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Key sidesteps allegations on Solid Energy’s Pike bid tactics

Key sidesteps allegations on Solid Energy’s Pike River bid tactics

By Pattrick Smellie

May 9 (BusinessDesk) –Solid Energy Ltd.’s tactics in bidding for the Pike River Coal mine assets are a commercial matter and not for government involvement, despite allegations the state-owned coal miner is trying to undermine Pike's value before a sale by receivers, says Prime Minister John Key.

“That is a commercial matter and we expect that SOEs will act in a professional and commercial way,” he said at his post-Cabinet press conference.

The Pike River receiver, John Fisk of PricewaterhouseCoopers, has sought to serve proceedings against Solid Energy and two land-owners who have cancelled leases on coal-handling facilities at Ikamatua in favour of leasing the facilities to Solid Energy.

Solid Energy rejects the allegations, which include apparently attempting “to place Solid Energy in a better commercial position than other prospective purchasers of the mine by taking over a key infrastructure asset, making the sale process more complex and uncertain and adding a value-destructive element.”

“The best value for Pike will be in its ability to sell the Ikamatua facility as a working operation to the successful purchase as part of the overall sale package,” Fisk says in an affidavit of April 29. This was in order to “extract the best value for the company and its creditors.”

Solid has portrayed itself as the natural owner for the assets, and is the only declared bidder for the assets of the Pike River mine, where 29 men died in a series of explosions that began on Nov. 19, forcing the ill-fated venture into receivership.

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In a statement on last Thursday’s deadlines for expressions of interest to the receivers, Solid Energy said it was committed to recovering the bodies of the 29 men and “if possible to address the situation of the unsecured West Coast creditors.”

However, its actions “in obtaining leases over the land which holds key infrastructure for the mine, at the expense of Pike, is in direct contrast” to that intention, Fisk says. “Pike’s creditors will likely suffer significant detriment.”

The receiver also alleges other actions by Solid Energy that threaten to reduce the value of the resource, which may hold as much as $4 billion of high-grade coking coal. These include:

* “Onerous penalties Solid Energy has looked to crystallise in respect of the Coal Transportation Agreement with Pike”, under which Solid was to allow Pike to send up to one million tonnes of coal by rail to Lyttelton annually.

* “Initial rejection of Pike’s force majeure under the CTA and attempt to cancel the CTA; and

* “A material variance in the actual versus market prices Pike has received for coal it has sold to Solid Energy which remains unexplained.”

In its Thursday statement, Solid Energy said it had “recently leased the land at the Pike River rail loadout at Ikamatua to complement its development projects in the Reefton and Greymouth area.”

(BusinessDesk)

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