Debt-laden Solid Energy talking to banks
MARTA STEEMAN, HAMISH RUTHERFORD AND TRACY WATKINS
Any more restructuring at Solid Energy will cut its operations ‘‘right to the bone’’, the Engineering, Printing and Manufacturing Union (EPMU) says.
The Government today revealed the distressed state of the state-owned coal miner, which is struggling with heavy debt. Finance Minister Bill English said the company’s board was working with Treasury, advisors and the banks about further restructuring options, with the aim of returning the company to a sustainable financial position.
The company itself revealed it had $389 million of debt and was talking to Treasury and its banks about equity and debt support.
EPMU assistant secretary Ged O’Connell, whose union represents miners at Solid Energy, said the company’s revenues came from coal so he could not see they could cut more jobs in that area.
Solid Energy made 450 employees redundant in November, 25 per cent of its staff, which included at least a couple of hundred miners.
‘‘At this stage we can only think they will be backroom jobs because we think they will be needing to produce coal to get revenue,’’ O’Connell said.
Stockton Mine near Westport was the biggest and also operating were an opencast and an underground mine at Huntly, and an open cast mine at Reefton. The costly-to- run underground mine, Spring Creek, had been closed.
The company might close its new lignite to briquettes plant at Mataura, O’Connell said, as well as other alternative energy strategies - coal seam gas exploration, underground coal gasification and lignite to fertiliser conversion in various stage of concept and development.
‘‘I think if last time if they didn’t cut to the bone they are just going to have cut right to the bone now. I think more than that they are going to have to get government financial support to see them through this particular period,’’ O’Connell said.
‘‘It looks like they have got themselves in such a state that they may well be in a financial bind and they need significant backing from the owner, an injection of capital obviously.‘‘
The union had not heard anything about more job losses but it would have to be consulted if there were more jobs axed among miners.
More mining had been part of the Government’s economic strategy. ‘‘What other economic strategy has the Government got?’’ he asked.
‘‘We would be fairly confident in what we know that, yes, it will recover but it might take two to three years to recover,’’ O’Connell said.
SOLID WON'T GO INTO RECEIVERSHIP - ENGLISH
At a media briefing this afternoon, English confirmed there had been differences of opinion for some time over the direction of the company, whose chief executive resigned earlier this month.
"There will be the opportunity for us to go back and look pretty hard at the governance and the monitoring."
The Government would not let the company go into receivership, English said. He would not directly answer questions about a taxpayer-funded bailout, but would not rule it out.
"Our best advice is there is an ongoing viable business there." However, it was yet to be seen whether the company was worth anything. The company had not missed any repayments to his knowledge.
He would not rule out more mine closures.
Coal prices had declined and the company's alternative activities had not performed as expected.
State-owned Enterprises Minister Tony Ryall said a number of factors had weighed against the company, in particular world coal prices dropping by 40 per cent.
"It is facing very serious financial challenges," Ryall said.
Ryall declined to say whether Don Elder received a payout on his departure as chief executive on February 4.
LABOUR: 'NATIONAL CAN'T RUN AN ECONOMY'
Labour State-owned Enterprises spokesman Clayton Cosgrove accused National of turning Solid Energy into a "basket-case".
"Four years ago it was a profitable business, now it's a train wreck. This is National's mismanagement.
"[Prime Minister] John Key is supposed to be a business guru, but National can't run an economy and they've proved they can't run a business,'' Cosgrove said in a statement.
"Solid Energy appears on the verge of collapse. This must be the first time any Government has overseen such a massive failure in a state owned asset.''
Earlier this week, Key said it was very unlikely Solid Energy would be sold in the near future.
The state-owned coal miner bought Pike River Coal last year, after the company went into receivership following an explosion that killed 29 workers in 2010.
Solid Energy was last bailed out in 1999 and laid off 120 staff.
Chairman Tim Saunders said at the time that "without restructuring the company would not be able to exist".