UDM warns Budge over pay

RICHARD BUDGE, the Government's preferred bidder for the bulk of Britain's coal industry, is facing a fresh setback after the Union of Democratic Minworkers warned it is heading for a serious confrontation with his company, RJB Mining.

The UDM was part of a consortium that unsuccessfully bid for two of the English coal regions in competition with RJB. It expects trouble if RJB pursues plans for radical changes in miners' pay and conditions.

Neil Greatrex, president and general secretary of the UDM, said: 'Mr Budge is going to want a good day's work on half the pay. I can see that creating problems.'

The union's warning comes as scepticism grows in the industry and the City about the amount offered by RJB to win its bid, which is thought to be pounds 900m. This figure is believed to be 50 per cent greater than the next highest bidder, which has prompted analysts to question whether Mr Budge, the company's chief executive, can make a satisfactory return on the money for new investors.

That concern comes on top of disclosures by Cork Gully, the receivers to Mr Budge's family company, of which he was a director until 10 months before it failed, that unsecured creditors are unlikely to get back any of the pounds 65m they are owed.

Mr Budge's brother, Anthony, who was chairman and managing director of AF Budge, the family firm, said that he did not want to make any comment about the company's collapse when contacted at his Nottinghamshire offices.

Richard Budge, who spent some of Friday in meetings with NM Rothschild, the Government's adviser, also declined to comment. An adviser said the issues had already been dealt with in the City.

AF Budge went into receivership in December 1992, two years after two City institutions, Charterhouse Bank and the Prudential, injected pounds 40m into the group. When the receivers went in, they found a string of more than 50 subsidiary companies that had invested in a number of unusual and unconnected businesses. These included investments in docklands property, antique books, military hardware, a multi-million pound yacht, racehorses, an airport and a joint venture in Doncaster racecourse. Mr Greatrex said that his members pay and conditions will be considerably worse under the new ownership, unless Mr Budge changes his current plans. UDM miners account for half of the 7,000 mining employees who Mr Budge will inherit.

Mr Greatrex said: 'I know that they are not going to like it. It may mean we have to fight him.' He said that Mr Budge plans to scrap collective bargaining and the incentive or productivity-based schemes, which the UDM says benefit both the mine operator and the workforce.

He said he has invited Mr Budge to address union officials at a meeting in Nottingham next Saturday. 'They can hear it from him in person. We also want to talk to Mr Budge again to see if he can act in a more reasonable manner.'

Both the UDM and the National Union of Mineworkers have welcomed the fact that Mr Budge is prepared to recognise the unions. However Mr Greatrex is now very concerned about the direction that pay and conditions might take.

Separately, industry experts are casting increasing doubts on Mr Budge's view of the coal market at the end of the decade and beyond. Mr Budge believes that annual sales of 45 million tonnes to the electricity generators, National Power and PowerGen are achievable, compared with the 30 million tonnes they buy from British Coal today. The size of the market is likely to be key to RJB raising a planned pounds 1.1bn, including pounds 600m of debt, to finance its pounds 900m bid.

McCloskey Coal Information Services, a respected industry consultancy, forecasts a slump in demand for coal from the generators in 1998/99, when the current coal contracts run out, partly because National Power and PowerGen have very high coal stocks. MCIS also predicts a continuing decline in coal purchases because of competition from gas and nuclear power, and environmental constraints.

In an article in its latest newsletter entitled The English purchase - a Budge Too Far?, MCIS paints a tough financial picture for RJB. It says that if Mr Budge is to pay back the pounds 600m debt plus interest within the lifetime of the current contracts with the generators - and offer shareholders a 10 per cent return - he would have to produce coal for power stations at a price of 95p a gigajoule. This compares with an average of about pounds 1.10 to pounds 1.20 at British Coal pits today.

(Photographs omitted)