State coal patronage ends in March with Solid Energy liquidation

GOVERNMENT patronage of the coal industry for the past 117 years concludes next year, when Solid Energy is formally placed in solvent liquidation in March.

It appears another robot is shortly to be sent into the illfated Pike River Coal mine, but that may yet have to be determined by whoever makes up the next government in a fortnight.

Solid Energy general manager Steve Esposito told delegates at the annual New Zealand branch of the Australian Institute of Mining and Metallurgy conference in Christchurch its demise ‘‘brought to a close state coal company patronage, which goes back to 1901’’.

‘‘By March 2018, all proceeds of the asset sales will go to the creditors,’’ he said.

In the face of declining revenue in 2012, with the price of coal beginning to tank, Solid Energy, which started in 1987, was restructured through 201314, but by mid2015 the writing was on the wall as amassed debts took their toll in the face of dwindling cash flow. Solid Energy was placed in voluntary administration, owing hundreds of millions of dollars.

In September 2015, the ODT reported 1500 creditors owed $400 million by Solid Energy voted for an asset selldown, after the company collapsed amid plummeting global coal prices.

Mr Esposito made no mention of former boss Don Elder’s research and development projects, which in themselves contributed tens of millions of dollars to the overall debt.

Revealingly, Mr Esposito did show Solid Energy had managed to largely trim its costs of production against income during much of 2012 through to the coal price recovery in June 2017, but payment of debt prevailed.

Mr Esposito said the subsequent asset sales prompted 20 indicative bids and almost 1000 questions during due diligence.

Southlandbased assets were sold to Greenbriar, a company with Dunedin connections, West Coast assets went to Birchfield, Reefton to Moore Mining and Stockton and North Island assets to BT Mining.

BT Mining is 30% owned by fishing company Talley’s and 70% by Australianlisted Bathurst Resources, which has adjacent coal permits on the contested Denniston plateau , above Westport.

The sales included a ‘‘massive’’, and surprising to many delegates, 12,784ha of land, ranging from numerous farms in Southland and even an entire North Island township.

‘‘I think we were the biggest dairy farmer in Southland, Mr Esposito quipped.

In spite of original estimates of payments to creditors ranging from just 15c20c in the dollar, Mr Esposito said the sales were likely to realise 60c in the dollar.

On the question of the future of the Pike River Coal mine, Mr Esposito said plans were under way with the Department of Conservation to ‘‘send another robot through’’, but that was likely to be decided by the next government, he said.

He was asked about what ‘‘legacy Solid Energy left behind’’ and highlighted its environmental rehabilitation, drawing together myriad widespread permits, information and data amassed, plus benefits the company bought to the economies in several areas.

During the asset sale, 31 mining permits were transferred to new owners, as were 99 business agreements and a total 252 resource consents.