McClay Todd: Ministerial Statements — Solid Energy—Voluntary AdministrationText is incorporated into the Bound VolumeMcClay Todd: Ministerial Statements — Solid Energy—Voluntary Administration[Sitting date: 13 August 2015. Volume:707;Page:5783. Text is incorporated into the Bound Volume.]Hon TODD McCLAY (Minister for State Owned Enterprises): I wish to make a ministerial statement under Standing Order 356 in relation to Solid Energy going into voluntary administration. Today the board of Solid Energy has placed the company into voluntary administration. This follows months of negotiation with key stakeholders who have agreed to put a proposal to creditors that provides for an orderly sell down of assets over the next 2½ years.This decision to place the company into voluntary administration was made after it became clear that even with significant operational improvements the falling international coal price means there is no prospect of Solid Energy being in a position to repay or refinance its bank debt. Solid Energy owes $320 million in bank debt some falling due in September of 2016 and overall has exposure of close to half a billion dollars. As a result of the considerable efforts of its board and management officials and lenders Solid Energy is certainly a much more efficient and effective business today than it was 2 years ago. But the reality is that there is still no prospect of the company being in a position to repay or refinance its debt or access the capital that it would require to invest for the future.An orderly sales process of Solid Energy gives the best chance that parts of the business can continue to operate under different ownership in the future. If the creditors agree to the proposal the company will remain solvent during the process and can continue to carry on its normal business under its existing board of directors. Payment of employees and trade creditors will continue on a business-as-usual basis and customers will continue to have access to coal. Under the terms of the restructure existing Crown indemnities for site rehabilitation costs are being restructured to assist the sales process and to provide certainty for affected local authorities. Solid Energy is currently exiting and rehabilitating the Pike River mine site. Once it completes this process the land will be returned to the Department of Conservation. Through the voluntary administration process Solid Energy remains committed to this work.The Government has provided intensive support to the company in an attempt to make it viable in a highly challenging international coal market. Over the past 2 years directors management banks and the Government have restructured the company’s finances and its operations. This has included commitments of taxpayer support totalling more than $250 million. In 2013 the Government negotiated a financial restructure package that saw Solid Energy’s banks contribute $75 million in equity to the company. The bank also contributed $25 million in equity and offered $130 million in low-risk secure loans for the company to use. In 2014 remediation liabilities totalling $103 million were transferred from the company to the Crown which strengthened the company’s balance sheet so it could continue trading.However the international coal price has fallen from over US$320 per tonne in 2011 to around US$85 a tonne this week. Forecast recoveries of the coal price have repeatedly failed to eventuate. This low price coupled with the significant levels of debt means that the company is no longer sustainable. The Government was prepared to provide further support for the company if there was a reasonable chance it could be made viable. We have worked intensively with the company and its bankers on a number of options for the company to continue operating but unfortunately none of these proved feasible. The Government’s focus will continue to be to invest in our core business of public services which we believe is the best way for us to achieve our goal of higher living standards for New Zealanders. The Government has been in talks with affected councils over the past month and I have this morning spoken to the mayors of these districts to thank them for the constructive way that they have worked through and supported this proposal. This voluntary administration offers the best chance for trade creditors to be paid and for employees of Solid Energy to continue employment in these regions.