Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Solid Energy's lignite plans dead, related assets for sale

Solid Energy's lignite plans dead, all related assets for sale

Feb. 22 (BusinessDesk) - State-owned coal miner Solid Energy's plans for a multi-billion dollar new industry based on turning low-grade Southland lignite coal into diesel, fertiliser and burnable briquettes has been abandoned as the company struggles with mounting debts and low world coal prices.

The new chairman of Solid Energy, Mark Ford, told Radio New Zealand the company could be profitable again with an improvement in world coal prices, but that the lignite projects were on the block.

"I think that's part of the non-core assets that we will be exiting from," he said, in the first announcement that one of the most cherished dreams of the former chief executive, Don Elder, would now be abandoned.

Solid Energy is in talks with its banks and the government over an unsustainably swift rise in its debt burden, which has gone from $300 million at June 30 to $389 million at present - effectively a $10 million a month increase.

Finance Minister Bill English has pledged the government will not allow the company, which employs around 1,200 people, to go into receivership, but is not commenting yet on whether a capital injection will be required.

Elder had already announced the sale of loss-making bio-fuels and wood pellet manufacturing when unveiling a $40.2 million loss last year, and had presided over the mothballing of the Spring Creek underground mine, a halt to expansion of the Huntly East mine and the loss of some 450 jobs across the Christchurch-based business.

The news was cheered by the Coal Action Network Aotearoa, which has campaigned against the lignite developments, which were also heavily criticised by the Parliamentary Commissioner for the Environment, Jan Wright, in a report in 2010.

“This was a ridiculous project from the outset: dirty, low-grade coal being turned into a product nobody wanted, digging up prime Southland farmland for coal that would simply end up in the sky, adding to the looming climate crisis,” said Kristin Gillies, CANA spokesperson.

Ford's announcement suggests Solid Energy's $29 million demonstration briquette production plant at Mataura faces mothballing before it even opens. The plant is close to commissioning, but recent reports suggest a prospective major customer, Fonterra, had already decided against using the materials.

Another possible customer for lignite-sourced urea, fertiliser producer Ravensdown, had also reportedly gone cold on the lignite plan.

The economics of the lignite developments as an export industry were likely to have changed for the worse with the rise of shale gas and oil extraction, Professor Basil Sharp, an energy expert and economist at the University of Auckland suggested earlier this year.

Ford also suggested there would be more cuts at Solid Energy's head office, a large standalone building that had often attracted criticism for its size relative to the company's coal mining activities and where many senior executives were tasked with bringing to life Elder's vision of a new generation coal and energy company.

"There needs to be a review of what's optimum" for head office staff, Ford told Kathryn Ryan's 'Nine to Noon' show. There had been one such review already, but "we need to review this again."

"If we take it back to just a straight coal production operation, it's a different configuration."

While he saw no prospect of the Spring Creek mine on the West Coast reopening, the open-cast operations at Stockton were "vital to us", said Ford.

Work under way at present was looking at how to optimise the mix of coals being produced from Stockton and other Solid Energy mines to achieve the best possible prices on a weak world coal market.

He pointed also to improvements in recent weeks for steel demand and the coking coal required to make steel, which is Stockton's primary output.

"The coal price has certainly contributed to the debt, but if the coal price bounces back, the gearing ratio would be quite reasonable. Coal prices are starting to move."

He declined to discuss the performance of the company's previous board and senior management.

However, Opposition politicians are attacking the government for allowing years of multi-million dollar salary and bonus payouts to senior executives. Elder turned down bonus elements of his package in the last financial year, but was still paid more than $1 million.

Solid Energy had been on the government's list for partial privatisation, although it was the process of preparing the company for sale that revealed the depth of its problems, English said.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Scoop Business: Alex Swney Pleads Guilty To $2.5M Fraud Charge

Alex Swney, former chief executive of the Auckland city centre business association Heart of the City, has pleaded guilty to dishonestly using documents to obtain $2.5 million. More>>

ALSO:

Petrol Burns Prices: Second Consecutive Quarterly Fall For CPI

The consumers price index (CPI) fell 0.3 percent in the March 2015 quarter, following a 0.2 percent fall in the December 2014 quarter, Statistics New Zealand said today. The last time the CPI showed two consecutive quarterly falls was in the December 1998 and March 1999 quarters. More>>

ALSO:

Scoop Business: NZ Broadcasters Launch Battle Against Global Mode ISPs

New Zealand broadcasters have confirmed they’ve launched legal proceedings against internet service providers who give customers’ access to “global mode”, which allows customers access to offshore online content, claiming it breaches the local content providers’ copyright. More>>

ALSO:

Sanford: Closure Of Christchurch Mussel Processing Plant Confirmed

The decision comes after a period of consultation with the 232 staff employed at the Riccarton site, who were told on 9 April that Sanford was considering the future of mussel processing in Christchurch. Recent weather patterns had impacted on natural spat (offspring) supply... More>>

ALSO:

Price Of Cheese: Dairy Product Prices Fall To The Lowest This Year

Dairy product prices fell in the latest GlobalDairyTrade auction, hitting the lowest level in the 2015 auctions so far, as prices for milk powder and butter slid amid concern about the outlook for commodities. More>>

ALSO:

Houston, We Have An Air Route: Air New Zealand To Fly Direct To The Heart Of Texas

Air New Zealand will fly its completely refitted Boeing 777-200 aircraft between Auckland and Houston up to five times a week opening up the state of Texas as well as popular nearby tourist states such as Louisiana and Florida. More>>

ALSO:

Scoop Business: Reserve Bank’s Spencer Calls On Govt To Rethink Housing Tax

The Reserve Bank has urged the government to take another look at a capital gains tax on investment in housing, allow increased high-density development and cut red tape for planning consents to address an over-heated Auckland property market. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news