Solid Energy is at a crisis point, with a Government bailout almost inevitable, mine closures possible and further job cuts likely in another restructure to try to salvage the debt-ridden coal mining company.
The state-owned enterprise yesterday revealed it was in talks with its banks and the Government over its future after its debt rose to $389 million and a further "significant loss" would be in its half-year result.
The company posted a $40 million loss last year.
Finance Minister Bill English said the banks had taken action because they were concerned about getting their money back - and he would not rule out a bailout by the Government, saying it would not let the company fall into receivership.
He would also not rule out job losses among the workforce of 1200 and mine closures in a future restructure aimed at returning the firm to its core business of coal mining but with much lower overheads.
Staff, suppliers and contractors would continue to be paid, he said, but faced two to three months of "unavoidable uncertainty" while the banks, Treasury and the company worked out how to restructure it.
Mr English said the Government would not just let Solid Energy collapse and believed it could still be a viable business, but would need restructuring and lower overheads.
"The company is in financial distress. We are not going to let the company go ... there are clearly going to be discussions around whether they are carrying too much overhead and which mines are viable and which mines are not."
Solid Energy has mines on the West Coast, in Southland and at Huntly East. Last year, it bought Pike River, which has been closed since a blast killed 29 miners in 2011.
In a tough last 12 months, the company shed about 450 jobs.
Mr English said it would take some time to decide which parts of the company were worth keeping. The shareholding ministers had not had a role in controlling the company's debt raising, and State Owned Enterprises Minister Tony Ryall said questions about the debt levels should be directed to the board.
A spokeswoman for Solid Energy said board chairman Mark Ford was unavailable for media interviews.
In a statement, Mr Ford - who took over in November as part of a wholesale changeover on the board - said it was working on a turnaround plan. "We believe this plan can provide a sustainable future business to meet expected market conditions."
Solid Energy was intended to be included in the Government's partial asset sales programme, but was effectively taken off the block once its financial decline became clear.
Mr English said the true condition of its books became clear only after Crisis at state coal company the Treasury began a scoping study as part of readying it for sale.
Labour Party spokesman Clayton Cosgrove said the Government had been negligent in its oversight of the company, which was once a "jewel in the Crown" of SOEs.
"Four years ago this was an export award-winning company. Now it's a train wreck. Where was the oversight and the monitoring? And what's the result? The poor old taxpayer gets kicked in the guts again - probably to the tune of hundreds of millions of dollars."
Grey District Mayor Tony Kokshoorn said West Coasters were feeling apprehensive and were waiting to see what would happen.
Many still felt "wounded" following the loss of more than 200 direct jobs and 130 contractors let off late last year when the Spring Creek mine was mothballed due to low coal prices, Mr Kokshoorn said.
"Now the attention will turn to Westport, where there's about 800 to 1000 working there.
"There's already rumours of lay-offs there ... and now that Solid Energy needs cash, it's starting to look quite serious."
Mr Kokshoorn was hoping the Government would note that coal prices were forever changing so Solid Energy was worth saving.
"I'm saying to the Government and Solid Energy, 'Don't lose your nerve'. Now is the time to inject cash in. Be patient and your $1.7 billion business will return to that eventually when the cycle comes to.
"If you're in your house and the roof's full of leaks, you don't abandon your house. You fix your leaks and you save your house that way."
Mr English said the SOE was now worth "a lot less" than the $1.7 billion it was valued at last year, but he did not know whether it was worth more than its $389 million debt.
Solid Energy's financial condition has deteriorated over the past two years, a slump it attributed to a 40 per cent fall in coal prices and low returns on investment attempts in areas such as biofuels.