Solid Energy jobs knife to cut even deeper
Christchurch-based Solid Energy has proposed even deeper staff cuts - including half its backroom work force and half its executive leadership - as it tries to weather the plummeting price of coal.
Yesterday the state-owned miner's new chairman, Mark Ford, announced another round of staff consultation after confirming the company proposed mothballing Spring Creek mine near Greymouth, halting further development of Huntly East mine, and cutting corporate staff.
The company said it needed to axe a quarter of its work force, or about 440 people, because of a severe downturn in global coal prices which would shave $200 million in revenue in the coming financial year.
That does not not include 130 contractors at Spring Creek who would also be out of work.
The new plan would slash 163 corporate and development staff, mostly from Christchurch, leaving only 150 staff. That includes halving the eight-strong executive leadership team.
The previous plan targeted only about 82 of those jobs, with only one top executive on the block.
The remaining executives would still take a 10 per cent pay cut.
Meanwhile, a mothballed Spring Creek would need only 20 workers, meaning 234 will be laid off and 130 contractors will be let go.
Huntly East will shed 63 staff along with its development plans, leaving 171 mining the existing areas.
"This is a sombre day for the company," Ford said.
The restructuring is expected to cost between $15m and $20m.
Other coal companies, both in New Zealand and abroad, were taking similar measures, he said.
Focusing on cheaper open-cast mining, turning the taps off $100m of capital spending and moving away from most of its side projects were necessary in the circumstances, Ford said. Coal seam gas and its renewable energy businesses, Nature's Flame wood pellets and Biodiesel, were to be sold or abandoned.
Group Manager External Affairs Bill Luff said the decision to change the proposals and go through another round of consultation and the further delays that meant for staff was not taken lightly.
More than 100 staff submissions had been made and they had been taken seriously and acted on, he said. "There's absolutely no suggestion that we are going through the motions and we have seriously responded to that feedback."
Chief financial officer Anthony Burg said the company and its bank had agreed to extend banking covenants for debt to assets from 50 per cent to 60 per cent.
Debt levels had increased steadily for the past few years as Solid Energy borrowed to fund developments, and was currently at $375m, he said. The company had another $140m of credit which it could take on.
Its debt to assets ratio was 42 per cent. It had been 36 per cent before it wrote down $110.6m of assets for the year ended June.
Prime Minister John Key said the company's massive job cuts did not mean the country's economy was failing. The decision would not have been made lightly and it was a difficult situation for the miners, the company and the West Coast, he said.
"There's always been industries going through rough periods or technological change," he said.
The Government had looked closely at the mine closure proposals and found the problem was not investment, but profitability.
"The issue isn't that we're not on their side, the issue is that international coal prices aren't on their side," Key said.
The float of Solid Energy was not likely in the foreseeable future simply because the company is going through a process of restructuring, but it was still on the cards.