July 3, 2008

ScottishPower Signs Biggest Scots Coal Deal for Longannet


SCOTTISHPOWER and Scottish Coal today unveil the largest coal contract in Scottish history, in a move that could create more than 100 jobs.

Under the five-year deal, likely to be worth up to GBP 700 million, Scottish Coal will supply fuel to ScottishPower's Longannet power station in Fife.

The amount of coal to be supplied will depend on the demand for electricity but it is understood it could be two million tonnes per year.

Scottish Coal operates nine opencast mines across the central belt and plans to bring its mothballed Broken Cross site, in South Lanarkshire, back into operation to cope with the demand. The firm said it already had planning permission to extend the existing mines.

Scottish Coal currently mines about four million tonnes a year. It supplies other power companies, including British Energy, Drax Power and Eon.

ScottishPower burns between four and six million tonnes of coal a year at Longannet and Cockenzie power station, in East Lothian.

The company said it was able to use Scottish coal at its Longannet station following a GBP 170m refit. The station's flue gas desulphurisation equipment, installed this year, will remove 98 per cent of the sulphur dioxide from the emissions of three of its four power units.

ScottishPower said it had previously imported foreign coal because of the high sulphur content of the Scottish fuel.

The utility giant added it "constantly reviewed" its coal supply contracts and that Scottish Coal had secured the new deal following months of discussions.

Ignacio Galn, chief executive of Iberdrola, ScottishPower's Spanish owner, said: "Coal generation has a significant contribution to the security of electricity supply in the UK. At the same time, Iberdrola is committed to developing the best technologies that will deliver low-carbon generation in this country."

This week, a consortium led by ScottishPower entered the UK government's competition to develop the UK's first commercial scale carbon capture and storage project.

Brian Staples, deputy chairman of Scottish Resources Group, which owns Scottish Coal, said: "The coal we will supply is all mined in Scotland, and it will displace an equivalent amount of imported coal, to the benefit of Scottish employment and the Scottish economy.

"Scottish Coal will increase output to meet the tonnage requirements of the contract, which, in addition to protecting existing jobs, will create in excess of 100 new jobs."

First Minister Alex Salmond said: "The announcement that coal is to supply one of Scotland's major companies is a declaration of faith in coal as one of Scotland's key indigenous fuels and shows that coal is a fuel of the future and not the past."

Details of today's contract came as Scottish Resources Group appointed Sen Mahon as its new non-executive group chairman.


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