SCOTTISH Coal will sign new long-term supply agreements with Scotland's two electricity companies early next week worth more than #450m, power industry sources said yesterday.
The separate agreements with ScottishPower and Scottish Hydro-Electric will provide a guaranteed market for 2.6 million tonnes of coal per year for at least five years.
They will also enable Scottish Coal to fund the development of new seams underneath the Firth of Forth at its Castlebridge deep mine in Fife. The mine is next door to ScottishPower's
Longannet power station and
provides most of its fuel.
Sources said ScottishPower would sign two agreements with Scottish Coal - one six-year contract to buy 1.7 million tonnes of coal per year from the Castlebridge mine, and one five-year contract to buy 750,000 tonnes of coal per year from the company's opencast pits in Central Scotland.
Together these will be worth around #400m.
Hydro-Electric will, meanwhile, sign a six-year contract worth more than #50m to buy 300,000 tonnes of coal a year. The Perth-based company does not have a coal-fired power station of its own, but it has the right to use up to a sixth of Longannet's 2400-megawatt generating capacity.
The deals, which have been under negotiation for several months, represent a life saver for the remnants of Scotland's coal industry. In particular they will secure several hundred jobs at Castlebridge, Scotland's last deep mine.
The underground seams being worked there only have enough coal for another three years' production. Scottish Coal needs to spend at least #15m on developing the Kincardine reserves under the Forth to extend the mine's life until 2020.
However, it could not undertake such a project without the new supply agreements in place.
Scottish Coal is likely to earn less per tonne from the new contracts than it did from its previous long-term agreements with the generators which expired at the end of March.This simply reflects the harsh reality of lower world coal prices. But Scottish Coal's earnings will be weighted towards the early years of the new contract to help it fund the investments needed at Castlebridge.
News that the much delayed contracts are finally ready for signature emerged as Scottish Coal announced the appointment of a new sales and marketing director.
Chris Banks, 38, joins the
Livingston-based company from Celtic Energy, a Welsh mining firm.
He replaces Andrew Horsler, who played a key role in negotiating the new generator contracts before leaving in January.
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