About 75% will be supplied by Daw Mill Colliery in the West Midlands, with the remainder coming from surface minesites in Leicestershire and Derbyshire.

All the coal will be supplied to E.ON's Ratcliffe power station, near Nottingham, with the deep mined coal being delivered by rail and the two surface minesites supplying via road.

UK Coal said the contract, which comes into immediate effect and runs to January 2012, secures the continued delivery of coal at improved prices, "more closely reflecting the price of internationally traded coal and including annual inflation rate increases from 2009".

The company is currently discussing term contract supply arrangements with other power generators and is also planning market priced, tonnage-based spot sales for coal produced at Daw Mill and other units.