Extension of Solid Energy’s remediation indemnity   18 Sep 2014

Hon Bill English

Minister of Finance

Hon Tony Ryall

Minister for State Owned Enterprises

18 September 2014

Media Statement
Extension of Solid Energy’s remediation indemnity

Government officials are working with Solid Energy to extend the company’s remediation indemnity, which will meet the future costs of returning the company’s mining land to its pre-mined condition, Finance Minister Bill English and State Owned Enterprises Minister Tony Ryall say.

“This will extend a similar remediation agreement made in 1987. It will strengthen Solid Energy’s equity position and ensure that it can effectively rehabilitate land after its mining has been completed,” Mr English says.

“It’s clear that Solid Energy’s trading conditions remain difficult and its challenges are still significant. The Government’s decision to extend support for Solid’s remediation obligations is a further demonstration of its commitment to give the company every opportunity to become viable.

“The company’s directors are required to sign off the company’s annual accounts by the end of September and they advised us they need this indemnity for the company to remain in a positive equity position through this financial year.

“We expect this process to be completed in the next week or so – in time for the annual accounts to be signed off.”

The indemnity is a promise by the Crown to reimburse the company for the costs of remediation as and when it is carried out, and it has a present value of $103 million.

Under current forecasts, expenses covered by the indemnity will be $6 million in 2015 and $11 million in 2016. There will be no overall impact on the Crown’s fiscal position, because the indemnity simply transfers a liability from an entity that is 100 per cent owned by the Crown to the Crown itself.

No change is proposed to the requirements or timing of the remediation work programme, which has been agreed between the company and the relevant local authorities. The only difference is that these costs will now be met directly by the Crown.

Mr Ryall says market conditions remain challenging for Solid Energy and its 700 staff.

“As we said when we announced Solid’s restructure package a year ago, the Government is not prepared to expose taxpayers to ongoing losses if the company’s core business is not considered viable,” he says.

“We also said that we are prepared to provide support for the company if there is a reasonable chance it can be made viable. The extension of this indemnity is part of that support.”

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