Energy security fears a contract boost for UK Coal

According to the UK’s largest coal producer, increased fears over energy security has rallied demand for coal.

UK Coal has signed and extended new long-term contracts with the big four in electricity generation.

The shares in the group reached a two-month high closing up 8.8 percent at 115p.

For 2008, the company posted a pre-tax loss of £15.6 million, compared to £69 million profit the previous year, as the current economic climate has hampered the coal price.

The new contracts which have been signed amount to 36 million tonnes and have been signed at far higher prices due to the energy price fear, meaning that they are ahead of the current external marker as energy companies want the security of local coal and, in return, are willing to pay a premium for it.

The company expects the cash flow benefits from the contracts to be £85 million in 2009, with a further £15 million next year, as it plans to step up production, hoping to produce 8.3 million tonnes this year, compared to 7.9 million tonnes in 2008.

I think it's normal that there is fear in this periode of economic crisis. That is why energy companies want to be sure that they will have enough coal to produce their energy. So according to me it is normal that they are willing to pay a prenium for the coal.

It's logical when companies want to pay more for the coal, that UK coal will have a contract boost, which means that UK coal will also have better econmic figures.


Source: http://www.yorkshirepost.co.uk/businessnews/Energy-security-fears-a-contract.5211995.jp


Dominique Van Huffel