Friday 31st August 2012
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Solid Energy will review its massive land holdings in Southland as part of decisions due by the end of the year on its plans to develop new industries from lignite, a low grade coal the state-owned coal miner says could be used to make fertiliser and diesel.
Outgoing chairman John Palmer told a media briefing in Wellington the company will look to sell land it doesn't need once it settles on the size and scope of its controversial plans.
"We have for some time been looking to see what options we have in relation to land holdings to cash out some of those," said Palmer. He was announcing writedowns of $151.7 million on underground coal mines and experiments in renewable energy that produced a $40.2 million loss in the year to June 30 and prompted restructuring that could cost 370 jobs above and below ground.
The company spent about $70 million in the mid-2000's buying up mainly farmland in eastern Southland, where it now owns more than 3,000 hectares sitting atop lignite reserves of around 1.35 billion tonnes.
Solid Energy believes the deposits could be worth billions of dollars in exports and import replacement, but the Parliamentary Commissioner for the Environment has slammed the proposed processes for their high output of greenhouse gases.
However, Solid Energy reaffirmed its lignite intentions this week as part of what chief executive Don Elder described as a "refined" strategy that will concentrate on opencast mining and developing underground coal seam gas extraction and lignite conversion industries.
The company has yet to commit capital to either initiative, but is expecting to consider plans for lignite development by the end of the year.
The decisions come as the company faces pressure to prepare itself for partial privatisation.
Also associated with the land, much of it currently dairy farms, is a substantial shareholding in Fonterra.
Shares in the dairy cooperative are valued in Solid Energy's books at $4.25 million, representing another asset the company could realise to shore up its balance sheet.
Investment analysts have been critical in the past of Solid Energy's "land banking" for access to the lignite resource.
Palmer said the farmland review was "something to be actioned this financial year."
Asked whether it could make a material contribution to Solid Energy's balance sheet woes, he said: "It could be significant, but a lot of it depends on the operating footprint that we think we would make. We can't make those decisions just yet."
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