Solid Energy on shaky ground
Friday 22 Feb 2013 6:18 a.m.
State-owned coal miner Solid Energy will limp along for the next few months while the company, its bankers and the Government find a way to keep a smaller, coal-only business alive.
The company, which employs 1200 staff, was on Thursday revealed to be in talks with its banks over its ballooning $389 million debt and its expectations of another shocking financial performance report in a few weeks, despite slashing 440 jobs last year and writing down its assets.
One of the companies the Government is planning to sell 49 percent of on the share market, Solid Energy will remain trading during a "difficult two or three months", Finance Minister Bill English says.
Dr English said that while the Government would be under pressure to put capital into Solid Energy to keep it afloat, he expects the company's bankers to share the pain.
The Government's "best advice" was that a core coal-based business was capable of being created from the assets.
"It looks like another Government bailout," said Grant Williamson, a director at brokerage Hamilton Hindin Greene. "It is pretty disappointing and shows another reason why these companies should be on the listed market and better scrutinised."
The Engineering, Printing and Manufacturing Union's Ged O'Connell called on the Government to help protect the 600 miners it employed.
"It's time that they supported New Zealand communities and workers through difficult financial times," he told Radio New Zealand.
Dr English said a scoping study ahead of its possible part listing discovered the company - which three years ago said it was worth $3.5 billion - had overvalued itself by nearly $2 billion. It also failed to appreciate how vulnerable it was to a drop in the international price of coal, he said.
Chief executive Don Elder, who resigned earlier this month, was on a $1 million package and TV3's Campbell Live reported that eight months ago paid out more than $11 million in bonuses.
Dr English refused to be drawn on the question of the quality of the board and management who created the current problem.