Solid Energy's record sales growth continues

Domestic coal sales increased by 6% from 1.96 mt in 2003 to 2.07 mt, reflecting strengthened demand for coal for electricity generation and industry, as Maui gas reserves declined.

Despite an extremely strong export market, coal exports were held back by transport constraints. Exports were still at a record 2.14 million tonnes compared to 2.13 million tonnes in 2003.

Solid Energy said it had the production capacity for further export sales but was constrained by rail capacity between the West Coast and the export port of Lyttelton.

Solid Energy returned a profit of $33.7 million for the year to 30 June 2004. While profit was down on the 2003 extraordinary result of $56 million, it was in line with the company’s long-term projections as revenues increased 5% to $334 million (2003: $317.1 million). A dividend of $10 million was paid to the New Zealand Government as shareholder.

Coal for electricity generation now accounts for over a third of Solid Energy’s sales in New Zealand. Just over 780,000 tonnes were supplied to Genesis Energy (2003: 650,000 tonnes) for the Huntly power station, while sales to BHP NZ Steel Ltd for its Glenbrook mill, south of Auckland, were down slightly at 802,000 tonnes (2003: 830,000 tonnes).

Chairman Tim Saunders said profitability was very dependent on US dollar denominated export markets, but currency hedging in place significantly reduced the impact of the strengthening New Zealand dollar which traded as high as $US0.72 in the year.

Chief executive officer, Dr Don Elder, said the company’s larger operations performed particularly well with increased volumes from Stockton, Strongman and Rotowaro opencast mines and from the Huntly East underground mine. The company’s biomass business, which trades as Nature’s Flame, has gone from strength to strength, with a 250% increase in the installation of wood pellet fireplaces over the year.

Domestic demand for Solid Energy coal is rapidly increasing with local sales estimated to grow to 3 million tonnes in 2005, about double the 2002 figure of 1.55 million tonnes.

Over the next 10 years Solid Energy estimates that coal-fired electricity plants could provide between 500 and 1000 MW of new, mostly baseload generation creating additional annual demand for up to 3 million tonnes of coal. Growth in the dairy, timber and other industrial processing sectors is likely to increase annual coal demand by around 2 million tonnes.

Dr Elder said: “If major new low-cost gas fields are not discovered and developed, and New Zealand’s growth continues to be driven by the primary sector, potential demand in New Zealand could grow up to 10 million tonnes within the next 10 years. By 2015 up to 25% of New Zealand’s electricity could be generated from coal".

He went on to say; “Increasingly strong demand for coal is likely to continue for at least 20 years. To support this growth Solid Energy is making significant investments in resource development and in new energy forms, in addition to coal-fired generation and cogeneration”.

"Demand for coking, thermal and specialist coals is also forecast to grow internationally keeping coal as an important New Zealand export for some years to come", Dr Elder said.