Miners concerned about job losses are expected to march on Parliament today, but Prime Minister John Key said changes were necessary because of unrealistic price expectations.
Solid Energy yesterday announced more than 400 job losses at its Spring Creek mine on the West Coast, head office in Christchurch and at the Huntly East mine.
Key said the Government took a "deeper dive" into the state-owned company because of plans to partially sell it and three state-owned power generation companies.
It found Solid Energy has unrealistic coal prices built into its forecasts.
"When people say the mixed ownership model isn't very good, this is actually a reflection of exactly what we're talking about, that Governments often aren't the best owners of companies."
Solid Energy also had a "reasonable pool" of debt which was not normal for coal mining companies, Key told TV3's Firstline.
"Now that the coal price is collapsing essentially Spring Creek is not viable."
Low coal prices also reduced the likelihood of selling Solid Energy, he said.
The Government had been negotiating back and forth with the company for about 18 months and had waited for a new chairman to come on board to see whether solutions, other than job losses, could be found.
Despite yesterday's announcement Solid Energy miners were expected to arrive at Parliament this afternoon in an attempt to save their jobs.
They want the Government to give the one-off $36 million payment needed to keep Spring Creek mine open.
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