A FORMAL announcement may be made next week that Scottish Coal has signed a #400m five-year agreement to supply the majority of the long-term coal requirements of
ScottishPower, writes Andrew Wilson.
It is believed the group will provide perhaps 2.3 million tonnes annually out of the three million tonnes being contracted, with the remainder coming from other Scottish coal producers.
Scottish Coal's Longannet complex will be responsible for about two-thirds of the coal from what is now the only deep mine in Scotland.
The rest will be from the nine open-cast mines.
The deal is unusual in that it is front-end loaded, so Scottish Coal will receive a disproportionate amount in the early years of the contract. That will finance development of the seams known as the Kincardine Reserves stretching under the Firth of Forth.
The final details are still being worked out, and Scottish Coal made no comment yesterday.
The Kincardine seams cannot be developed out of the company's current cashflow and financial reserve, so some assistance was imperative.
ScottishPower will gain from the pricing on the other side of the bargain.
The agreement safeguards the future of Longannet, which will supply additional tonnages to ScottishPower from 2000 onwards as it and Hydro-Electric benefit from the interconnector being built by National Grid in Yorkshire.
The following year, the link with Northern Ireland will be put in place, which will result in an additional 250mw of power, requiring 600,000 tonnes of coal.
ScottishPower said the contracts which took effect from April 1 for low-sulphur coal would significantly reduce costs, making good some of the damage done by lower customer prices and extending the life of the Cockenzie power station to 2010 and Longannet to 2020.
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