Solid Energy exports burn bright

By CHRIS DANIELS energy writer

Solid Energy is riding high thanks to international demand for its premium coal.

The state-owned company has signed contracts with Indian steelworks keen on buying New Zealand coal.

Solid Energy has concluded an $80 million three-year contract, which is designed to roll over at the end of the term, with Tata Steel.

It has also just renewed a $120 million deal to sell the Steel Authority of India 1.5 million tonnes of coal over the next five years.

Prices for thermal coal, which is used in power stations, are at a 20 year high but Solid Energy primarily exports coking coal, used in steelworks.

It also sells thermal coal from its Waikato coal field to state-owned enterprise Genesis, which burns it in the Huntly power station.

The SOE made an after-tax profit of $56 million last year, up 47 per cent from 2002, but did not pay a dividend to the Government.

More than three quarters of coal exported by Solid Energy goes to steel mills and coke makers. Its coal is shipped to Japan, China, South Africa, Brazil and India.

Crown Minerals, a branch of the Ministry of Economic Development, released figures last month showing that New Zealand coal production topped five million tonnes for the first time last year.

Increased world demand for coal and rising prices has led to a resurgence of interest in domestic coal resources.

Crown Minerals said it had "observed an increased demand for information on coalfields that are not currently in production", but that due to demand and current high prices had the potential to be developed.

Demand for New Zealand coal had grown dramatically over the past two years, with China becoming a much bigger customer.

Solid Energy said that capacity problems on the rail line connecting the West Coast to Lyttelton prevented it from exporting more coal.

New Zealand Oil & Gas subsidiary Pike River Coal is developing a new mine near Greymouth and hopes to begin exporting premium coal through a new facility run by the Port of Marlborough. Coal would be trucked to Greymouth, then barged to Shakespeare Bay, near Picton, where it would be loaded into coal transport ships.