Creditors of ailing state coal company Solid Energy should know more about the company later today when a full and independent report of the company's assets is unveiled.
Photo: RNZ / Conan Young
The creditors will then have a week to digest the findings of the report before a make-or break meeting, one week later.
At that stage they will have to vote for one of two options.
The first would see trading continue during a gradual sell-off of the company's assets to private investors over two and a half years, which would be followed by the formal disappearance of Solid Energy.
The other option would be the immediate liquidation of Solid Energy, and a firesale of its assets.
An orderly sell off of Solid Energy's assets was the process that was recommended by Solid Energy's board when it went into voluntary administration almost a month ago.
But administrators KordaMentha needed to commission its own research to check out the board's proposal, and that report is due to be presented to creditors in the next day or two.
It was not known what that report will recommend, and no one connected with the process was giving anything away.
But one likely option was that the report would recommend creditors approved the two-and-a-half year sell-off proposed by the board. At least two of New Zealand's biggest private coal miners have said they would like to buy some of Solid Energy's assets, and there could be interest from overseas as well, which would buoy hopes for an orderly sell off.
Moreover, the mood at Solid Energy was said to be quite chipper, given the circumstances.
A bigger problem will be the price that is offered.
Solid Energy's last annual report put gross debt at $320 million.
One coal expert predicted the total price from a sell off might be little more than 10 percent of that, though that figure could not be confirmed.
But even if it is two or three times that sum, the banks which have lent a big chunk of that money look set to take a big loss.
The Government has also written off its contributions to keep the company afloat.
Whatever happens, the latest events mark the end of the line for Solid Energy, which is the latest incarnation of 150 years of coal mining and more than 70 years of state ownership.
Ten years ago, Solid Energy was booming, producing millions of tonnes of high quality coal and exporting it to India, China, Japan and elsewhere.
The company was financially successful, earning $94 million after tax in 2007 and $68 million in 2010.
But it also launched some costly investments in that time.
These included biofuel farms, a coal-to-gas conversion scheme, wood pellets and large areas of farmland bought in Southland for future brown coal or lignite mining.
Then, during the global financial crisis, the price of coal collapsed on world markets to about a third of its previous level.
The company had borrowed from the banks to fund expansion during the good times, leaving a dangerous debt overhang which could not be funded from earnings when times got tough.
In 2013, Solid Energy went through the first of a series of September crises, when it found it could not pay its interest on the debt. In a deal two months later, the banks took a $75 million haircut, but won preference shares in return.
The Government also got preference shares in return for a $25 million grant and made $100 million available to the company as a loan.
A year later, the crisis returned.
This time, the Government made $103 million available to Solid Energy in a complex arrangement which was actually an indemnity against the cost of restoring mined land to its previous condition.
This also ensured there was enough equity in the company to outweigh its debts.
But the latest September trouble was a crisis too far. The Government refused to put any more money into the company and the Board of Directors declined to sign off on the accounts, leaving Solid Energy with only one way to go - down and out.
For the workers and contractors, though, there is a potential silver lining. If the creditors vote to accept an orderly sell-down, then, the mines will keep on working during that time, and salaries and contractors' fees will continue to be met.
The administrators are due to issue their report to the company's 1500 creditors at 12.45pm today.
