UK Coal, the owner of what remains of the English coalfields, could be worth at least twice its current stock market valuation based on new estimates of the value of its huge property portfolio, analysts said yesterday.
The company said its 50,000 acres of land, which constitute one of the biggest brownfield land banks in the country and are valued in its books at £274m, could be worth in excess of £800m with planning permission. This compares with a current stock-market value of £445m for the entire group.
Shares in UK Coal closed 13 per cent higher last night at 303.25p, after a presentation of the property review to analysts and shareholders, having risen by more than 8 per cent on Monday.
Bridgewell Securities put a medium-case valuation on the company of 625p-a-share, which would give UK Coal a stock market value of £928m.
The company told the City that over the next six years it was looking at developing 60 "priority sites" covering 2,650 acres which between them could provide 14,000 new homes and 25 million square feet of industrial and office space.
Most of the vacant land is on disused open cast and deep mine sites strung along the M1/A1 corridor from Newcastle to Leicester. Two of the biggest development sites are the former Prince of Wales colliery near Pontefract in West Yorkshire, which could be worth £55m, and the Waverley site near Sheffield in South Yorkshire, which could be worth £195m. Redevelopment has begun at Waverley while UK Coal will submit plans for Pontefract next month for an 80-acre housing development, a 20-acre business park and a 70-acre country park.
Jon Lloyd, who was poached from HBOS in June to become UK Coal's new property director, said the revaluation was based on conservative assumptions and took into account £40m-£50m for cleaning up the sites.
Despite the property re-valuation and a return to profits of £7m in the first six months, UK Coal said it expected to suffer a loss for the year as a result of production problems at two of its seven remaining deep mines and legacy contracts which mean it gets much less than the market price for its coal. UK Coal produces about 10.5 million of the 55 million tonnes of coal that the country burns each year. The Drax power station in North Yorkshire takes about a third of UK Coal's output.
Jerry Spindler, UK Coal's chief executive, said that output was likely to fall by 3 million tonnes in the foreseeable future because the way the electricity market was structured meant it could not get long-term supply contracts at market prices. He said he was, however, confident there was a strong future for coal in the UK's energy mix.Reuse content