UK Coal today (Tuesday) announced an innovative restructuring of its mining operation, securing 2,000 jobs.
This agreement means its pension scheme now enters the Pension Protection Fund (PPF).
Responding to UK Coal's announcement, PPF Executive Director for Financial Risk, Martin Clarke, said:
"We are very pleased to have been able to work with the company to put together this innovative plan. It means that pensions have been protected, the company can continue trading as a going concern and that 2,000 jobs have been saved from an uncertain future.
"It became clear to everyone involved very quickly that, whatever the future held for UK Coal, its pension scheme would come into the PPF because of the size of its deficit.
"By taking on the scheme, we will now protect the pensions of its 7,000 members and they will receive PPF compensation, either now or in the future, to provide them security in retirement.
"The agreement also means that we will receive regular payments from the company which we expect to produce a higher return in the long run than if the company had simply been allowed to collapse into insolvency. This is good news both for our members and our levy payers.
"The PPF is a mature and significant financial institution with assets of £20 billion. We are built to take on this level of pension deficit and there is no question about our ability to pay compensation, not just for UK Coal scheme members, but for all our members, for as long as they need it."
David Kelly, Robert Hebenton, and Ian Green of PwC were appointed joint administrators of UK Coal Operations Limited on 9 July 2013. The appointment was made by Birmingham High Court on application by the directors of the Company.
Immediately following the appointment, the administrators completed a restructuring of the majority of the Company’s business and assets to a new company called UK Coal Production Limited and its trading subsidiaries, which include, UK Coal Kellingley Limited, UK Coal Thoresby Limited and UK Coal Surface Mines Limited.
Nearly 2,000 jobs across the whole group have been preserved by the wider restructuring, including 120 former Daw Mill miners. Regrettably, there will be 280 job losses at Daw Mill and we are in the process of notifying those affected whom the company has previously served with redundancy notices. Since the fire, nearly 90 Daw Mill employees have worked their notice period and left the Company prior to the administration appointment.
As part of the restructuring the administrators were able to protect around 1,500 Company jobs and secure on-going production by agreeing a compromise with major creditors, including the defined benefit pension schemes and the Pension Protection Fund (“PPF”). Over 400 jobs will also be preserved as part of the wider restructuring under a separate insolvency process.
UK Coal Production Limited and its trading subsidiaries will not be owned by the PPF, but the PPF will retain economic benefit through substitute debt instruments. Negotiations are on-going for the sale of the interests of the shares of UK Coal Mining Holdings Limited, a new holding company for UK Coal Production Limited and its trading subsidiaries, to an Employee Benefits Trust. An announcement will be made in due course.
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”
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