Crown extends clean-up promise to Solid Energy
By Pattrick Smellie
Sept. 18 (BusinessDesk) - Commercially troubled state coal miner Solid Energy requires an extension of a government guarantee to meet the $103 million future cost of returning mined land to its pre-mined condition in order to maintain positive equity in its balance sheet.
The extension of the company's remediation indemnity extends a similar deal made in 1987, when the then Labour government corporatised state coal mines and created Coalcorp.
“The company’s directors are required to sign off the company’s annual accounts by the end of September and they advised us they need this indemnity for the company to remain in a positive equity position through this financial year," said the Finance and State-Owned Enterprise Ministers, Bill English and Tony Ryall, in a statement.
"Under current forecasts, expenses covered by the indemnity will be $6 million in 2015 and $11 million in 2016. There will be no overall impact on the Crown’s fiscal position, because the indemnity simply transfers a liability from an entity that is 100 per cent owned by the Crown to the Crown itself.
“It’s clear that Solid Energy’s trading conditions remain difficult and its challenges are still significant," they said. Extending support for Solid’s remediation obligations was part of the government's programme to "give the company every opportunity to become viable."
“We expect this process to be completed in the next week or so – in time for the annual accounts to be signed off.”
Ryall reiterated the government's unwillingness to keep running Solid Energy if it could not be made commercially viable.
“We also said that we are prepared to provide support for the company if there is a reasonable chance it can be made viable. The extension of this indemnity is part of that support.”
A restructuring of Solid Energy was announced last October, coinciding with the publication of the annual reports, after collapsing coking coal prices on world markets exposed the company's over-commitment to a range of development initiatives, including development of options to turn lignite coal into diesel and urea, and renewable energy products such as pellets for wood burners.