Land values boost worth of UK Coal
UK COAL, the country's largest coal producer, should see a four-fold increase in profits this year thanks to a steep rise in the value of its land.
The Doncaster-based company said its property portfolio had increased in value by £69m to £415m over the year despite significant market turbulence in the final quarter.
Chief executive Jon Lloyd said he saw the recent property downturn as a short-term issue.
"The UK still has a structural shortage of homes. The Government has a target of building 300,000 homes a year and it's only building 200,000 at the moment. We are in a very strong position to supply brownfield sites," he said.
Earlier this month the group gained planning consent for 250 homes and 160,000 sq ft of industrial space at Edlington, Doncaster. The scheme should provide 250 jobs at nearby company Polypipe Building Products.
Negotiations continue on a major scheme at the Prince of Wales colliery site at Pontefract, where the council is expected to grant planning approval shortly.
UK Coal is also hopeful of getting Government approval for a major housing scheme at Rossington near Doncaster.
Over recent years the value of the group's 46,000 acres of land has eclipsed its mining profits.
UK Coal estimates that its land will be worth £926m by 2012 once planning consents come through. It has 76 projects spread across the country from Newcastle to Leicester and across the M62 corridor.
The group's coal mining operations have been hampered by contracts signed four years ago which seriously undervalue the price of the group's coal.
Its coal prices over the year increased 15 per cent to £1.62 per gigajoule (GJ), but it should be selling for £2.50-£2.60 per GJ.
"It's all down to these old contracts. They were entered into in good faith but commercially they are wrong. We estimate that we will sell coal at between £1.75 and £1.80 per GJ in 2008," said Mr Lloyd.
In time the old contracts will reach full term and UK Coal can arrange to sell its coal at a fairer price. It has already renegotiated three contracts which will improve prices in 2008.
UK Coal's deep mining operations fell from 7.5 million tonnes to 6.4 million tonnes over the year. This was expected after a fatality at Daw Mill colliery, near Coventry, last January closed the mine for three months.
The group has also had problems at Kellingley, near Knottingley, where productio n has slowed down until higher-quality reserves are accessed in 2009 in the Beeston seam.
Surface mine production almost trebled from 600,000 tonnes to 1.5 million tonnes thanks to three new surface mines which began production in the fourth quarter.
In the year to December 31 the group expects to make pre-tax profits of £69m, a four-fold increase from 2006 when it made £17.6m.
It operates four deep mines in the Midlands and Yorkshire and six surface mines in the North East, the North West and the Midlands. Over 90 per cent of the company's annual output of coal is sold to generate around six per cent of Britain's electricity.
In November the group said it had secured a contract for the final reserves at its 95-year-old Welbeck colliery. The Welbeck mine at Mansfield, Nottinghamshire, secured a new deal to supply coal to power generator EDF Energy over the next two years.
Chief executive Jon Lloyd said he saw the recent property downturn as a short-term issue.
"The UK still has a structural shortage of homes. The Government has a target of building 300,000 homes a year and it's only building 200,000 at the moment. We are in a very strong position to supply brownfield sites," he said.
Earlier this month the group gained planning consent for 250 homes and 160,000 sq ft of industrial space at Edlington, Doncaster. The scheme should provide 250 jobs at nearby company Polypipe Building Products.
Negotiations continue on a major scheme at the Prince of Wales colliery site at Pontefract, where the council is expected to grant planning approval shortly.
UK Coal is also hopeful of getting Government approval for a major housing scheme at Rossington near Doncaster.
Over recent years the value of the group's 46,000 acres of land has eclipsed its mining profits.
UK Coal estimates that its land will be worth £926m by 2012 once planning consents come through. It has 76 projects spread across the country from Newcastle to Leicester and across the M62 corridor.
The group's coal mining operations have been hampered by contracts signed four years ago which seriously undervalue the price of the group's coal.
Its coal prices over the year increased 15 per cent to £1.62 per gigajoule (GJ), but it should be selling for £2.50-£2.60 per GJ.
"It's all down to these old contracts. They were entered into in good faith but commercially they are wrong. We estimate that we will sell coal at between £1.75 and £1.80 per GJ in 2008," said Mr Lloyd.
In time the old contracts will reach full term and UK Coal can arrange to sell its coal at a fairer price. It has already renegotiated three contracts which will improve prices in 2008.
UK Coal's deep mining operations fell from 7.5 million tonnes to 6.4 million tonnes over the year. This was expected after a fatality at Daw Mill colliery, near Coventry, last January closed the mine for three months.
The group has also had problems at Kellingley, near Knottingley, where productio n has slowed down until higher-quality reserves are accessed in 2009 in the Beeston seam.
Surface mine production almost trebled from 600,000 tonnes to 1.5 million tonnes thanks to three new surface mines which began production in the fourth quarter.
In the year to December 31 the group expects to make pre-tax profits of £69m, a four-fold increase from 2006 when it made £17.6m.
It operates four deep mines in the Midlands and Yorkshire and six surface mines in the North East, the North West and the Midlands. Over 90 per cent of the company's annual output of coal is sold to generate around six per cent of Britain's electricity.
In November the group said it had secured a contract for the final reserves at its 95-year-old Welbeck colliery. The Welbeck mine at Mansfield, Nottinghamshire, secured a new deal to supply coal to power generator EDF Energy over the next two years.