Solid Energy lines up more job cuts after deciding against asset sales, liquidation

Thursday 7th May 2015

Solid Energy, the financially stricken state owned coal miner, plans to cut its workforce again to keep a lid on costs after the board decided against selling assets or liquidating the company.

The Christchurch based company plans to lay off 113 staff at its Stockton mine in Buller from July, as it cuts production, and will cut six maintenance staff at its Spring Creek mine in the Grey District to cut annual costs by $36 million, it said in a statement. Solid Energy anticipates restructuring costs of $4.3 million from the redundancies. The Stockton mine's production will drop to 1 million tonnes a year from its current 1.4 million tonnes, a level Solid Energy says will keep it relevant while minimising losses.

The government helped bail out Solid Energy in 2013 with $130 million of preference shares and a funding line for operations in a deal that saw taxpayers treated as secured creditors and forced banks lending to Solid Energy to take a $75 million collective writedown and become unsecured creditors of a company that lost $517 million in the previous two years after global coal prices fell dramatically.

Ongoing poor trading conditions saw Solid Energy announce on Feb. 27 it risked breaching its banking covenants in 2016, based on current forecasts of coal prices and commercial performance, and a need to engage again with its bankers on a restructuring, just three days after the sudden departure of chair Pip Dunphy. Emails released later showed she did not believe Solid Energy could be made viable, while Finance Minister Bill English remained optimistic.

Among the responses considered were "selling assets, liquidation, or trading though," the company said in a statement today.

Solid Energy said it had no immediate difficulties in meeting its commitments, and is holding talks with its shareholder and major lenders over the proposal.

Chief executive Dan Clifford signalled more job cuts were likely at the Stockton mine in March as low global coking coal prices continue to threaten its viability.

Feedback on the miner's proposals will be considered before a final decision is made on May 26, Solid Energy said.

BusinessDesk.co.nz

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