Post on 25-Aug-2020
UK COAL PLC
PRELIMINARY RESULTS
YEAR ENDED 31 DECEMBER 2003
1
2003 Highlights
• Turnover for year £563.9m (2002: £596.6m)
• Loss before tax and operating exceptionals of £7.6m (2002: £8.4m profit)
• Profit after tax of £3.9m (2002: £81.8m loss)
• Cash inflow before use of liquid resources, financing and dividends of £39.1m (2002: £25.2m outflow)
• Dividend for the year 10p (2002: 10p)
• Coal sales from UK operations unchanged at 18.9m tonnes
• Unit costs in deep mines reduced despite continuing losses at Selby
• Increased property sales, generating a profit of £5.8m (2002: £2.0m)
• Underlying improvement in deep mines performance, good progress at Daw Mill
• Investment aid accepted worth £35.4m over the period 2003/05
2
Segmental Profit/(Loss)
Coal sales - Deep Mines (8.6) (5.9)Coal sales - Surface Mines 0.7 16.5Other associated activities 0.7 (2.3)Manufactured fuel 0.4 (0.6)Emissions trading 3.2 4.2Australia - coal sales (4.0) 1.8
- hedging loss 0.0 (2.5)Property activities - rentals & ongoing 1.1 0.9
- profit on sales 5.8 2.0Profit before interest and exceptionals (0.7) 14.1Net interest (6.9) (5.7)Profit/(loss) before tax and exceptionals (7.6) 8.4Exceptional items 6.3 (91.5)Loss before taxation (1.3) (83.1)
2003 2002£m £m
3
Movement in Profit before Interest and Exceptional items
-30 -25 -20 -15 -10
-5 05
1015
£ m
illio
ns
2002
Coal priceM
ining costM
an. FuelEm
issions tra...Other
AustraliaProperty2003
4
Exceptional Items2003 2002
£m £mRedundancy (2.7) (60.3)Other closure items 0.7 (9.8)DTI contribution to Selby closure - 10.0Concessionary fuel - 4.5Net redundancy & closure costs (2.0) (55.6)Selby asset impairment - (20.2)Recovered/(Provided) against TXU debtor 6.5 (6.4)Provision against other amounts receivable (1.7) (9.3)Coal Investment Aid 3.5 -
6.3 (91.5)
5
Balance Sheet
Fixed assets 399.9 433.7Stocks 59.5 79.2Debtors 82.4 82.0Cash and short term deposits 60.4 60.9
Total Assets 602.2 655.8
Shareholders’ funds 222.5 228.1Provision for liabilities and charges 227.0 258.7Creditors 152.7 169.0
Total funds employed 602.2 655.8
Net gearing Nil Nil
31 Dec 2003 31 Dec 2002£m £m
6
Cash Flow
Operating loss (0.2) (79.5) Depreciation 52.6 59.3Impairment - 20.2Stocks movement 19.7 (7.3)Movement in debtors/creditors and provisions (30.9) 16.2Gov’t contribution to Selby redundancy 4.8 -Cash inflow from continuing operations 46.0 8.9Net interest and finance charges (0.1) 2.3Taxation 4.0 0.0Capital expenditure (19.1) (40.5)Capital sales (property/plant & machinery) 10.4 4.1Purchase of trade and assets (2.1) -Cash flow before use of liquid resources, financing and dividends 39.1 (25.2)
2003 2002£m £m
Includes £8.6m in respect of TXU claim receipt
7
• Current year disclosure only - full implementation will be in 2005
• Two defined benefit schemes (ex TUPE employees) which were effectively closed to new members in 1995
• Actuarial review (based on long term view of assets and liabilities at Dec 2000
— IWMPS 101% funded
— IWCSSS 87% funded
• Potential volatility as asset value will be dependent on market performance -FRS17 gross liability £102.7m (2002: £108.1m)
• Actuarial review underway as at Dec 2003 (results due Q3 04). New funding rates from 2005
FRS 17 – Retirement benefits
8
UK Steam Coal Supply and Consumptionexcluding coking - 2003
2003
0
10
20
30
40
50
60
Mill
ion
Ton
nes
Consumption Supply
2002
0
10
20
30
40
50
60
Mill
ion
Ton
nes
Consumption Supply
Electricity Dom./MFP Industry
UK COAL UK Others ImportsSource: Dti Energy Trends
9
