which may cast doubt about the Company’s ability to continue as a going concern. The interim financial statements do not include the
adjustments that would result if the Group were unable to continue as a going concern” 5.
In January the company announced further delays in meeting coal targets, reduced levels of coal production plus expected losses of £115m for the last financial year.5 Further evidence about effect of the economic downturn also came in January with the latest set of statistics on coal usage at power stations indicating that coal stocks at power stations had untypically risen in the last quarter to their highest level since 1994, to 23m tonnes which MOPG has already calculated is equal to approximately 6 months supply of coal for generating purposes.6
Taking firstly the worst case scenario discussed earlier, that after 2016 the total size of the coal market for generating purposes will be 19m tonnes (pgs 14-15). If domestic producers maintain their share of this shrunken market at 30% (Table 2) and UK Coal plc do not continue to loose market share as previously discussed then it will need to produce just 2.5m tonnes rather than the 7.7m tonnes produced in 2008..
However, as already discussed, we live in an era where governments are attempting to reduce both the use of energy and the emission of pollution and are willing to use fiscal means to do so, as recently announced in the Pre Budget Statement in 2009 and we can expect more government intervention in this area in the future that may well reduce the demand for energy and the demand for coal as part of the energy mix. UK Coal’s prospects at present still seem to contain ‘material uncertainties’.
This level of ‘material uncertainty’ about the future viability of UK Coal plc raises more fundamental questions about whether the Government’s stated policy of securing Energy Security by encouraging diverse sourcing of energy supplies is easily achievable. A recent independent review of Energy Policy undertaken by The Right Hon Malcolm Wicks MP the Government’s Special Representative on International Energy, for the Government, suggested that to achieve Energy Security Britain needed to produce 20m tonnes of indigenous coal. 6 If the major British supplier of coal, UK Coal plc
continues to reduce its level of coal output,
continues to rack up such losses, especially on its deep mine coal production and,
and has the quality of its land bank questioned
how long will it be before real questions are raised about whether, under such circumstances, the Energy Security goals set by the Government can be achieved?
UK COAL plc: AN ALTERNATIVE REPORTPAGE 31