* UK Coal in talks with creditors to stay solvent
* Declines to confirm FT report of new debt restructuring
* UK industry struggling to survive in tighter market
By John McGarrity
LONDON, May 1 Britain's largest miner UK Coal
said on Wednesday it was in talks with creditors to fend off a
collapse that would cost up to 2,000 jobs and force power
stations to scramble to cover their fuel needs.
Heading a domestic coal sector that already looks under
threat, the miner warned in February that a fire that closed its
largest mine, Daw Mill, could harm the viability of the whole
company unless it got outside help from government or creditors.
"We remain positive that we have an underlying profitable
business," UK Coal, part owned by Coalfield Resources,
said in a statement after the Financial Times reported it had
proposed a voluntary liquidation and the handing over of its
remaining mines to a new company.
"I hope we are close to securing a way forward for our
remaining mines. There will undoubtedly be some difficult
decisions as we have had to look at all possible options," chief
executive Kevin McCullough added.
A source with one utility said the company had avoided a
debt default and closure of its operations last December after
completing a major debt restructuring with shareholders and
renegotiating terms with power generators.
The Financial Times story said creditors including power
companies EDF, Drax Group, SSE and E.ON
were being offered 32 pence for every pound of debt,
with the generators having prepaid for coal supplies.
But UK Coal declined to confirm it had made any kind of firm
offer to creditors and Drax - which operates Western Europe's
largest single power station in northern England - said later
that it did not have balance sheet exposure to UK Coal.
Analysts said that if any of UK Coal's mines were to close,
utilities would have to buy more of the fuel from overseas.
"UK Coal is a key supplier and therefore its proposed
voluntary liquidation is a concern," Liberum Capital said in a
British miners have been hit hard by falling international
prices, competition from U.S, Colombian and Russian imports, and
rising costs for equipment and fuel. Scottish Coal went into
liquidation with the loss of almost 600 jobs earlier this month.
Another major producer, Hargreaves, has secured a 42 million
pound cash injection from shareholders to buy mines from rivals
and develop new sites.
But Britain is likely to burn less coal this year as old
power plants are brought offline under EU environmental
regulations and producers, utilities and unions have called for
a government 'coal strategy' to reboot the industry.
"Britain's coal industry has long been far too fragmented,
but it may be difficult for some of these mines, especially the
deep shaft ones, to find a buyer," one former industry lobbyist
told Reuters, asking not to be name.
"The key to UK Coal's survival will be how much it gets in
an insurance payout for the Daw Mill fire."