Anderton 'saved' Solid Energy from privatisation

By Chris Hutching

Friday 28th June 2002

A proposal to privatise Solid Energy was killed by Deputy Prime Minister Jim Anderton and his Alliance Party soon after Labour came to power.

Mr Anderton raised the matter obliquely in a recent speech when he took credit for "saving" Solid Energy from being sold.

A Beehive source said four mines on the West Coast were being considered for sale early in the Labour government's new term when Solid Energy was still a financial cot case. The assets being considered for sale would have comprised a minority of the company's total assets but they were the most profitable.

If the deal had proceeded it probably would have spelt the end of Solid Energy as a state-owned enterprise. Prime Minister Helen Clark was advised to reject the deal and Mr Anderton is taking credit for that.

But there were other political considerations in addition to Mr Anderton and the Alliance. At the time, Labour was embroiled in arguments about Timberlands and the abolition of indigenous logging on the West Coast. Dealing to another state-owned enterprise that has always been considered a key employer in the region would have created too strong a backlash among potential labour voters.

Instead, the insolvent Solid Energy was recapitalised with a $42 million government to help restructure and overcome the huge losses from falling coal prices and exposure to foreign exchange losses.

Its recovery was swift and the first new investment was in a 50-50 joint venture in Greymouth Coal with Todd Energy for the development of the new Rapahoe mine prospect.

The recovery plan reduced staff by about 30%, simplified the company structure and closed offices, closed the new Mt Davy mine and wrote off $20 million of its development costs, abandoned plans for an export coal jetty costing $170 million and wrote off $14 million feasibility costs. Last week it concluded a long-term exporting contract with Lyttelton Port company (NBR, June 21).

The company's re-emergence was being helped by BHP's decision to continue operations at Glenbrook Steel till 2005.

Last week, Solid Energy also announced it had settled a deal to acquire Todd Coal's half share in the Spring Creek underground coal mine near Greymouth.

Solid Energy plans to reopen the mine as soon as an operating plan is finalised in a few weeks but has yet to confirm if it has sufficient economic potential to complete a 10-year programme.

The mine was put into "care and maintenance" in February last year when unforeseen geological conditions forced the joint venture to suspend mining and reassess the mine's long term future.

The Commerce Commission approved Solid Energy's application to acquire Todd's interest in Spring Creek at the end of June 2001.

Before the suspension of mining there were 61 people employed at Spring Creek extracting semi-coking coal, in demand for its low sulphur characteristics, popular with Japanese steel mills and for thermal power generation.

Spring Creek mine is planned as a replacement for Solid Energy's Strongman 2 underground mine, which is scheduled to close next year.

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