR MORE INFORMATION ON THIS PRESS RELEASE CONTACT:

STEVE LEARY, SPOKESPERSON, MOPG

                                                                                    email steve46leary@googlemail.com

 

FOR MORE INFORMATION ON MOPG PLEASE GO TO:

http://www.mopg.co.uk  or 

Email Contact email: steve46leary@googlemail.com