English: Solid Energy not ready for sale
Solid Energy "certainly isn't" in shape for a partial sell-down, Finance Minister Bill English says.
The state-owned mining company is one of four energy companies in the Government's partial asset sale programme, but appears at the back of the queue amidst falling coal prices and disagreement over its value.
English today said Solid Energy faced "a number of commercial issues" and was "rethinking its business".
"We would only take any of these companies to the market if they are in good shape for investment and Solid Energy right now certainly isn't. It's got some fairly substantial issues that they have signalled. Whether it ends up being able to be floated would depend on whether they can get in suitable shape for public investors," English said.
"We wouldn't be planning to float it any time soon."
Solid Energy has previously been valued at anywhere between $1.69b and $2.77b, offering a potential return from a 49 percent sale of $827.6m to $1.36b. But English suggested a valuation today would give a figure "a bit less" than that.
Last week, Solid Energy announced it was reviewing all aspects of its business in response to "extremely challenging market conditions".
There had been "a major fall in international commodity prices" magnified by the continuing strong New Zealand dollar.
A projected $200m cut in revenues at Solid Energy was sparked by a "steep fall" in demand and prices for internationally traded coal.
English said Solid Energy needed to be in "considerably better shape than it is now" before it could be floated.
"There would be a question mark there. It's a tax-payer asset, it's experiencing the difficulties of the global economic crisis and we've got to act as good stewards and get that asset in to good shape," English said.
A delay in the sale would not affect the Government's goal of a return to surplus in 2014/15 "directly".
There was "always some uncertainty" with a sales process about the value of assets and global market conditions, he said.
"We're fully aware of those uncertainties and we're being fairly careful about making decisions in the programme so that we're not getting ahead of time or putting ourselves in a situation where we would have to have a less than appropriate sale.
"That's one of the reasons we express the proceeds of the sale as a range of $5b to $7b because you can't be certain just where you'll come out."
Questions have also been raised over the suitability for sale of shares in Air New Zealand.
The Government has also slated a sell-down of its 73 percent stake in the company. However, outgoing chief executive Rob Fyfe has said he would be "surprised if the Government would be wanting to sell" at the current low share price.
The company was in the midst of a "cyclical low" on its share price, Fyfe said in June.
But English today insisted market conditions for a sell-down of Air New Zealand were "quite possibly" acceptable.
"We've got to make some judgements over the next wee while which will determine how much we can get through this term of office," English said.
"All these companies are having to deal with the continued change in the economy related to this challenging global financial environment so that's going to raise issues that the Government is going to have to deal with as owners."
- © Fairfax NZ News
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