​Bank writes off coal miner loan amidst depressed market

The coal industry is seeing more investment caution in its future, as New Zealand’s largest coal miner’s loan is written off by one of its backers.

New Zealand’s TSB Bank has made provisions against the entirety of its NZ$53.9 million worth of Solid Energy bonds, according to Stuff.co.nz

This equates to the total book value of its loans.

“Along with the Government and a number of NZ-based banks, TSB Bank has been working with Solid Energy in an attempt to achieve a positive outcome for the company,” TSB Bank said.

“However on the back of trading difficulties and gloomy coal demand forecasting, TSB Bank has decided to write down the full value of the investment in Solid Energy.”

Another major bank in NZ also wrote to the miner last month expressing concern over the company’s financial solvency.

The New Zealand Government is also understood to have extended indemnity to the company on Friday.

However it stated that it was not preparing to place the miner into receivership.

Earlier this year Solid Energy announced a decision to cut jobs at its major Stockton coal mine, only six months after slashing more than 100 jobs from the same operation.

This latest decision by the bank is unsurprising as coal continues to suffer and investors depart the commodity.

The commodity has faced a massive decline. It has fallen in price by more than a third in a year from December 2013 to December 2014, as Chinese demand waned and projects came online, flooding the market and causing excessive supply problems.

According to Anglo American CEO Mark Cutifani coal mines will be closed or suspended at a steady rate until reduced supply drives a price recovery, adding that globally they will most likely shut at a rate of around one every two to three weeks until the lack of supply finally affects price.

Last week Glencore announced plans to cut 15 million tonnes from its Australian output in the wake of the falling price.

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