Solid Energy has revealed today it will enter voluntary administration.
It comes after months of speculation on the New Zealand coal miner’s future following NZ finance minister Bill English’s revelations in March that the company may not have been financially viable, broaching the subject of a potential collapse at the time.
“It’s still not clear [if the company is viable], and that’s with very serious and competent efforts by the board and management of Solid Energy, and now, increasing focus from the banks,” he said nearly six months ago.
“Solid Energy has done a lot of work to right-size itself, but the coal price has kept falling away in front of them and that's made it a continuing challenge.”
The statements came on the back of Solid’s bonds, to the tune of NZ$53.9 million, being written off by its backer TSB Bank in February.
This equates to the total book value of its loans.
Another major bank in NZ also wrote to the miner that month expressing concern over the company’s financial solvency.
The New Zealand Government extended indemnity to the company in March and managed to keep the business afloat since then, albeit with the company carrying out multiple waves of redundancies, but it appears that it can no longer support the operation in the wake of weak coal prices.
The decision to enter voluntary administration was communicated to staff across its operations today, according to Stuff.co.nz
Solid Energy acting chairman Andy Coupe stated that the move had been on the cards since last year due to the current challenges the miner was facing.
He said while workers had made a very substantial effort to maintain the business over the last few years, it was not enough to wipe more than NZ$300 million worth of debt.
"Regrettably those gains have been negated and more by the continuing sliding price of [coal]."
The business will carry out a sale of its assets over the next two years, however it will maintain business as usual for the next five weeks, with no more planned redundancies ahead in the meantime.
Coupe declined to state whether the assets would be sold piecemeal or as a single entity.
"The assets of Solid Energy are good assets", however under their current structure they are "not sustainable".