LONDON (Reuters) - Britain's biggest coal producer, UK Coal, will be placed in administration and most of its mines and pension liabilities transferred to a state-run pensions agency in a bid to save 2,000 jobs, according to a union leader and a newspaper report.
The British coal industry has struggled to break even in recent years because of rising costs, hefty pension liabilities and competition from cheap imports from Colombia and the United States.
The future of UK Coal, which in 2012 produced over a third of Britain's domestic supply of the fuel, has been increasingly in doubt after a major fire in March prompted the closure of its largest mine, Daw Mill.
The government-run Pension Protection Fund (PPF) is expected to take over most of UK Coal's eight remaining mines, while miners' pensions will be cut by up to 25 percent, the Financial Times reported at the weekend.
UK Coal said it could not confirm or deny reports that it was near concluding a deal with the government to save jobs.
But Chris Kitchen, who leads the National Union of Mineworkers, said talks had taken place between the company and several government departments that would involve most of the company's 550 million pound pension liabilities being transferred to the government's pension fund.
"It is our understanding that the PPF will take a 90 percent share of UK Coal, meaning it will have ownership of collieries and surface mines that are viable economically," he said.
The government's pension fund would be required to take on liability for UK Coal's pensions anyway if the miner was to slide into bankruptcy, the union leader said, adding that miners' pension payouts would be cut by at least 10 percent.
The PPF said it was in talks about the future of UK Coal's operations and would seek to minimise the costs to its members from a transfer of UK Coal's liabilities.
The Department of Energy and Climate Change said government ministries were still working with UK Coal.
Editing by Pravin Char