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13/3/2015 — Coal, Lignite and CSG/CBM
Issue of Solid Energy’s viability raised
By Ross Louthean
The delay in release of the December half year financials for Solid Energy made known early this month has seen new reverberations in Parliament.
Added to this Finance Minister Bill English was quoted by Fairfax News this week as saying he doesn’t know whether Solid Energy was now viable.
Fairfax News pointed out the National Government has previously bailed out the company which amassed a large workforce and several non-core projects as a coal miner before the impact of the sliding coal price, particularly for export coking coal, became known about two years ago.
Government support was $258 million, including agreeing to cover $103 M required for remediation on old mining operations.
Fairfax News reported on March 2, that Prime Minister John Key said it is now not the Government’s preferred option to put more taxpayer money into Solid Energy. Bill English subsequently ruled out any cash, loans, or guarantees.
“Solid Energy has done a lot of work to right-size itself, but the coal price has kept falling away in front of them and that’s made it a continuing challenge.” English said.
“The Crown has been pretty keen to make sure that it’s not in the position of offsetting the risk that the banks took. The banks took a risk lending the company money and they’ve got to deal with the consequences of those decisions.
Fairfax said Solid Energy was negotiating with bankers to reduce a debt mountain of $400 M. Release of the overdue financials won’t take place until the company says the balance sheet reflects the company’s true position.
One of the original bankers, TSB Bank, wrote off its entire $53.9 M. Solid Energy also owes a combined $250 M to Commonwealth Bank, BNZ, ANZ, Westpac, and Back of Tokyo Mitsubishi.
Labour spokesman on State-Owned Enterprises, Clayton Cosgove said the problem was that $390 M has “gone down the toilet” and those originally responsible were not around – a comment taking in former chief executive Don Elder.
Mines were closed and operations at Waikato and on the West Coast have been dramatically downsized and there were now about 680 workers, including those in the headquarters in Christchurch.
In Parliament the Green Party which wants to demonise coal mining, forgetting its important role still in global industry including steelmaking, used the current coal industry crisis to claim coal was on the skids.
Co-leader Russel Norman urged the Government to provide proper support for workers if the company collapses as did Labour Leader Andrew Little. Dr Norman also claimed coal mining was a dying industry.
If the straits are that dire then perhaps the white knight may well be one of the big Indian coal companies or steelmakers who have been looking at stressed projects in Australia and New Zealand.
Sources: stuff.co.nz and nzresources.com data files.