Government Declines To Sell Solid EnergyFinance
The Government has declined final bids from parties seeking to purchase Solid Energy, Finance Minister Bill Birch and State Owned Enterprises Minister Tony Ryall announced today. "In any asset sale this Government's aim is to secure a good return on the taxpayers' investment. The bids we received for Solid Energy did not meet that criterion," the Ministers said.
"This Government will not proceed with asset sales at any price." The Treasury and the Crown's
commercial sales advisor, Credit Suisse First Boston NZ Limited, both advised against accepting
the final bids. The Government made the in-principle decision to sell Solid Energy earlier this year.
A scoping study of Solid Energy advised the Government to proceed with a sale as soon as practicable, as this would enable the business to progress its expansion and transport strategies. The company had forecast capital expenditure in excess of $300 million over the next five years, and the Government believed these commercial judgements would be better made by the private sector.
Indicative bids submitted in July were of a value acceptable both to the Crown and its advisers.
"However, since then, the price of export coal has softened considerably. For example, between July and November, the international spot market price of hard coking coal fell by 21% from US$47 a tonne to US$37. "Projected increases in production from Australia, coupled with flat demand from Asia, have further lowered expectations for future coal prices.
"These were key factors influencing how bidders valued the company. They also affected the ability of other coal companies to bid for Solid Energy." Given these circumstances, the sales process would be ended, and Shareholding Ministers would now be working with Solid Energy to re-evaluate its strategies and operations in line with current market realities. This would include examining its foreign exchange hedge position. Solid Energy's annual accounts are to be tabled in Parliament this afternoon.