Power deal revives coal group

MARY FAGAN

Industrial Correspondent

Coal Investments, the company run by the former British Coal director Malcolm Edwards, has won a five-year contract to supply National Power with an annual 2.8 million tonnes of coal.

The company also announced that it will expand its workforce this year from 800 to 1,200 and will break into profit within months.

Coal Investments suffered a severe blow last year when the Government announced the sale of almost every English coalfield to a rival bidder, RJB Mining.

As a result of the sale of British Coal, the company acquired only five mines, all of which were earmarked for permanent closure and none of which inherited any orders or sales contracts.

Mr Edwards, chairman, said: "We seem to have made a decent business out of the rejects. The group is now developing one of the best balanced coal operations in the UK, with a good spread of sales to power stations, steelworks, industry and home heating."

He said that the National Power contract, which brings annual sales to the generating industry to 3.3 million tonnes, is "of the greatest importance" as it provides security for the long term and allows the company to plan ahead.

National Power said that the contract with Coal Investments' "reconstructed" mines was at an internationally competitive price and would enable the generator to scale back its need for imports.

Coal Investments made a loss of pounds 18.3m for the year to March, after almost pounds 9m in development costs, compared with a loss of pounds 2m the previous year.

Mr Edwards said the abortive bid for a large part of the English coalfields cost pounds 373,000 "but also absorbed all the management resources for many weeks".

The company raised pounds 50m on the stock market during the year to fund the renewal of its mines. Gearing at the year end was 15 per cent but is expected to rise.

Mr Edwards said that the company was well on the way to annual production of about 5.5 million tonnes a year, which was about three times the size of the original plan.

Customers other than the generators and the domestic market include British Steel, which takes 5,000 tonnes per week. Coal Investments also hopes to break into the export market for coking coal.

Coal Investments is among those interested in buying power stations from National Power and PowerGen. The company may also look at the sale of British Coal's fuel distribution business, although this may carry a price tag of as much as pounds 60m.