29 Aug 2016

Coal price rise raises sale hopes

9:14 am on 29 August 2016

Coal prices are rising, boosting confidence that some assets of the defunct state enterprise Solid Energy might be saved.

Digger loads up a truck at Stockton Coal Mine.

Digger loads up a truck at Stockton Coal Mine. Photo: 123RF

Solid Energy went out of business last year and its mines and other properties were put on the market.

The merchant bank Goldman Sachs was hired to complete the sale.

Goldmans are not talking at all but RNZ understands buyers from within New Zealand and overseas have been investigating the assets. Some are looking to buy all the company and others just the jewel in the crown, Stockton mine near Westport.

This process is going to schedule and an announcement is expected from October onwards.

Buller mayor Garry Howard

Buller mayor Garry Howard Photo: RNZ / Tracy Neal

While no-one is saying anything official, Buller mayor Garry Howard is quietly assured.

"I am very confident that we will see a sale of Solid Energy and the Stockton field," he said. "There has been a pleasant surprise at the degree of interest, so there is every reason to believe we will see a sale."

It is not known how much money will be paid, but it will go some way at least to meeting the debts that were consolidated when Solid Energy went under last year.

To help this process, Stockton Mine has even recruited a small number of staff after years of layoffs.

Garth Elliott of E tū union said the workers there were in quite good shape.

"The morale is pretty good, considering. There have been no more layoffs since the last restructuring, and they have hired a few people on fixed term contracts to deal with some unexpected work.

"There are people looking around to buy it and Solid Energy has extended the period for the sale process which is a positive I suppose, but we really will not know for sure until an announcement is made."

This process has been helped by a recent rise in the price of coal after years of decline.

Coal prices vary depending on quality, but prices have generally risen since February, peaking at more than 50 percent for the best coal.

This is understood to appeal to people wanting coal for the steel industry, which is Stockton's speciality.

Not everyone shares this optimism, though.

A coal analyst in Sydney, Daniel Morgan of UBS, thinks the rise in the price of coal will not last.

He said China had been reforming its coal industry to reduce industrial accidents, cut pollution and boost profitability.

This depressed production there, boosting demand for imported coal.

Mr Morgan said this demand would ease when the Chinese reforms were completed, and prices could slip back again.

"What you have had is a government mandate to restrict production in the short term. This may not be sustainable because the benefits of this policy have transferred to international producers.

"So I think there is a risk of prices weakening and volumes reducing as well, once that process is completed."

The Coal Action Network agreed that the revival in the price of coal was a false dawn, and investors would be unwise to buy into a dying industry.

It added the long term cost of climate change would far outweigh any short term economic gain from a revived coal industry.

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