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

 

Power Outages, Roads Close: Easter Storm Moving Down Country

The NZ Transport Agency says storm conditions at the start of the Easter break are making driving hazardous in Auckland and Northland and it advises people extreme care is needed on the regions’ state highways and roads... More>>

ALSO:

Houses (& Tobacco) Lead Inflation: CPI Up 0.3% In March Quarter

The consumers price index (CPI) rose 0.3 percent in the March 2014 quarter, Statistics New Zealand said today. Higher tobacco and housing prices were partly countered by seasonally cheaper international air fares, vegetables, and package holidays. More>>

ALSO:

Notoriously Reliable Predictions: Budget To Show Rise In Full-Time Income To 2018: English

This year’s Budget will forecast wage increases through to 2018 amounting to a $10,500 a year increase in average full time earnings over six years to $62,200 a year, says Finance Minister Bill English in a speech urging voters not to “put all of this at risk” by changing the government. More>>

ALSO:

Prices Up, Volume Down: March NZ House Sales Drop 10% As Loan Curbs Bite

New Zealand house sales dropped 10 percent in March from a year earlier as the Reserve Bank’s restrictions on low-equity mortgages continue to weigh on sales of cheaper property. More>>

ALSO:

Scoop Business: Chorus To Appeal Copper Pricing Judgment

Chorus will appeal a High Court ruling upholding the Commerce Commission’s determination setting the regulated prices on the telecommunications network operator’s copper lines. More>>

ALSO:

Earlier:

Cars: Precautionary Recalls Announced For Toyota Vehicles

Toyota advises that a number of its New Zealand vehicles are affected by a series of precautionary global recalls. Toyota New Zealand General Manager Customer Services Spencer Morris stressed that the recalls are precautionary. More>>

ALSO:

'Gardening Club': Air Freight Cartel Nets Almost $12 Million In Penalties

The High Court in Auckland has today ordered Swiss company Kuehne + Nagel International AG to pay a penalty of $3.1 million plus costs for breaches of the Commerce Act. Kuehne + Nagel’s penalty brings the total penalties ordered in this case to $11.95 million ... More>>

ALSO:

Crown Accounts: Revenue Below Projections

Core Crown tax revenue has increased by $1.9 billion (or 5.0%) compared to the same time last year. However this was $1.1 billion less than expected and is reflected across most tax types, continuing the pattern of recent months. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news