After having its "for sale" sign removed when it almost collapsed this year, state-owned coalminer Solid Energy will be partially privatised in a restructuring deal revealed yesterday that could cost the taxpayer as much as $155 million.
After months of negotiations between the company, its banks, the Treasury and the Government, Finance Minister Bill English and Minister for State Owned Enterprises Tony Ryall revealed the rescue package for the company, which is struggling under a $380 million debt pile and has shed 700 jobs in the past year.
Most of its debt - $286 million - is owed to the company's banks, which will exchange $75 million of that debt for shares in the company. While that effectively makes them part-owners of the stricken company, the deal does not require the law change needed for the partial sale of state assets under the Government's "mixed ownership model".
That is because the State Owned Enterprises Act allows the Government to issue non-voting redeemable preference shares of the type the banks will receive.
The shares are redeemable because the company can buy them back if it wants to.
They are called preference shares because holders would have a greater claim over the company's assets in a liquidation than the Government does as holder of Solid Energy's ordinary shares.
However, the Government is also buying $25 million of new redeemable preference shares itself and is extending two $50 million loans to the company.
It will also make a $30 million "standby" facility available to Solid Energy.
A Solid Energy spokeswoman said the deal, if approved, would reduce Solid Energy's debt by $75 million immediately.
But debt levels would increase again as the company withdrew money from the loans provided by the Government.
Green Party energy spokesman Gareth Hughes said it was the Australian-owned ANZ, BNZ, ASB and Westpac banks that would take the $75 million stake in the company.
"With the stroke of a pen, National has sold a large chunk of Solid Energy into foreign ownership," he said
Solid Energy's spokeswoman said the extent of the banks' ownership was likely to be revealed when the company issued new financial statements shortly.
But Mr Hughes said the big four Australian-owned banks would get about 14 per cent of Solid Energy, "at the very least".
Mr Ryall said the company "still has a lot of work to do, and market conditions remain challenging" but the proposed restructuring "will give the company more time to work through the issues it faces, as it continues to focus on its core coal business".
The deal requires investors who hold $95 million of Solid Energy bonds to waive their rights to put the company into receivership.
Labour state-owned enterprises spokesman Clayton Cosgrove called the package " too little, too late", and said it lacked detail.
"Kiwis are still left in the dark on how much the failure of Solid Energy has cost them. National must come clean and tell us the full cost."
The taxpayer's Solid Energy lifeline
$25m cash in exchange for new shares
$50m secured working capital loan
$50m secured land mortgage
$30m secured standby facility if required