NZOG and Pike River

Trans-Tasman has a useful item on NZOG and Pike River:

NZOG has been named in last week’s Greymouth District Court decision of Judge Jane Farish as a party capable of contributing to the orders for $3.4m in fines and reparation, since Pike River Coal’s husk, in receivership, has nothing like enough in kitty to pay its fines.

Even though NZOG was in the process of quitting its unfortunate experiment in underground coal mining when the Nov 2010 blasts occurred, and even though Pike had already chewed through half of a $25m credit facility from NZOG by then, the Wellington-based oil and gas explorer gave the destroyed company access to the balance of those funds to tide it over. It also contributed $1m to a crisis fund and, perhaps most tellingly, allowed unsecured creditors – an array of third party, often West Coast contractors who faced potential ruin – access to $7m in claims NZOG might legitimately have had first dibs on. Pike River’s bank, the BNZ, took no such generous action.

This is a point worth making. NZOG have already gone well beyond what they legally had to do in helping families, suppliers and the wider community.

NZOG received an insurance payout of $42m on its losses from holding a 29% share of the illfated venture in which 29 miners died. One could even argue the company should treat the remaining $110,000 compensation per family as chump change, cheap at the price to preserve NZOG’s social licence to operate and to prevent more mud more sticking to the politically contentious oil and gas industry. NZOG may yet decide this is it’s best bet. Yet the company has every right to feel aggrieved by Judge Farish’s as yet unpublished decision. NZOG was neither a party to nor a called witness at the Pike River prosecution. The company was not named in the findings of the Royal Commission of Inquiry into the disaster as a culpable party.

Again a key point.

Now, with the written judgment not due for another week or so, NZOG is in a no-win holding pattern of saying it can’t respond without seeing the judgment. It’s not even clear there’s a right of appeal for NZOG. Another question arises – why just single out NZOG? Some 13.1% of Pike was in the hands of two Indian coal companies, Saurashtra Fuels an Gujarat NRE Coke, both attached to billionaire families, neither of whom has uttered so much as a public word of condolence to the Pike families. If NZOG is judged in the court of public opinion to owe the Pike families more, then why not every other out-of-pocket shareholder?

A fair point.