1 Oct 2013

Solid Energy debt deal announced

9:58 pm on 1 October 2013

The Government has reached a deal with four banks to cut Solid Energy's debt. The agreement will wipe about $100 million off the company's burden of $381 million.

Solid Energy has been in talks with the ANZ, BNZ, ASB and Westpac banks as well as the Government about its financial future for several months.

Under the agreement announced on Tuesday, the banks will write off $75 million of debt in return for non-voting Solid Energy shares of the same value.

The Government will get $25 million worth of shares in return for giving the company cash.

The Government will also provide the company with a capital loan of $50 million and a land mortgage of $50 million - both to be repaid within three years.

It will also provide a standby facility of up to $30 million, to be used only if required. That takes the total Crown commitment to Solid Energy to $155 million.

Deal preferable to liquidation or receivership - English

Finance Minister Bill English said the deal struck over Solid Energy was preferable to allowing the state-owned coal company to go into liquidation or receivership.

Mr English said that Solid Energy has the potential to be a viable business, and everyone involved had to focus on keeping it out of liquidation.

"Because if the company went into liquidation receivership then there would be probably nothing for anybody, or not much at least, so the bank stood to lose a lot of their debt, we stood to lose all our investments and actually have to face a few liabilities in the future around environmental issues."

Mr English said ministers were not prepared to expose taxpayers to on-going losses if Solid Energy's core business was not considered viable.

He said the proposed restructuring will give the company more time to work through the problems it faces, as it continues to focus on its core coal business.

Mr English said if the price of coal goes down there could be some big challenges, if it stays the same the company may get through, and a lift in the coal price would be the most beneficial thing that could happen.

He said the process to formally adopt the proposal is expected to be completed by the end of the month.

Labour and Greens oppose deal

The Labour Party said taxpayers were footing the bill for Solid Energy's restructure, when it was the Government's fault that the state coal miner was in financial trouble.

Labour's Clayton Cosgrove said National was warned time and again that Solid Energy was in trouble, and ministers refused to listen and took no action.

He said the deal announced on Tuesday was too little too late.

Green Party energy spokesperson Gareth Hughes said with the stroke of a pen, National had sold a large chunk of Solid Energy into foreign ownership.

"What the Government's doing is privatising part of Solid Energy, it's not a debt write-off it's a debt for ownership swap and we're going to see the big Australian banks take approximately 14% ownership in Solid Energy."

The Government said it did not regard the deal with the banks as a privatisation, rather everyone was more focussed on reaching a compromise.

EPMU says without the deal Solid Energy likely to close

The union that represents mine workers says without the just-announced Government financial support for Solid Energy it would be likely to close down.

Ged O'Connell, acting national secretary for the Engineering, Printing and Manufacturing Union (EPMU), said there was no doubt reckless management got the company into this situation and the Government recognised it had some responsibility to help it out.

He said a good percentage of that debt needed to be forgiven to enable the company to trade on and trade out of the precarious position it was in.

Mr O'Connell said for a company that had returned $600 million in profits to the taxpayer over the last decade - it was not a bad deal.

He said there had been no indications from Solid Energy so far about restructuring or possible job losses.