GTL Energy’s NZ unit, with option on Solid Energy’s idled briquette plant, posts wider loss

Wednesday 12th March 2014

The New Zealand unit of Australia's GTL Energy posted a wider loss last year, reflecting its share of costs to develop Solid Energy's now-idled Mataura briquette plant.

GTL Energy (New Zealand) had a loss of $761,289 in the year ended June 30, from a loss of $205,431 a year earlier, according to its annual report. It garnered no revenue while completing the plant, which used GTL's technology to increase the thermal energy of lignite, converting it into a coal product that could be used by industry.

The briquette plant was one of the projects driven by former Solid Energy chief Don Elder, who had a vision to expand the state-owned miner into a broad-based energy company based on bullish expectations for coal and oil prices. He resigned in February last year, followed by most of the company's board, as a slump in the price of coal left it stranded with high debt and uneconomic assets, forcing the government to provide a bailout while dropping it from a list of SOEs earmarked for sale.

"The macro challenges are the deteriorating sea-borne thermal coal price, which has impacted on our target customers' willingness to allocate capital to new project opportunities, and access to capital for small-cap pre revenue development companies such as GTL Energy," directors of the New Zealand unit wrote in the report.

"Solid Energy New Zealand's change in circumstances, widely reported, has completely changed the landscape for the use of the NZ plant to support GTL Energy's expansion and deployment plans," they said.

Solid Energy took a $26.2 million charge against the plant in its 2013 accounts, a year when total impairments to write down the value of assets was $215.3 million. It has begun to sell non-core assets although the Mataura plant has been leased to GTL Energy.

The Australian company put the plant into care and maintenance in November "to limit the associated costs, whilst it reviews its strategy and funding options," according to the annual report. It has an option to buy the plant, according to a Solid Energy spokesman.

Solid Energy made a payment of $500,000 to GTL Energy last June under their agreement, which the state-owned coal miner had terminated in April 2013.

Grant Thornton, the auditor for GTL Energy (New Zealand)'s 2013 accounts, added an emphasis of matter to its report, noting that the company's current liabilities exceeded current assets by $1.49 million and drawing attention to a note that the New Zealand business was reliant on its Australian parent for capital.

Adelaide-based GTL Energy was set up in 2000 to investigate coal-to-gas and gas-to-liquids technology for a specific project in Australia using low grade coal, according to its website. This resulted in the company researching and developing technology to convert low grade coal into "higher rank fuel."

The company operates a commercial scale plant in North Dakota and is in talks with Indonesian coal producers, Indian companies and other potential customers about opportunities in the US, India and Australia, it said.

BusinessDesk.co.nz

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