RJB secures jobs with Eastern deal
Saturday 15 November 1997
Eastern, Britain's fourth biggest electricity generator with a 10 per cent market share, has agreed to buy 4 million tonnes a year for three years from next April with an option to continue the agreement for a further two years.
However, the deal only covers about half Eastern's coal requirements and represents less coal than it is currently being supplied with by RJB.
There are fears that as many as seven of the company's pits may have to close next year if it fails to secure enough long-term contracts with the three big fossil fuel generators.
Under its existing contracts RJB supplies 30 million tonnes a year to Eastern, National Power and PowerGen and still needs to tie down deals covering 85 per cent of its output for electricity generation.
Eastern and RJB declined to comment on the price they had agreed but one report suggested the deal was worth pounds 600m over five years. Charles Kernot, the Paribas analyst, said: "It's a jolly good price ... not a bad deal, really." He added that the deal equated to around 125 pence a gigajoule, though this is likely to be a delivered price as opposed to a pithead price.
Delivery, he estimated, would reduce this by around 5 pence a gigajoule. Existing contracts inherited from government-owned British Coal are thought to be worth 150p a gigajoule, while the world market price is 100p-105p.
Eastern is part of the Energy Group, subject of an agreed bid by the US utility, PacifiCorp. The Monopolies and Mergers Commission report on the takeover is due to be delivered to the President of the Board of Trade Margaret Beckett next Friday.
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