Government invests S15M in Winstone-Samsung mill

Press, 12 May 1981, Page 18

Government invests S15M in WinstoneSamsung mill

The Government -. has agreed to invest $l5 million in the Winstbne-Samsung company to assist the operation of the Karioi thermomechanical pulp mill, the Prime Minister (Mr Muldoon) announced yesterday. The investment will take the form of $lO million in preference shares which will carry a 14 per cent dividend and will be entitled to participate in the form of higher dividends, when the company’s trading -position improves, and a $5 million loan at an interest rate of 14 per cent with interest to be capitalised for the first three years. “Our investigations have shown that, though the pulp mill has gone through a difficult time, there are good prospects that in the long run it can become a profitable operation making a useful contribution to export receipts,” Mr Muldoon said. “The market for pulp has been weak in the last couple of years. This coincided with the start-up of the Korioi

mill, and hit the company at a vulnerable time. “Losses have accumulated to the point that it was difficult for the shareholders to justify continued operation unless they could secure a capital injection to refinance the mill. In the Government’s view it would be an unnecessary waste of a potentially valuable national asset to allow the mill, to close down because of short term problems.

“Cabinet has agreed that the Government should give the company a breathing space in which to sort out its problems,” Mr Muldoon said. According to Mr Muldoon, the investment was “not a gift.”

“The minimum rate of return is 14 per cent, that is one per cent higher than the Government’s borrowing rate. In addition, the terms of the preference shares ensure that if the market improves and the mill becomes profitable the Government will receive a fair share of

that profit in return for this investment.” Mr Muldoon said that the company was retaining overseas consultants to advise on improvements that could be made to the mill operations, and would be making some investment in plant to improve their production efficiency.

"This will enable the company to trade their way out of their present short-term difficulties,” he said.