City & Business: Burning questions

COAL PRIVATISATION is already running into difficulties. Our report on page 1 appears to raise concerns about Richard Budge, head of the company chosen by the Government as the preferred bidder for the bulk of British Coal. While a director of a private company that subsequently went bust, he received payments that did not appear to the receivers Cork Gully to have been properly authorised by the board. Mr Budge insists they were, and the Department of Trade and Industry says the affair does not affect the credibility of the bid by Mr Budge's company, RJB Mining.

Meanwhile the RJB bid, at pounds 900m, is more than 50 per cent higher than rival offers. Some coal experts say the company will have to work very hard to make any kind of return on that level of investment. Mr Budge has an excellent mining record. But electricity generators are switching to gas, the coal industry faces ever more onerous environmental pressures, and coal prices are expected to fall. It hardly augurs well for the pits and miners that come under RJB's control - the entire English part of British Coal.

But there is worse. RJB is a relatively piddling company, valued by the stock market at pounds 157m. To finance its hefty bid, it will have to raise about pounds 400m in equity plus pounds 600m in debt. After the series of stock market flops this autumn, institutional investors are in no mood to cough up for more paper. And the banks will only put in the necessary loans once the equity is in place.

There will be some crossed fingers at Barclays de Zoete Wedd and Rothschild - advisers respectively to RJB and HMG. Any slip-up would be deeply embarrassing, and there will no shortage of unsuccessful bidders only too happy to stir things up.