Coal Investment Aid
The United Kingdom has the most efficient coal industry in Europe but until July 2002, European Union rules prevented the Government from supporting viable investment projects. Member States were not allowed to pay investment aid under the ECSC Treaty and coal projects are excluded from support under Regional Selective Assistance. However, Article 5(2) of the coal State aid regulation (2002-2010), which came into force after the expiry of the ECSC Treaty on 23 July 2002, provides Member States with the flexibility to pay investment aid for mines that have a viable future.
The Government’s intention to offer Coal Investment Aid (CIA) was announced on 3 March 2003. CIA was launched on 16 June 2003, with a budget of up to £60 million to be allocated in three application periods and spent by 31 December 2008.
The aim of the scheme is to create or safeguard jobs in the UK coal industry within socially and economically disadvantaged areas by encouraging coal producers to enter into commercially realistic investment projects that maintain access to reserves, ensuring the medium term economic viability of the relevant mines. Approved projects will receive up to 30% funding with the mine operators financing the balance themselves.
Applications
Three application periods were planned:
Period 1
Period 1 closed on 31 July 2003 with 14 applications received requesting a total of £131 million of aid towards projects in England, Scotland and Wales worth £476 million. With applications received for over twice the CIA funds available, successful projects were limited to two years worth of spend (up to 31 March 2005). As a result, award announcements were made on 1 December 2003, 15 March 2004 and 20 April 2004, offering £55.8 million worth of aid to 13 applicants.
Acceptances were received from 12 of the successful applicants, resulting in £41 million being allocated to viable projects.
Period 2
Period 2 closed on 1 June 2004, with 12 applications received, requesting £95 million of aid towards projects in England & Wales. Taking into account the Period 1 awards, there was up to £19 million available for allocation.
On examination, one application was found to be incomplete and therefore could not be considered for an award. Two applications for further support towards projects that had already received awards under Period 1 were assessed as representing inferior value for money compared to other bids. One of these applications did not receive an award, while the other was subsequently revised. In total, nine applicants have been offered a total of £17.35 million.
Period 3
In a speech in Westminster Hall on 12 October 2005, the Minister for Energy, Malcolm Wicks, confirmed that almost £58.5 million had already been awarded in the first two application rounds, most of which will be drawn down by mid-2006, and that, allowing for project monitoring costs, the whole of the CIA fund has now been committed. This means that the planned third application period will now not take place. Eligible claims under awards in the first two periods will continue to be paid until these awards have been exhausted. Most are expected to be drawn down by mid 2006.
Mr Wicks also said that the future of coal will be scrutinised as part of a review of energy policy and that this would include a re-consideration of how best to create a climate in which the industry can attract the long-term investment it needs. A further announcement about the review will be made in due course.
Consultancy services in processing applications for investment aid
Following a competitive tender process IMC Consulting Limited (re-named WYG International Limited - 1st July 2005) were appointed on 19 June 2003 to work with the Department of Trade & Industry (DTI, now BERR) officials during the administration of Coal Investment Aid. WYG International Ltd will provide independent technical advice to BERR during the assessment of applications for aid and throughout the monitoring of projects selected for support.
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