Treasury claims summit breakthrough on coal as generators agree new deal

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The Treasury last night claimed to have achieved a breakthrough in the coal crisis by persuading the power generators to bring forward delivery of coal stocks next year. But as Chris Godsmark explains, the Treasury's attempt to broker a solution to the coal crisis has privately met with scepticism from the generating groups.

Geoffrey Robinson, the embattled Paymaster General, held talks lasting four hours with Richard Budge, chief executive of RJB and the heads of the three big coal fired generators, Keith Henry from National Power, Ed Wallis from PowerGen and John Devaney from Eastern Group.

The generators had hoped to hear details of the Government's plans for a three month stay of execution for looming pit closures, which could involve up to 5,000 job losses. The proposals, revealed by Tony Blair, the Prime Minister, last week, would involve the generators building up bigger stockpiles of coal after existing long term supply contracts with RJB expire at the end of March.

A Treasury statement last night said National Power and Eastern Group, which have already signed new contracts to buy around half their current order from RJB, had agreed to "accelerate deliveries" of coal between April and June.

The statement added: "Arrangements for coal deliveries up to the end of June 1998 have been agreed. This gives the Government the opportunity to carry out the wider ranging reviews on Energy policy it has put in hand."

Officials said National Power would bring forward delivery of 350,000 tonnes between April and June. This represents a limited concession compared with a total order of 8 million tonnes. Eastern would accelerate delivery of 250,000 tonnes, compared with contracts to buy 4 million tonnes a year. National Power confirmed it had agreed to "facilitate" the deal.

PowerGen, which has yet to conclude negotiations with RJB, had agreed to buy at least 1.1 million tonnes from the coal producer. Mr Wallis, PowerGen chief executive, had previously warned he could buy all his coal from abroad. The Treasury said the new deal would be "at a price acceptable to both parties."

Another element to the agreement involves RJB extending redundancy terms to worker from April to June which offer more generous compensation packages. The current redudancy deal, agreed at privatisation, expires with the coal contracts at the end of March.

The Treasury said RJB would "use this period to continue to reduce operating costs and to improve their competitiveness. Any increase in pithead stocks in the April to June period will be financed by RJB."

John Redwood, the shadow industry secretary, yesterday accused Mr Robinson of "bungling" by intervening in coal contracts which should have been left to the private sector to sort out.

He continued: "Miners will not be grateful for a very temporary stay of execution which serves only to delay and cut their redundancy money." Mr Redwood said the Treasury should stop interfering and leave energy policy to the energy minister, John Battle. "Geoffrey Robinson should stand aside," he said.

An RJB spokesman said last night that it was unlikely to press ahead with pit closures until the three month deal ended next summer. By then the group, which bought British Coal's English pits on privatisation three years ago, hopes to have gained contracts to supply coal to Spain and Germany. The government has been lobbying to persuade other European countries to buy UK produced coal.