Fortescue forced to sell power station

• 11 years ago (2012-09-06)
• Junior Isles

North America 998

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Fortescue Metals Group has confirmed the sale of its Solomon ore mine power station in Pilbara region, Western Australia, to Canada's TransAlta for A$294.9 million ($300m). Fortescue is trimming assets in order to raise the funds to meet its debt obligations in the face of slumping iron ore prices.

The company has also revealed its intention to cut around 1000 jobs and cancel its expansion plans in an attempt to save up to $1.9bn this financial year.

"It was always our intention to divest the Solomon power station to an established owner and operator of power-generation assets," Fortescue chief executive Nev Power said.

The sale will give Fortescue cash upfront but increase operating costs at the Solomon project. TransAlta has said it will receive pre-financing cash returns of $40 million (A$39.7m) a year from the sale.

Despite the drastic action taken by Fortescue a severe slide in its share price has not been averted.

This week, Fortescue’s shares fell 8.5 per cent in a day, to $3.12, their lowest price since June 2009.

It was the company's biggest percentage share price slide in a day for almost a year and leaves the stock down around 50 per cent in the past five months.

Fortescue had previously said it anticipated a price floor would form for iron ore prices at the $120-a-tonne mark, a prediction which now looks unlikely; prompting the share collapse. The company maintains it is certain prices will eventually move to that level.