Contracted ESI Sales and Projected ESI Market
0 5 10 15 20 25 30 35 40 45 50
2007
2006
2005
2004
Million tonnes
Projected burnFirm sales
10
NW Europe Spot Steam Coal Price(Delivered Into Deep Water Ports)
20
30
40
50
60
70
80
91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06
$ / t
onne
Actual
TFSForward
Source: McCloskey Coal / TFS
Basis: <1%S, CIF NW Europe, 6000 Kcal / Kg NAR (25.122 GJ/Tonne)
11
UK Electricity Market• Rising electricity prices – reflecting station withdrawals and
security of supply concerns
• Lower gas generation - high gas prices
• Electricity consumption 1% higher than 2002
• Coal burn increased by 12% year on year
• Forward electricity prices continuing to firm reflecting price of carbon and increased fuel input prices
12
Medium Term
• Unlikely to see new station build in short term, (Ilex Consultants suggest no new entry before 2009)
• Short term market determined by traditional economics within NETA
• Price of carbon will determine potential for coal
• New FGD plants will increase available market for UK Coal
— West Burton (2GW), Cottam (1GW), Eggborough (1GW) together increase UK FGD capacity by 67%
• LCPD risk from 2008
13
Large Combustion Plant Directive• European legislation. Applies from 2008
• Government to choose between “Emission Limit Values (ELV)” and “National Plan” approach. Government have provisionally lodged a National Plan with the Commission, but are still considering the options available
• UK COAL prefers the ‘ELV’ option. Delivers the same environmental objectives without damaging the indigenous mining industry
• UK COAL is active in a concerted lobbying campaign
14
Deep MinesProduction - 2003
15.2
1.4
1.7
1.5
1.9
0.7
1.3
0.7
1.4
1.6
1.2
0.7
0.8
0.3
Mil tonnes
2002
14.8Total
1.1Wistow (Selby)
1.6Welbeck
1.5Thoresby
1.6Stillingfleet (Selby)
0.9Rossington
0.9Riccall Combine (Selby)
-Prince of Wales
1.4Maltby
1.6Kellingley
1.2Harworth
0.6Ellington
2.2Daw Mill
0.2Clipstone
Mil tonnesDeep Mines:
2003
Ceased production in April 2003
Ceased production in August 2002
15
Deep MinesOperational Review
• Ongoing mines returned 2003 Q4 costs of £1.09Gj
• Flat line management structure implemented July 2003
• Maltby flexible working has increased planned face MAT by 34%
— Kellingley offers increased MAT from 5th April 2004
• Daw Mill better performance in 2003 having passed through the geological feature and known fault - production 2.2m tonnes (2002: 0.8m tonnes)
• Selby complex continues to underperform – Geological issues
• Impact of geology necessitated revised mining plans at Welbeck and Rossington
• Project 105 initiatives continue
16
Deep MinesProject 105 improvement initiatives
• Five integrated themes for focus in 2004 comprising 22 projects 1. Performance Improvement
2. Skills and Process Development
3. Performance Management (inc Risk and Data management)
4. Communication
5. Cost Reduction
— Themes divided into 22 “targeted” projects led by UKC staff
17
Investment Aid
• UK Coal have accepted seven offers totalling £35.4m — Daw Mill - £9.7m— Kellingley - £7.2m— Welbeck - £5.2m— Harworth - £4.7m— Rossington - £3.3m— Thoresby £2.9m— Maltby £2.4m
18
Surface MiningOperational Review
• Production of 3.1m tonnes (2002: 4.3m tonnes)
• Planning permission for 350,000 tonnes received during year
• 2.7m tonnes awaiting approval from Mineral Planning Authority
• Two new site extensions commenced production
• 3.5m tonnes to be submitted for approval in 2004
• Focus to be on brownfield sites which have added development potential following mining operations
