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

 


Solid Energy gearing stuck around 70% unless prices recover

Solid Energy gearing stuck at about 70 percent unless coal prices recover

April 11 (BusinessDesk) – Solid Energy continues to forecast far higher levels of debt than sector peers and does not expect that to improve until international coal prices recover, Parliament’s commerce select committee says in a report on the troubled state-owned enterprise, published today.

Solid Energy came close to commercial failure in 2012 when, like other coal mining companies around the world, it was caught out by a sharp plunge in the price of coal, which saw it report a $40.2 million loss in 2012 and a further $335.4 million loss in 2013, reflecting writedowns and restructuring.

The committee reports includes a minority view by Labour Party members, who say it was “grossly irresponsible of the government” not to initiate an open inquiry into Solid Energy’s near failure at the cost of some 800 jobs to date and some $400 million to the Crown.

The committee reports it asked Solid Energy’s current chair, Pip Dunphy, whether the company would have been in a better position today if its level of debt in 2012 had been more like 10 percent of the value of its assets, “the same as other mining companies at the time.”

Such low gearing would have helped, Dunphy told the committee, but that “typical gearing ranges between 20 and 50 percent in the mining sector.”

“We noted (Solid Energy) has forecast gearing in excess of 70 percent from 2014/15 onwards”, despite expecting a significant reduction in debt over the next two years after renegotiating with its banks last year.

“This may not be achieved if coal prices remain at current levels,” the committee reports.

Dunphy told the committee that Solid Energy “believes its business can be sustainable with a hard coking-coal price of US$140 to US$150 a tonne, but the current price is only US$119.”

The committee also queried consideration of reopening the underground semi-hard coking coal mine at Spring Creek, on the South Island’s West Coast. The mine was mothballed as part of wider restructuring because of uneconomically high mining costs and safety concerns.

The committee was told a feasibility study was under way on recommencing operations at Spring Creek because its very low ash coal is desired in the silicon and ferroalloy manufacturing processes, making it worth up to US$100 a tonne more per tonne than coking coal.

“However, this potential will be limited until coal prices increase internationally,” the committee report says.

In questions on corporate head office costs and company culture, the committee was told that almost all the board members and senior managers responsible for the decisions that led to the company’s financial difficulties had departed, and that half the space at the Christchurch corporate headquarters had been leased to other tenants.

However, Solid Energy’s headquarters would remain in Christchurch “for strategic reasons.”

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

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:

Auckland Outage: Power Mostly Restored Overnight

Vector wishes to advise that all but 324 customers have been restored overnight. These customers are spread throughout the network in small pockets. The main St Johns feeder was restored around midnight allowing most of the customers in all affected areas to have power this morning. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand

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