The deals are due to be concluded early next month after publication of the Government's energy review and will guarantee RJB sales of 20- 25 million tonnes of coal for three years.
Peter Mandelson, the Secretary of State for Trade and Industry, is understood to have been involved in helping broker the deal. Last week he approved PowerGen's pounds 1.9bn takeover of East Midlands Electricity on condition that it disposed of two coal-fired power stations. This removed one of the remaining obstacles to a deal with RJB.
Weekend reports suggested PowerGen will buy 25 million tonnes of coal from RJB over the three-year period. This figure is thought to be on the high side although it is clear PowerGen is preparing to buy substantial tonnages. It will burn 12-13 million tonnes of coal this year, of which RJB is so far contracted to supply 1.5 million tonnes.
RJB has been spared from having to close pits because of a fall in electricity imports through the cross-Channel connector to France. This has resulted in the coal burn at UK power stations since April being 23 per cent higher than last year - creating a market for an extra three million tonnes of coal.
National Power has already signed up to buy 18 million tonnes of coal over the three-year period, while Eastern, the third big fossil-fuel generator, is buying 14 million tonnes.
PowerGen is aiming to raise about pounds 1bn from the sale of the two coal- fired stations. It will sell them with coal supply agreements with RJB intact.
The energy review is likely to re-affirm the moratorium on the building of further gas-fired stations in order to give coal a level playing field.
The one area of uncertainty that remains is how much coal-fired capacity National Power will have to sell. Based on the size of the PowerGen disposals it could be as much as 6,000 megawatts, or three stations.
The Government has less leverage since National Power has said it has no interest in buying a regional electricity company. However, weekend reports again linked it to a possible bid for London Electricity while British Energy, the nuclear power generator, was said to be eyeing up Yorkshire Electricity.Reuse content