Coal mining company U.K. Coal PLC (UKC.LN) Monday said it won a major contract to supply coal to Scottish & Southern Energy PLC (SSE.LN), as it swung to a GBP15.6 million 2008 pretax loss, weighed on by lower gains on its substantial property portfolio.

The largest coal producer in the U.K. said it agreed to provide 3.5 million metric tons of coal to Scottish & Southern's Ferrybridge power station over the next five years.

Scottish & Southern has also agreed to provide U.K. Coal with a loan to help fund investment in its mines. These arrangements, which include a degree of prepayment for future deliveries, will provide U.K. Coal with GBP85 million in cash in 2009 and another GBP15 million in 2010, it said. Chief Executive Jon Lloyd said U.K. Coal will use the money to help fund investments in its deep mines at Kellingley and Thoresby, where it intends to start mining new coal seams that will increase production rates.

The company is also investing in overtime to boost production, Lloyd said.

U.K. Coal said revenue for the year to Dec. 27, 2008, advanced to GBP393 million from GBP328 million a year earlier, helped by a higher average sale price for its coal.

It reported a pretax loss of GBP15.6 million, compared with a profit of GBP69 million in 2007. Last year's figures were helped by a GBP67 million rise in the value of its investment properties, which U.K. Coal holds for rental income and capital appreciation.

This year's gains, from disposals and revaluation, were just GBP3.7 million as property markets in the U.K. weakened.

Market prices for coal have fallen recently as the deepening recession cuts industrial demand for fuel. Chinese coal miner Yanzhou Coal Mining Co. (1171.HK) said Sunday it expects its 2009 first-half net profit will decrease by more than 60% from a year earlier because of lower prices.

Lloyd said U.K. Coal expects its average selling price to remain stable at 2008's GBP1.92 a gigajoule during 2009, due to fixed prices on many contracts.

Also Monday, Lloyd said U.K. Coal is likely to benefit from the U.K. government's renewed interest in coal as a means of securing energy supplies, albeit with strict emission controls. Energy and Climate Change Secretary Ed Miliband said he wants four new coal-fired power stations to be built in the U.K., with the earliest up and running ideally by 2015.

Lloyd said U.K. Coal would be well-placed to provide coal to all four power stations should they get built.

At 1018 GMT, shares in U.K. Coal were up 8.75 pence or 8.2% at 115 pence, making it the biggest riser in a lower FTSE Small Cap index, down 0.6%.

Company Web site: www.ukcoal.com

-By Jason Douglas, Dow Jones Newswires; 44-20-7842-9272; jason.douglas@dowjones.com

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