22 Feb 2013

Solid Energy drops lignite plan for Southland

8:21 pm on 22 February 2013

Debt-stricken coal miner Solid Energy is abandoning plans for a multibillion-dollar lignite industry in Southland as it looks to sell parts off in a struggle to survive.

The state-owned enterprise is in crisis talks with the Treasury and its banks over its $389 million debt and is restructuring despite cutting hundreds of jobs.

The company's problems culminated last year in the mothballing of Spring Creek mine on the West Coast and 544 redundancies nationwide in an effort to reduce costs.

Solid Energy chairman Mark Ford, who took over in August 2012, said on Friday that most of its troubles stem from an exceedingly low international coal price and investment in non-core businesses.

These include biodiesel, which Solid Energy has sold off already, and wood pellets, but also lignite mining in Southland. The plan had been to turn low-grade lignite coal into diesel, fertiliser and burnable briquettes.

One dream of Don Elder's, who quit as Solid Energy chief executive on 4 February this year, was for a $2 billion urea and diesel near Mataura. But only a $30 million briquette-making plant has been set up, and Mr Ford said on Friday the company would be getting out of the project altogether.

However, a spokesperson for Solid Energy later told Radio New Zealand that the project is not necessarily dead in the water, and the company wants to sell it to other firms with capital and experience to take it further.

Solid Energy bought many dairy farms to source the coal and has now put three up for sale covering 920 hectares, about a quarter of all its Southland land.

Chairman Mark Ford is not ruling out more job cuts as part of Solid Energy's survival strategy, though staff numbers have already been cut by a quarter down to 1200. He suggested there could be more cuts at its head office in Christchurch.

However, Mr Ford said he is confident a solution can be found and the company can be profitable again with an improvement in world prices.

Solid Energy has other mines on the West Coast at Stockton, the mothballed Spring Creek and Pike River, one at New Vale in Southland and Huntly in Waikato.

Finance Minister Bill English said on Thursday the Government will not allow Solid Energy to go into receivership.

Blow for Gore if plant sold

Gore District mayor Tracy Hicks says the council is frustrated that big promises made by Solid Energy may not be kept.

Mr Hicks told Radio New Zealand's Checkpoint programme on Friday it is likely that the company's trial plant for briquettes will be sold, resulting in job losses.

The mayor said Solid Energy made promises about the future of lignite in the region that are now unlikely to happen.

"Absolutely big promises and it's frustrating and it's disappointing if that is indeed what the plans are.

"As a district and as a council, we've put a lot of time and energy over the last two or three years into actually understanding what the challenges and the opportunities are and how to respond to that. To think that that might go on the shelf for some time is frustrating.

"I'm surprised that they want to flick that on - it's virtually at the ready to go stage. And will there be other people out there, who knows?

"Unfortunately there are a number of jobs involved in that, so if it does not progress then that's really disappointing for those individuals."