Media Release
Windfall Surplus Benefits Coal Producers Investment Programme
26 March 2003
High international coal prices, coinciding with a brief period of very low exchange rates, were major factors in producing a windfall after-tax surplus of $26.3 million for the six months ended 31 December 2002 for coal producer, Solid Energy New Zealand Ltd.
The unbudgeted surplus will help finance the companys on-going programme of investment to replace diminishing developed coal reserves to meet increasing demand for coal within New Zealand and for export. Financial performance over the second half of the year, to 30 June 2003, is expected to be weaker, although still positive.
The record half-year result compares with a profit of $15.9 million for the same period in the previous financial year and a surplus of $38.1 million for the 12 months ended 30 June 2002. Sales again reached a half-year record of $147.6 million (1.94 million tonnes) compared with $133.55 million (1.67 mt) in the same period last year and $264.5 million (3.35 mt) for the 2001/02 financial year. Export volumes increased to 1.03 million tonnes, compared with 0.86 million tonnes in the six months to the end of 2001 and 1.8 million tonnes for the last financial year.
Sales within New Zealand continued to grow, totaling 0.9 million tonnes for the half year (2001: 0.81 mt) with increased demand from the electricity sector and a number of New Zealands major industrial sectors including steel, dairy, cement and timber processing.
Solid Energy Chairman, Tim Saunders, comments: "While high international prices and low exchange rates were significant factors in producing this unexpectedly strong result, the use of the last carried forward tax losses was also a contributor to this windfall surplus. We can expect the recent steep appreciation of the New Zealand dollar and the downturn in USD export prices to significantly reduce export margins in the coming months once favourable short-term foreign exchange hedges run out."
Chief Executive Officer, Dr Don Elder, adds that the company will continue to adopt a conservative approach in securing its future as a successful commodity exporter and producer of home-grown energy for New Zealand industry.
"Solid Energys investment programme involves major capital expenditure commitments for mines that are technically complex and significantly more costly to operate than existing mines. The company will only be able to protect margins through achieving increased economies of scale in production and distribution. We are considering a range of options to lower transportation costs, particularly from the West Coast.
During the period Stockton Opencast (near Westport) and Huntly East Underground Mines both produced record volumes. The feasibility of further underground and opencast developments at Huntly is being assessed, in discussion with major customers. Further export mine developments on the Stockton Plateau are mainly lower value thermal coals which will be subject to the company developing viable transport options to Lyttelton or alternative export ports.
Development of Spring Creek Underground Mine (near Greymouth) is on schedule, with coal extraction expected to start in the third quarter of 2003, replacing the company's nearby Strongman 2 Mine. At Ohai in Southland, work has started to establish the feasibility of developing an opencast mine to replace Wairaki Underground Mine.
Dr Elder comments: "With New Zealand again facing the prospect of electricity shortages this winter, coal remains by far the lowest cost energy source for much of New Zealands demand, even though the effect of a carbon tax could add about 1c/kWh to coal-derived electricity. There is a major opportunity for Solid Energy to increase the supply of coal to primary export industries and for the generation of electricity in New Zealand."
"New Zealand has 10 billion tonnes of economic coal reserves - equivalent to 45 Maui gas fields, or over 200 Pohokura fields. Solid Energy is currently assessing the business case for coal-fired power stations These could help meet New Zealand's energy shortages, and keep wholesale electricity prices near current rates - in real terms - for hundreds of years."
For further information contact:
Vicki Blyth,
Communications Director,
Solid Energy New Zealand Ltd
Tel: 03 353 0100
Mobile: 021 670 250
