Solid Energy in talks with banks over $389 million debt
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.