PPF welcomes government’s £10m UK Coal loan

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10 Apr 2014

The Pension Protection Fund (PPF) has welcomed the government’s £10m loan to UK Coal to help fund the closure of its two deep mines over the next 18 months.

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The Pension Protection Fund (PPF) has welcomed the government’s £10m loan to UK Coal to help fund the closure of its two deep mines over the next 18 months.

The Pension Protection Fund (PPF) has welcomed the government’s £10m loan to UK Coal to help fund the closure of its two deep mines over the next 18 months.

The government stepped in after UK Coal, which employs about 1,300 people, announced it was seeking investment needed to fund a managed run-down of its two deep mines – Kellingley Colliery in Yorkshire and Thoresby Colliery in Nottinghamshire – following “extremely difficult trading conditions”.

In July last year the PPF took UK Coal’s pension schemes into its assessment period following a restructuring of the firm. The PPF did not take an equity stake at the time, but received a dividend of approximately £2.2m and an income from the firm through a series of debt instruments, a secured £60m loan note and an unsecured £790m loan note.

In a statement, the lifeboat fund said it was “unfortunate” that UK Coal had not been able to profit from the opportunity offered by the arrangement.

It said: “We welcome the news that the government has been able to step in to support UK Coal in an orderly wind-down of its activities.

“It is unfortunate that, following various adverse events, the company has not been able to profit from the opportunity offered by the arrangement of July 2013, under which the PPF took on UK Coal’s pension schemes to protect pensions for its 7,000 members while enabling the business to continue trading.”

The PPF added that the announcement would not create additional liabilities and it expected to make a recovery from this arrangement such that it would be no worse off than if UK Coal had passed into immediate liquidation last July.

It added: “Our priority all along has been to protect the interests of the pension schemes that fund the PPF through their levies and of the nearly 200,000 people whose pension benefits we have secured. This includes those of current and former UK Coal employees, who will receive PPF compensation, either now or in the future, to provide them with security in retirement.”

As well as the UK government input, negotiations are underway between a number of other stakeholders, including Hargreaves Services, Harworth Estates (who will invest £5m each), the Department of Energy and Climate Change, the Department for Business, Innovation and Skills and the PPF as part of a private sector-led consortium that will invest in a managed closure of the business by late 2015.

UK Coal chief executive Kevin McCullough said: “We are pleased that the government has indicated a commitment to this deal which will give other parties the confidence to conclude their own positions.

“This proposal offers the best opportunities for our workforce, our customers and our suppliers.  Without the support to close the business on a phased basis to 2015, we would have been announcing an immediate insolvency and 2,000 job losses.”

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