The Mail on Sunday (London, England), December 7, 1997 | Go to article overview
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SENIOR Labour ministers are trying to broker a [pounds sterling]1 billion deal allowing generator PowerGen to buy a stake in Midlands Electricity.

In return, PowerGen would purchase larger supplies of coal from beleaguered RJB Mining, where 5,000 pit jobs are under threat.

Dick Caborn, Minister for the Regions, is behind the controversial move, but has the backing of Deputy Prime Minister John Prescott, according to industry sources.

PowerGen tried to buy Midlands last year, but the bid was blocked on competition grounds by Ian Lang, then President of the Board of Trade.

In recent weeks PowerGen chairman Ed Wallis has made no secret of his ambition to buy a regional electricity company (REC).

The bulk of RJB's coal is bought by the three big UK generators -PowerGen, National Power and Eastern Group. But contracts expire in March and National Power and Eastern have said they will substantially cut the amount of RJB coal they will buy.

Negotiations with PowerGen have been protracted, with the company hinting that it might bypass RJB entirely and increase imports of cheaper coal from mainland Europe.

Such a move would leave RJB, which now supplies 29 million tonnes to the three generators, with a market of no more than 12 million tonnes from Eastern and National Power.

RJB's chief executive Richard Budge says this would precipitate another programme of mass redundancies, with the closure of up to seven of the company's 17 deep mines. Budge also faces threats from cheaper and cleaner gas-fired power stations like PowerGen's site at Connah's Quay, Deeside, North Wales - opened in July by Trade President Margaret Beckett.

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