WELLINGTON: New Zealand’s largest coal miner was forced into a managed bankruptcy due to a steep fall in coal prices over several years. Government-owned Solid Energy announced it was placing itself into voluntary administration, a process it hopes will allow it to keep trading as it tries to sell its assets. Whether any of its coal operations remain viable will be up to any potential buyers to decide.
The company employs 540 staff directly and another 200 contractors. At its peak, it was mining more than 4 million metric tons of coal each year, about 70 percent of which was used for making steel.
The company said its large debt was exacerbated by a drop in the price for hard coking coal from over $300 per metric ton in 2011 to about $85 this year. Contributing to the fall has been China’s slowing growth, some U.S. utilities switching to natural gas, and a glut of supply.
Solid Energy’s acting chairman Andy Coupe said in a statement that despite the company reducing costs and improving efficiencies, the continuing fall in coal prices meant there was no prospect of any significant recovery soon and the business was no longer sustainable.
“We have been upfront with our employees and other stakeholders about the challenges facing Solid Energy,” he said. “For some months, we have been consulting with our banks and shareholder to develop a suitable plan.”
Under the plan, which creditors will need to approve next month, most of the company’s debts will be frozen so they don’t accrue more interest. An investment bank will then try to sell off the company’s assets over the next 2 years. If no buyers are found, they will be shut down. The company is already much smaller than it was three years ago after it sacked more than 500 workers and lost others through attrition.
In 2012 the company purchased the Pike River mine, where 29 workers had earlier died in a methane-fueled explosion. But Solid Energy later announced it wouldn’t attempt to reactivate the mine or recover the dead miners’ bodies, which remained inside, because the mine was too dangerous.
New Zealand’s government previously hoped to sell part of its stake in Solid Energy as part of an asset-sales program designed to raise billions of dollars. Instead, over the past two years it sank more than 250 million New Zealand dollars ($165 million) of taxpayer money into the company in an attempt to keep it afloat.
