Solid Energy comes to Lyttelton's party

By Chris Hutching

Friday 30th August 2002

Lyttelton Port Co will receive an initial pre-payment of $13 million from Solid Energy under the terms of a coal-handling arrangement that shareholders will be asked to ratify at a special meeting on September 11.

Lyttelton Port needs the money because a policy of paying high special dividends to its cash-hungry 65% city council shareholder in recent years means it does not have reserves for such capital expenditure

Lyttelton Port will also borrow $10 million to finance a $26 million upgrade to receive bigger tonnages of coal railed from Solid Energy's Stockton open pit mine on the West Coast for loading on ships at the port.

The stockpile area will be doubled to 4.2ha and the ship-loading rate of 18,000 tonnes a day lifted to 25,000 tonnes. Solid Energy will also pay future fees but the numbers are confidential.

A Grant Samuel report says that after the upgrade the pre-tax earnings of the port will lift between 25% and 83%.

Based on information from the company the report forecasts that after tax profits in 2003 will fall 2.6% but will rise 3.3% in 2004 to $15.9 million profit if the arrangement goes ahead. Otherwise the 2004 profit would be $15.4 million.

In 2005 under the new deal the profit is forecast to rise 10.5% to $17.2 million ($15.6 million without the deal). In 2006 the rise is estimated at 18.3% or $18.3 million ($15.6 million otherwise).

The debt-to-equity ratio would rise to 50% under the deal but would be worked off within three years, the report says. Optional upgrades could cost another $17 million.

The deal requires ratification of 75% of shareholders and is unlikely to be opposed. The directors, including the appointees of Christchurch City Council, are recommending acceptance.

The port company's other main initiative is negotiating a flexible labour deal with waterfront unions that would allow for around the clock unloading of P&O Nedloyd's large container ship service.

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