19
Surface MiningOperational Review
• Profitability hit by lower coal prices and reduced production from high volume sites
• Continuation of difficult planning environment will further impact on production volumes going forward
20
PropertySales 2003
• Proceeds from disposals £9.7m (2002: £2.2m)comprising:
Rockingham £1.7mWimblebury £3.0mTetron Point £4.1mOther £0.9m
• Profit on disposals £5.8m (2002: £2.0m)
21
PropertyPlanning Approvals 2003
• 50 acres of land received detailed planning consent — Tetron Point— Waverley AMP— Donisthorpe— Arkwright
• Waverley / Orgreave - 80 acre planning application for Advanced Manufacturing Business Park
- Orgreave Public Consultation for further 350 acres - residential, B1 and B2
- Next steps• Cannock DP - Planning Application made
22
PropertyPlanning - Current Progress
• Wardley (150 acres, B2 B8)
• South Leicester (30 acres, B2,B8)
• Prince of Wales (60+ acres, B1,B2,B8+ residential)
• North Gawber (25 acres, residential /mixed)
• Yorkshire Main (32 acres, residential)
• Lounge (100 acres, B2,B8)
• Houghton Main (58 acres, B1,B2,B8)
• Denby Hall (60 acres, B1,B2,B8)
• Tetron Point (60 acres, B1,B2,B8,leisure)
• Rockingham (15 acres, B1,B2,B8)
• Waverley/Orgreave (350 acres,B1,B2, residential)
• Cut Acre (200 acres, B1,B2 B8)
• Orchard (90 acres, residential /mixed)
Development classification: B1 = Office, B2 = Industrial, B8 = Distribution
23
PropertyOperational Rental Review
• Income - £3.8m (2002: £3.4m)
• Business parks rental demand:-— Asfordby (South Leicestershire) - units 90% let— Whitemoor (North Yorkshire) - units 58% let— North Selby (Yorkshire) - units 34% let
• Agricultural tenancies
24
PropertyOutlook
• Securing value from development sites• Agriculture - increase rentals through diversification• Business Parks - build for pre-let
— Improving site quality / services— Increasing percentage occupation— Rent reviews— Selby sites
• New sites - working on new planning allocation / zoning
25
Outlook
• Sharp rise in world coal prices offset partly by weakening dollar
• Limited upside from strong coal price due to forward contracted sales for 90% of 2004 and 50% of 2005 production
• Geological problems at Rossington and Welbeck will add around 3% to unit costs
• Slow start to 2004 production – expected to recover during year
• Continued effort to reduce unit costs with Project 105 initiative and closure of loss-making Selby complex
• Continued focus on property both from increased sales and rentalincome and also adding further value to these assets
26
Appendices
27
UK Generation Forecast
050
100150200
250300350400
TWh
2003 2004 2005 2006 2007 2008
CoalOilGasNuclearRenewables
53mtce
47mtce
42mtce
41mtce
40mtce
Source:Dti Energy Trends – actual; UK COAL forecast of energy mix
39mtce
28
Coal Consumption 2003excluding coking
3% 2%
95%
ESI
Domestic &MFPIndustrial
Source: Dti Energy Trends
56.4m tonnes (2002: 52.1m tonnes)
29
EU Emissions Trading Scheme• Government reaffirmed 20% CO2 reduction by 2010,
significantly higher than Kyoto 12.5% reduction of GHGs.
• Electricity generators to be responsible for achieving additional reductions of 5.5 MtCO2 by 2010, over and above projected business as usual.
— “power generation faces limited international competition ….and has relatively good, low cost abatement opportunities.”
• First phase 1st January 2005 – 31 December 2007. Target reduction in line with a 16.3% by 2010.
• Free allocation to coal stations equivalent to around 38mt per year during first phase.