Coal heads for sell-off without power deals
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Your support makes all the difference.BRITISH COAL could shrink to half the size of even the most pessimistic current estimates, if the Government goes ahead with secret plans to privatise the industry regardless of whether it signs vital contracts with the electricity generators.
Without the supply contracts, the privatised coal business would find it hard to survive in the private sector, and would have to shed thousands more jobs on top of the 30,000 redundancies to be announced on Tuesday. However, the Government's willingness to press ahead with privatisation without the contracts is a sign of its determination to sell off the industry come what may.
The move is bound to provoke a political row and a head-on clash with the unions, coming on top of the massive cuts British Coal will announce this week - the closure of about 30 of its 50 remaining deep mines. But these shutdowns - which will devastate entire communities, particularly in Yorkshire and the Midlands - take no account of closures that a failure to sign power contracts would necessitate.
British Coal employs 51,000 people, of whom 41,000 are miners, compared with 220,000 in the mid-1980s. The planned closures assume that the company will secure contracts with the electricity generators to supply 40 million tonnes next year, falling to 30 million a year for the four following years. This compares with 65 million tonnes this year.
Ministers at the Department of Trade and Industry accept, however, that the contract negotiations, which have dragged on for months, may not succeed. This would mean that British Coal would have no medium-term security and would be subject to market forces as soon as the existing contracts expire in the spring.
Although the generators, National Power and PowerGen, agreed tonnages and prices last month, contracts cannot be signed until the regional electricity companies agree to buy the power generated from the coal. And the regional companies, many of which have long-term contracts to buy electricity generated from new gas-fired plant, have yet to sign.
Timothy Eggar, the energy minister at the DTI, is believed to be furious at the lack of urgency shown by the regional companies. He is thought to be concerned about the impact of the continuing uncertainty on miners' morale.
Ministers believe that the contracts would dictate the size of the coal industry, not its ownership. But they are still applying pressure on the electricity companies to agree a deal.
Almost all the regional companies are thought to be willing to sign contracts, albeit grudgingly. But two - believed to be Manweb and Yorkshire - are still resisting. Agreement from all 12 is deemed necessary to proceed.
One big problem is how the electricity generated from the coal should be shared out among them. Another is a fear that the watchdog, Offer, will penalise them for not buying their electricity as economically as possible.
(Photograph omitted)
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