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The Restructuring and Privatisation of Coal in the UK. Lessons for Ukraine
- 2. Sharp falls in world coal prices Falling demand for coal in the UK as a result of new CCGT capacity Government committed to privatisation and had already privatised the Electricity industry Colliery closures following the strike of 1984 but not sufficient to keep pace with falling demand and prices Coal in Ukraine Slide 2
- 3. New contracts with the Electricity Supply Industry (ESI) were at much lower volumes and tonnages British Coal (BCC) attempted to reduce capacity drastically to reduce demand Collieries closed at this stage were offered to the private sector under lease/licence arrangements. 9 were eventually transferred Coal in Ukraine Slide 3
- 4. BCC’s remaining deep mines and opencast sites were split into 5 regional companies 7 collieries that could not be accommodated in the main sale were placed on care and maintenance (C&M), and offered as stand- alone units alongside the main privatisation Other activities (such as and manufactured fuel plants, domestic coal distribution, technical services and so on) were sold separately Coal in Ukraine Slide 4
- 5. Importantly, the Government decided to keep the rights to the coal in the ground, so buyers were granted a licence to work the coal. It set up the Coal Authority to: ◦ License coal extraction ◦ Hold land that might be needed for mining ◦ Maintain records ◦ Deal with historic mining liabilities not associated with the assets sold. Coal in Ukraine Slide 5
- 6. Detailed Information Memoranda were produced for all the assets to be sold and bids invited All the regional companies were bought plus plus 4 C&M collieries, often in competitive bidding. One company bought all three English companies Contracts were finalised and the sales completed at the end of 1994 Coal in Ukraine Slide 6
- 7. Lease/Licence C&M Main privatisation Form of sale Standalone collieries (9) Standalone collieries (5) Packages of collieries (15) and opencast Physical assets Leased Sold Sold Land Leased Sold Sold Workforce None None Transferred under TUPE ESI contracts None None 3.5 year contracts Mineral rights Retained by the Coal Authority Historic liabilities Retained by the Coal Authority Coal in Ukraine Slide 7
- 8. Public Offering: rejected because of losses and risk Selling best mines first: rejected because it would leave increasingly difficult residue with Government Selling all mines singly: because of complexity and loss of potential value Chose simultaneous trade sales of all government shares in whole industry
- 9. Sales completed, significant income received But: ◦ Little international interest in the sale ◦ Value enhanced by: Coal stocks Contracts Land ◦ Value achieved small compared to: Book value Government spending on restructuring