Solid Energy in talks with banks over $389 million debt

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Govt not ruling out Solid Energy bailout

3News NZ

Bill English

Bill English

The Government is not ruling out a bailout of state-owned electricity company Solid Energy after its dire financial situation was revealed today.

The company is in talks with its banks as its debt nears the $400 million mark.

Finance Minister Bill English and State-Owned Enterprises Minister Tony Ryall held an urgent press conference this afternoon to discuss the company’s future.

Mr English says the Government will not let Solid Energy go into receivership and would do anything to save it from that fate, including closing mines.

He says the financial hole the business is in became apparent in the last 6 months, adding that they were too optimistic about the price of coal.

“The Solid Energy board is working with Treasury, advisors and the banks with respect to further restructuring options,” Mr English says.

The aim is to return to the company to a “sustainable financial position”.

“World coal prices have dropped significantly, which has contributed to the deteriorating financial position that Solid Energy is in now.”

Mr Ryall says a number of factors have weighed against the company, including world coal prices dropping by 40 percent.

“Solid Energy’s debt stands at $389 million and its interim result, which is due shortly, will show additional losses.

Earlier this month, Solid Energy's chief executive Don Elder resigned after 12 years.

“The new chair and board are focusing on a return to a core coal business which is viable at current world prices. The public is aware that there had already been restructuring at the company, but more may be required,” Mr Ryall says.

The company lost $40 million in the last financial year and it has axed 440 positions in the last year, including mothballing its Spring Creek mine on the West Coast.

Solid Energy is one of four state-owned energy companies that the Government plans to partially sell. It was valued at $3.5 billion in 2011.  

3 News/NZN

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Comments

25/02/2013 2:07:09 p.m.

katubaldy wrote:

Circular misguided arguments from Mike of the Misinformation. Funny how you're immediately latching onto the past again Mike and then playing the 'quickly say lower,lowering' word game. Then its fall back on the weird obsessive 'head up arse' projection problem you have dude...? You're reality isn't like anything in the outside world, inflation isn't the economy eating monster hiding in the shadows that you trouble yourself with on a daily basis...the only person you're scaring with your tales of woe and calamity is you Mike...take a break and try to debate issues without fear and angst creeping into the situation....wow..

22/02/2013 11:14:02 p.m.

Kathy wrote:

LOL Mikes usual blame it on labour or the unions speech... pointless, baseless and stupid as per usual. With the company nose diving into debt why did National allow this years performance bonus payout?. Because the unions and Labour made them? lol Oh you are so sad Mike. And yes I expect your usual sexest nasty response with lies about things I have never said before.

22/02/2013 9:25:28 p.m.

Mike wrote:

That Solid Energy would have trouble has been likely for over a decade, and sucessive governments have ignored the problems.

Why have coal prices fallen? Simply the world is using less of it than they were, so this pushes the price down. We also have coal seen as a dirty industry, so its not perceived to be enviromentally friendly so Russel Norman will be one happy chappy as he wants unemployed coal miners out of spite.

While the dollar has strengthened on other curencies like the US printing money, our currency is still lower than those used by our trading partners, ie a lower dollar hasn't helped so lowering it further wont help more. NZ min wages have risen to the 4th highest in the world on Nationals closing the gap. Sure, those with heads up the oppositions ass see higher real wages as bad, and they want to give NZ huge inflation to lower the min wage back to around 35-39th in the the world in real terms, as lower wages will help our exporters keep costs down. Except reality isn't like that, if the dollar devalues and we have inflation, any gains of a lower dollar are quickly eliminated. Given the rise in NZ real wages, the likes of Solid Energy employees could take pay cuts to help lower costs, and protect their jobs, this would make it lose less, and could save the company ... so the unions talking strike action to gurantee the businesses failure.

22/02/2013 1:24:49 p.m.

Kathy wrote:

Just a quick question for the National Party fan base out there. With Solid Energy failing whilst Phil Heatley was holding the reigns with hundreds of layoffs due. Followed By telecoms announcement today that they will be laying off hundreds of staff as well. What has National done to improve the economy exactly?. One of the biggest issues during the financial collapse was the continuation of performance bonuses that were being paid out of tax payer funds to companies that were being bailed out by governments. Nothing has changed, performance based pay needs to be scrapped universally. Particularly by the state as these are tax payer funds.

22/02/2013 9:35:32 a.m.

Think outside the square! wrote:

Use the coal to make synthetic fuel/automotive gas, then NZ would be self-sufficient and not have to import oil from overseas. Everyone would win.

22/02/2013 9:20:58 a.m.

zac wrote:

Solid Energy had been returning very healthy dividends for the government in recent years. This government and it's policies or lack off is partly to blame. They fell asleep at the wheel. Now their mismanagement is certain to cost NZ tax payers millions more. There's been far too many costly mistakes made by this government in just 4 years. The question is, how much longer will NZers be able to tolerate with this governments mismanagement and incompetence? @ Steve - Try bonuses for some staff as well, and its not hundreds, it's thousands per individuals.

22/02/2013 6:21:59 a.m.

Steve wrote:

so when times are good the CEO gets a massive bonus and when times are bad the CEO gets a massive payout. Corporatisation is just great - only if at the top though it seems.

21/02/2013 11:08:31 p.m.

Mike wrote:

NZ needs more long term power generation, plus we have more water than we need on the west coast than we need, and more water demand on the east than we have water.

Why not dust off the plans for tunnelling through the ranges, can make a huge catchment underground, feeding hydro energy to the south island, and water east.

This has the advantage of being able to employ many miners not needed for coal, plus build a valuable energy resource and water resource that would be beneficial to NZ. It wont be cheap, but the end result could be extremely valuable to NZ. We have the heaviest rainfall on the west coast which is just runing off the land into the sea, so catching some of this and sending it east would be good use of the resource, plus generate power on the way, and give plenty of employment.

21/02/2013 9:34:42 p.m.

jock wrote:

John Key: “I've got an idea. We'll run the Kiwi Dollar up high enough so that Solid Energy becomes unprofitable, then sell half of it off at bargain basement rates to our very best friends. Then when the deals done we intervene in the New Zealand currency so that the coal giant wakes up and our mates can take full advantage of Solid Energy's license to print money”.

21/02/2013 8:06:19 p.m.

kahu wrote:

Gosh, who could possibly have predicted the world price for coal would drop so suddenly? Certainly not our National Government, with its head-in-a-hole approach to climate change. Possibly the Greens, who have been talking about moving NZ to a greener economy , and halting coal production, since the 1970s. Anyone listening?