Editorial: Solid Energy on shaky ground

Last updated 05:00 07/02/2013

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OPINION: Solid Energy is in turmoil; its huge ambitions for Southland lignite is unlikely to materialise any time soon.

This could be taken as a disappointment or a relief, depending on what we know, or accept, about the potential implications for the economy and the environment.

The departure of chief executive Don Elder is part of a cleanout that has claimed six of its eight board members following hard times that have seen the loss of 450 jobs, about one quarter of the company's workforce.

Times had been pretty tough when Dr Elder came into his role in 2000, pretty much charged with little more than paying off the debt of the seemingly doomed state coalminer.

He presided over a startling upturn, posting much better returns while embarking on a diversification programme under which staff levels rose spectacularly. And, perhaps less conspicuously, so did debt.

Central to the far-reaching agenda in recent times was the development of lignite in Southland, initially with a new briquetting plant at Mataura. This pilot was potentially to be followed by a much bigger export facility.

Much grander plans, still, were for plants to convert lignite into urea, through a $1.5 billion plant, and diesel with a $10b to $15b plant.

The clear impression now is that some of Solid Energy's most important decisions over the past few years have been rendered a seriously expensive irrelevance.

The viability of new uses for lignite has plummeted worldwide amid the rampant development of fracking - another process less than beloved by the Greens, but which has internationally provided a much cheaper way to extract oil and gas from deep underground.

Even mining lobby group Straterra has granted that the drop in both gas and oil prices in recent years had made lignite conversion less alluring.

Meanwhile, Solid Energy's briquette plant - its only lignite processing asset - has so far proven a modest presence indeed and for all the reassurances attributing lack of conspicuous output to careful commissioning processes there has to be some question over the viability of plans to expand beyond the local market to international export status. As things stand, that agenda is on hold.

As the Coal Action Network has been taunting, Solid Energy has lost putative project partners, Ravensdown for fertiliser and Fonterra for the briquette biz.

Solid Energy is declining comment on what impact Dr Elder's resignation may have on lignite development in Southland, or if it is struggling to finance its projects.

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What is more, the uncertainties about the lignite plan still include some heavyweight scepticism about the environmental tolerability of it all. It was a heavy blow against the agenda when parliamentary commissioner for the environment Jan Wright in 2010 slammed it for the upsurge in greenhouse gas it would create.

Much as the projects may be still on Solid Energy's agenda, it's an agenda that is right here, right now, looking increasingly like a historical document rather than a still-vibrant plan.

- © Fairfax NZ News

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