Contracts vital to secure British Coal sale

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The Independent Online
BRITISH COAL is unsaleable unless the Government secures contracts for the company lasting 15 years, according to the British Association of Colliery Management.

The union, which is seeking financial advisers with a view to launching a buyout of British Coal, says that without contracts of that duration investors will not be interested in a mining business.

The Government, which wants to privatise the coal industry rapidly, has failed to persuade the electricity industry to sign up for five-year contracts with British Coal. These contracts are needed because the current agreements, under which National Power and PowerGen take 80 of British Coal's output, expire next spring.

The generators, now privatised, want to switch to cheap imported coal and natural gas.

John Meads, the general secretary of the union, says that even if the Government intervenes and forces a five-year deal on the companies, this would be insufficient to save British Coal.

'There must be something beyond 1998 or you end up with a business run for cash and with no long-term investment capability. If you do that in mining you do not have a future,' he said.

There is a growing consensus that British Coal will have to shrink to 20 mines or fewer to compete with other sources of fuel. The union believes that there could be as few as 10 pits within a few years compared with 50 today and 169 in the mid-1980s. The workforce has already dwindled over that period from 220,000 to 51,000, of whom 41,000 are miners.

The Government had originally hoped that the contract with the generators would be in place by the end of July to keep the sale of British Coal on track.

It is renewing its efforts to have something agreed before the Conservative Party conference at the beginning of October.

But because ministers do not want to be seen intervening in the markets the deal must appear to come from British Coal and the generators. However, electricity industry executives say they are still a long way from agreement on how much coal they would take from British Coal and at what price.