Landcorp board in talks with ministers over debt levels, PM Key says

Monday 17th August 2015

The board of state-owned farming operator Landcorp Farming is in active discussions with ministers over its levels of debt, but isn't in as big a hole as failed coal-miner Solid Energy, according to Prime Minister John Key.

The Wellington based state-owned enterprise faces growing scrutiny by the government as a slump in the global milk price creates unease over Landcorp's debt. Key told his weekly post-Cabinet press conference ministers are in talks with the SOE's board, but he wouldn't put it in the same boat as Solid Energy, which was put into voluntary administration last week after a collapse in coal prices compounded the company's over-ambitious expansion strategy and high level of debt.

"Ministers are aware of the debt that Landcorp carries and are having active conversations about that," Key said. "There's been a number of discussions between the Minister of State-Owned Enterprises Todd McClay and the board of Landcorp, along with the minister of finance."

Finance Minister Bill English told TV3's 'The Nation' programme that the government was uncomfortable with the level of Landcorp's dairy conversion on the 26,000 hectare Wairakei Estate north of Taupo, and was having a look at it. Landcorp chief executive Steve Carden rejected the suggestion the low dairy price would warrant a review, saying it was a long-term development.

Key said he didn't know what steps the ministers and Landcorp will take, and that he hasn't received a report on the review.

The economic assessment for the Wairakei Estate forecast revenue increasing to $168 million by 2021, at the end of the conversion process, from $41 million in 2014, with dairy revenues accounting for the lion's share of future revenue. At the time, the milk price assumption was $7 per kilogram of milk solids.

Fonterra Cooperative Group has since slashed its forecast payout to farmers for the 2016 season to $3.85/kgMS.

BusinessDesk.co.nz

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