Solid Energy in bank talks

Solid Energy mine in Huntly. Photo / Ross Setford

The Government is this afternoon holding a briefing on Solid Energy's worsening financial position.

The Government and the company released statements saying Solid Energy was in discussion with its banks as it struggles with low coal prices.

Solid Energy's shareholding ministers, Finance Minister Bill English and State Owned Enterprises Minister Tony Ryall said the company's board was working with Treasury, advisers and the banks about further restructuring options, "with the aim of returning the company to a sustainable financial position."

The company - which was once a candidate for partial sale - has laid off hundreds of workers on the West Coast, Huntly and from its Christchurch head office. There has been a board cleanout and its long-serving chief executive Don Elder announced his departure earlier this month.

"Discussions are required because the position of the state-owned enterprise has continued to deteriorate despite the restructuring that has already taken place," Mr English said.

Mr Ryall said Solid Energy's debt stood at $389 million and its interim result, which is due shortly, will show additional losses.

"The new chair and board are focusing on a return to a core coal business which is viable at current world prices. The public is aware that there had already been restructuring at the company, but more may be required," says Mr Ryall.

"The Government appreciates this is a very unsettling time for employees and suppliers and the company's wider stakeholders but it is a process which must be worked through carefully and properly," the ministers say.

Solid's chairman, Mark Ford, said a restructuring and turnaround plan for the company was being prepared by the newly appointed board.

"Despite some modest recovery of international coal prices from a low of around US$140 per tonne in September last year - down from US$224 in June 2012 and a high of US$350 in January 2011 - the company expects any sustained recovery will be prolonged," he said.