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: RBNZ Keeps OCR At 3.5%, Signals Slower Pace Of Future Hikes

Reserve Bank governor Graeme Wheeler kept the official cash rate at 3.5 percent and signalled he won’t be as aggressive with future rate hikes as previously thought as inflation remains tamer than expected. The kiwi dollar fell to a seven-month low. More>>

ALSO:

Weather: Dry Spells Take Hold In South Island

Many areas in the South Island are tracking towards record dry spells as relatively warm, dry weather that began in mid-August continues... for some South Island places, the current period of fine weather is quite rare. More>>

ALSO:

Scoop Business: Productivity Commission To Look At Housing Land Supply

The Productivity Commission is to expand on its housing affordability report with an investigation into improving land supply and development capacity, particularly in areas with strong population growth. More>>

ALSO:

Forestry: Man Charged After 2013 Death

Levin Police have arrested and charged a man with manslaughter in relation to the death of Lincoln Kidd who was killed during a tree felling operation on 19 December 2013. More>>

ALSO:

Smells Like Justice: Dairy Company Fined Over Odour

Dairy company fined over odour Dairy supply company Open Country Dairy Limited has been convicted and fined more than $35,000 for discharging objectionable odour from its Waharoa factory at the time of last year’s ”spring flush” when milk supply was high. More>>

Scoop Business: Dairy Product Prices Decline To Lowest Since July 2012

Dairy product prices dropped to the lowest level since July 2012 in the latest GlobalDairyTrade auction, led by a slump in rennet casein and butter milk powder. More>>

ALSO:

SOE Results: TVNZ Lifts Annual Profit 25% On Flat Ad Revenue, Quits Igloo

Television New Zealand, the state-owned broadcaster, lifted annual profit 25 percent, ahead of forecast and despite a dip in advertising revenue, while quitting its stake in the pay-TV Igloo joint venture with Sky Network Television. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

Standards New Zealand

Mosh Social Media
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news