Solid Energy has been in the news for the wrong reasons lately. About 450 jobs, a quarter of its staff, are to be made redundant. But what of chief executive Don Elder who has run the state-owned coalminer for a decade? MARTA STEEMAN reports.
Don Elder is the country's champion of coal - not that the Labour government which hired him in early 2000 wanted that.
They installed Solid Energy's new chief executive to pay off the company's debt and wind it up over three years after the company had lost $87 million in the year to June 1999 through a slump in international coal prices and $24m of losses on currency hedging contracts.
It was suggested Elder view the role at Solid Energy, formerly Coal Corp, as a stepping stone to bigger paying positions overseas.
Elder had been head-hunted while in New Zealand for his brother's wedding and had been working in Canada in a high-powered environmental consulting job at Jacques Whitford Group, one of Canada's leading engineering companies with worldwide offices, where he had held management roles in corporate development and in environmental engineering from 1990-2000.
Elder had not been a chief executive before. He was trained as a civil engineer and gained a first class honours degree from Canterbury University, later a doctorate from Oxford University and also a Rhodes Scholarship.
Probably not widely known is that Elder and two others wrote a report for the Earthquake Commission that examined the effects of a large earthquake on Christchurch. It was published in 1991 and is on the Earthquake Commission website.
Much of what has happened in Canterbury, liquefaction, building damage, intense ground-shaking etc, was foreshadowed in the report.
Elder would not be interviewed for this piece but did agree to supply a CV. It shows an impressive career in several aspects of engineering in New Zealand, Canada and the United States, directorships on several companies over the years including ASB Bank and Orion and consulting and research work in the port industries, to Government and local Government in Canada. Elder is a keen sportsman and a writer of more than 30 publications and articles.
Within a few days of being at Solid Energy, Elder was persuaded by a handful of executives that New Zealand was sitting on a huge and valuable lignite resource.
Since then he has cheerled the highly ambitious and contentious concept of turning Southland's vast resources of lignite - a poor quality coal - into fertiliser and diesel as the answer to New Zealand's future energy needs.
The size of the two projects - lignite to urea for fertiliser and lignite to diesel - involve a scale of coalmining New Zealand has not had before and will cost multi-billions of dollars.
The coalminer has a 20 year plan. It is soon to commission the first of its lignite projects, a $29 million pilot plant at Mataura to turn lignite into briquettes for the local market.
Elder has admitted it's a low-return business squeezing the water out of lignite and producing briquettes, but he says it will demonstrate the technology. The company wants to build something much bigger and eventually export the briquettes.
These "unconventional coal developments" are the same types of "think big" projects the Liquid Fuels Trust Board investigated for former finance minister Sir Bill Birch in the late 1970s and early 1980, triggered by the oil crises of the times. Making our own diesel and fertiliser will reduce the need to import the large amounts we already do and reduce our dependence on the rest of the world - that's the argument.
For a long time Elder and Solid Energy were swimming against the tide because his political masters were committing to renewable energy goals. His grand plans for lignite were cold-shouldered by the Labour government for whom coal was a dirty word.
But that didn't deter Elder from promoting them or arguing against Labour's proposed carbon tax. An energy industry insider remarked recently that Elder was not afraid "to get up people's noses".
Elder has had a tendency to over-sell his views on the prospects for coal.
In December 2001 he said the company expected to lift production from 3 million tonnes of coal a year to about 6.5m tonnes a year in the next five to 10 years. For that it would need another 400 workers - 300 on the West Coast and the rest in the North Island.
Solid Energy has not reached 6.5m tonnes a year yet. The highest sales year was 2007 when it sold 4.8 million tonnes.
In September 2002, he said: "We think coal will happen because there is no choice. We'll need two or three [power] stations in the next five to 10 years. Otherwise there will be blackouts."
But it has been wind farms rather than coal-fired power stations that have been built.
In March 2004 he said the company expected to double its production to feed a new generation of power stations after the demise of Project Aqua, a big hydro project on the Waitaki River. Elder said he expected Solid Energy production to double to 8 million tonnes a year to feed the country's power needs. That has not happened.
Elder justified the company's tangent into making renewables - wood pellets and biodiesel - as diversification and said Solid Energy was not just a coal company now, it was an "energy" company. Others had found it hard to make a buck out of renewables but Solid Energy had a lot of interest in the products, he said.
The company has presented an optimistic picture of its progress even though it has not made money for Solid Energy.
Nature's Flame pellet business is not yet breaking even, but close to it, and biodiesel has been losing money.
It is hard to see why a coal company embarked on renewable energy projects. The company spent nearly $100m in the past decade on them - building a plant to make wood pellets from wood waste and later building a plant for turning rapeseed into cooking oil, then into biodiesel, and contracting farmers to grow the rapeseed.
It has never been clear how many people were employed on these projects and on the lignite projects but staff levels at the company have ballooned to 1800 at the beginning of this year.
The company shifted its Christchurch headquarters a couple of years ago to accommodate more staff.
The huge staff cuts at its head office in Christchurch - about 160 jobs or more than half the positions to be axed - and 230 jobs at its Spring Creek underground mine on the West Coast and 63 at its other underground mine in Waikato, are embarrassing for the SOE and its Government masters.
The last time Solid Energy faced a similar slashing of its workforce - in 1999 - the government changed both the board and the chief executive but it waited a few months to do that.
On the other side of the ledger, this National Government wants more mining to be a key part of New Zealand's future economic growth and Elder and the team at Solid Energy have laid the groundwork for the lignite projects.
Minister of State-Owned Enterprises Tony Ryall said the Government would closely monitor the board's performance.
"I think the board will have some additional members over the next few months. I'll leave it at that because we haven't made any decisions."
- © Fairfax NZ News
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