THE UK’s biggest coal producer has landed a deal to supply 3.5m tonnes of coal to Scottish & Southern Energy’s Ferrybridge power station in West Yorkshire.
Under the five-year contract, energy supplier SSE will also make an up-front loan to help UK Coal boost production at its Kellingley and Thoresby mines.
The deal comes after UK Coal made moves to renegotiate supply contracts with existing major customers such as EDF Energy, E.ON and Drax.
The better prices struck will help fund new investment and provide more certainty over revenues after an “extraordinarily volatile” year for coal prices.
UK Coal has deep mines at Daw Mill in Warwickshire and Welbeck in Nottinghamshire alongside Kellingley and Thoresby, as well as five surface mines.
Chairman David Jones said: “The new coal contracts, as well as the planned impact of our deep mines investment programmes and the growing strength of our surface mining provide a more positive and more financially underpinned outlook.”
The firm made operating profits of £1.8m in 2008 compared with £72.1m the previous year when results were boosted by property gains and a one-off tax credit.
Sales last year were up by 19.5% to £392.5m, reflecting an 18.5% rise in average prices to nearly £50 a tonne.
Full-year production of 7.9m tonnes of coal was matched by a first-quarter haul of 1.7m tonnes – in line with the previous year.
As well as fluctuating coal prices, the firm was also hit by equipment breakdowns and the difficult geological conditions at Kellingley and Thoresby – prompting a profits warning last October.
Shares recovered some momentum following news of the SSE deal. UK Coal also estimates its property portfolio should double in value to about £866m by 2014.
UK Coal, which is based at Harworth, near Doncaster, employs about 3,150 staff.