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

 


Govt blocked grandiose Solid Energy plans in 2009

Govt blocked grandiose Solid Energy plans in 2009

Feb. 25 (BusinessDesk) - The government blocked proposals in 2009 from its coal mining company Solid Energy for a billion dollar capital injection to allow it to become "the Petrobras of this country," Prime Minister John Key says.

The Solid Energy plan grew from encouragement by the last Labour-led government for state-owned enterprises to expand their activities and would have arrived at the Cabinet table at a time when then Energy Minister Gerry Brownlee was entertaining advice from other quarters to establish a national oil company.

NOC's, such as Brazil's Petrobras or Norway's Statol, are government-owned oil and gas companies whose profits are invested for national benefit.

While the New Zealand government was unwilling to back Solid Energy in that role, it appears to have been powerless to prevent the company from taking what Key described as "baby steps" towards such a future.

"The company did have the right to draw down debt and make investments without shareholder authority" up to a certain level, said Key.

That included investigation of coal seam gas plays, which former chief executive Don Elder was still touting last year when he announced Solid Energy's $40 million loss for the last full financial year, and investment in farmland in Southland to allow exploitation of low-grade lignite coal for conversion to diesel, urea and burnable briquettes for industrial heat.

Concentration on these new areas of business were part of the reason the company's head office staff grew substantially and Key said the company defended an identified lack of proven coal reserves to support its future business on the grounds it was pursuing a wider brief than just coal mining.

They were, however, "worthless investments," said Key. Other initiatives included bio-fuels and pellets for wood pellet burner investments. The company has a $29 million demonstration briquette plant awaiting commissioning in Mataura, which Solid Energy's new chair, Mark Ford, said last week was for sale along with all other lignite development assets.

The company began talks with its bankers, the Treasury and the government as shareholder last week over its future, after concerns that it was adding around $10 million a month to its balance sheet debt, now sitting at around $389 million.

The government has said it will not let the company go into receivership, but is looking for it to be reconstituted on a much more conservative basis, as a company focused solely on mining coal.

Asked yesterday whether Solid Energy was worth anything at present once its debts were repaid, Key said: "I would be surprised if it's worth more than it owes."

However, that was "a snapshot based on current coal prices", which have plunged in the last 18 months but are showing some signs of recovery, and could allow the business to become viable again.

The problems at Solid Energy first came to light when the government started scoping the business for partial privatisation, at which time it became clear the Solid Energy board's valuation of around $2.8 billion was wildly at odds with an independent valuation of $1.5 billion.

The board, chaired by Air New Zealand chair John Palmer at the time, had projected the path of world coal prices "completely and utterly wrong", said Key, and insisted until the middle of last year that officials' criticism was unfounded.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Media: Julian Wilcox Leaves Māori TV

Māori Television has confirmed the resignation of Head of News and Production Julian Wilcox. Mr Maxwell acknowledged Mr Wilcox’s significant contribution to Māori Television since joining the organisation in 2004. More>>

ALSO:

Genetics: New Heat Tolerant Cow Developed

Hamilton, New Zealand-based Dairy Solutionz Ltd has led an expert genetics team to develop a new dairy cow breed conditioned to thrive in lower elevation tropical climates and achieve high milk production under heat stress. More>>

Fractals: Thousands More Business Cards Needed To Build Giant Sponge

New Zealand is taking part in a global event this weekend to build a Menger Sponge using 15 million business cards but local organisers say they are thousands of business cards short. More>>

Scoop Business: NZ Net Migration Rises To Annual Record In September

New Zealand’s annual net migration rose to a record in September, beating government forecasts, as the inflow was spurred by student arrivals from India and Kiwis returning home from Australia. More>>

ALSO:

Scoop Business: Fletcher To Close Its Christchurch Insulation Plant, Cut 29 Jobs

Fletcher Building, New Zealand’s largest listed company, will close its Christchurch insulation factory, as it consolidates its Tasman Insulations operations in a “highly competitive market”. More>>

ALSO:

Scoop Business: Novartis Adds Nine New Treatments Under Pharmac Deal

Novartis New Zealand, the local unit of the global pharmaceuticals firm, has added nine new treatments in a far-ranging agreement with government drug buying agency, Pharmac. More>>

ALSO:

Crown Accounts: English Wary On Tax Take, Could Threaten Surplus

Finance Minister Bill English is warning the tax take may come in below forecast in the current financial year, as figures released today confirm it was short by nearly $1 billion in the year to June 30 and English warned of the potential impact of slumping receipts from agricultural exports. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand

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