West Coast 'ecstatic' with Solid Energy bailout
Wednesday 2 Oct 2013 10:48 a.m.
Under the rescue plan, the Government will loan the state-owned, debt-ridden coal mining company $100 million, and give it a $25 million cash injection. Shares worth $100 million will also be issued, largely to banks the company owes money to.
Grey District Mayor Tony Kokshoorn says locals are "ecstatic" with the decision.
"We are really pleased that Solid Energy and the Government have sat down and worked this through," he said on Firstline this morning.
"Being a Government-owned enterprise, it's only natural that they put some money back into it and get it up and running because it is a valuable company."
It was revealed earlier in the year Solid Energy had debts of $389 million, following a year of job cuts and accusations of extravagant bonus payments to then-CEO Don Elder and other board members.
The company apparently missed a downturn in the international coal price, something Mr Kokshoorn says won't happen again.
"I suppose in the future they need to put a sign in the boardroom… saying that coal prices also go down. Commodity prices are cyclical, so they have to be aware of that."
Mr Kokshoorn says putting money into Solid Energy is the only way to ensure New Zealand will be able to pay for projects like the Canterbury rebuild and Auckland's rail loop.
"You have to speculate to accumulate, so if you own a company and it's down on its cashflow and it needs some money, you have to inject that money to make money into the future," he says.
"Let's supply our own coal into that rebuild. It just makes sense – why use other countries' coal?"
The EPMU has split with its ally the Labour Party on this issue, saying the deal gives workers on the ground some "much-needed security". Mr Kokshoorn says it will save the region's economy.
"Coal mining runs through our veins here. It always has," he says.
"Now that the Government's going to recapitalise the company we can actually start planning ahead and produce coal again, which is much needed throughout the world."
State-Owned Enterprises Minister Tony Ryall says there is a lot of work to do, but this deal will give the company more time to refocus on its core business – digging up coal.