Adam Bennett

Adam is a political reporter for the New Zealand Herald.

Solid Energy's losses grow to $335m

Solid Energy's losses ballooned to $335 million in its latest financial. Photo / Chris Loufte
Solid Energy's losses ballooned to $335 million in its latest financial. Photo / Chris Loufte

Troubled state-owned coal miner Solid Energy's losses ballooned to $335 million in its latest financial results released this afternoon.

The company said the result, a deterioration from its $40 million loss last year was largely down to asset write downs of $215.3 million and $102.2 million in one off restructuring, redundancy and closure costs.

Underlying earnings dropped fell 78 per cent $22.2 million which chairman Mark Ford said was "a less than satisfactory trading performance" even given the weak global coal market.

"But we do believe that Solid Energy has a good operating future now that we have focused the business on cash generation, and reduced and contained costs," Ford said.

"The carrying values of our coal assets are likely to remain low for some time as we expect that international export prices will remain depressed in the short to medium term."

Ford said the write-downs "draw a line under those parts of the business that no longer form part of our future and acknowledge that any future improvement in value will come from our core coal mining activities.

"We have rigorously cleaned up the balance sheet to give the refocused coal mining business its best chance to trade its way back to profitability over time and to repay the confidence shown in us by our shareholder and funders."

The company wrote down the value of its Stockton mine - where it has invested heavily in recent years - by $80 million

It wrote down the value of its mothballed Spring Creek mine by $53 million.

The other big write downs were almost $24 million on its underground gasification plant at Huntly and $26 million on its briquette plant.

The company's $22.2 million in underlying earnings were well down on the $99.7 million last year.

Coal sales fell 11 per cent to 4.1 million tonnes, and prices for hard coking coal, one of the company's key products also fell, from a high of US$221 a tonne in June 2012 to US$130 a tonne for the same month this year.

Restructuring costs including redundancies totalled $46.7 million.

Earlier this week the Government announced a 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. The company will also issue $25 million new shares to the Government in exchange for $25 million in cash.

Solid Energy this afternoon said the writedowns of its assets and other factors had reduced its existing shareholders' equity by $332 million to $91.6 million.

That means the company's banks may own as much as 40 per cent of the company via their non-voting redeemable preference shares if the restructuring deal goes ahead.

- NZ Herald

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