The board of RJB, led by Richard Budge, chief executive, will meet on Monday to sanction a review of how it will match capacity with demand when existing long term coal contracts, negotiated before privatisation, expire next April. The company will draw up the list of pit closures, though sources denied that the first wave of cuts would come next week.
However,colliery managers have been preparing for closures, with industry experts suggesting at least six of the 17 RJB pits likely to close. Mines on the "at risk" list include all or part of the Selby "superpit", where output has shrunk from 12 million tonnes to less than 8 million as RJB hit a series of production problems. Selby also employs a high proportion of contract workers, which make up almost a quarter of the 9,000 strong workforce at RJB's deep mines.
Other pits facing possible closure include Calverton and Clipstone in Nottinghamshire, where workers would not be subject to the generous redundancy compensation agreed by the government for most mines at privatisation. Neil Greatrex, president of the Nottinghamshire Union of Democratic Mineworkers, said: "It looks at this moment in time like half the pits in the industry will close."
The drastic drop in demand for RJB coal from the big power generators was confirmed yesterday when National Power said it would buy just 18 million tonnes of coal from the group over the next three years. It compares with the 18 million tonnes it currently buys annually. RJB has also been forced to accept a near 25 per cent price cut, to around pounds 1.15 a gigajoule.
The deal will see National Power buy 8 million tonnes next year, though this includes a 3 million tonne contact already announced. In the following two years the tonnage will drop to just 5 million tonnes. The agreement is the latest blow to the embattled RJB, which has concluded a deal with Eastern, the third biggest coal-fired generator, which would also see its order fall by half next year to just 4 million tonnes.
PowerGen, the second largest generator, has yet to conclude negotatiations but said last week that it could buy just two or three million tonnes annually from RJB, down from nine million this year. It means the group's total order book for its deep mines would slump from 30 million tonnes to 15 million tonnes or less.
David Price, from the industry journal Coal UK, said the National Power deal was a "disaster" for the industry. "Other people have spent a year and a half taking Richard Budge's business off him and he tried to stick out for a better deal. He's failed."
The game of political brinkmanship between RJB and the Government escalated yesterday, when John Battle, the energy minister, told the Commons that the company had formally asked the Department of Trade and Industry for a subsidy. Mr Battle rejected the demand, telling MPs he did not "believe we should give a cash subsidy to a private, profitable company".
The RJB letter did not mention a specific sum, though the company believes a pounds 35m annual grant over two years would be enough to save around 10 pits. The cash would encourage the generators to switch from buying imported coal, is some 15 per cent cheaper than RJB's prices for next year.
Mr Battle also announced that Clare Spottiswoode, the gas regulator, would be investigating claims that gas-fired generating plants built by the regional electricity companies were more expensive than coal. Ofgas, the gas watchdog, is expected to give details of the review next week. RJB has already complained to the European Commission about the so-called take-or-pay gas contacts agreed by the RECs after privatisation.
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