The Management Interview What Fires Up Solid Energy’s Don Elder?

At 44, Don Elder must be one of the fittest chief executives in New Zealand. He doesn’t just run. Elder hits the tennis court competitively, plays soccer, mountain bikes, tramps, yachts and skis. He also coaches his daughter’s soccer team. While he insists he’s just sporting “jack of all trades”, Elder’s physical energy is good analogy for his business style and motivation: he embraces serious challenge; he strives for swift momentum and he applauds preparation, planning and effort.
Christchurch born and bred, Elder slipped into Solid Energy’s top slot in 2000. He’d neither worked in the coal industry nor been CEO before. But with high-level experience and qualifications in environmental and soils engineering behind him and an extensive stint consulting to the Canadian government he felt, what he calls, an instant affinity with the organisation. Now he simply loves the job.
In double quick time he has built reputation as an astute company leader with the ability to get things moving. And fast.
Solid Energy, once the grubby imaged State Coal and then, post corporatisation Coal Corp, was in woeful condition when Elder joined. Reeling from the Asian economic crisis and low global coal prices, the company recorded an $86 million loss (including write-downs) in the year to June 1999. It was, in fact, facing technical insolvency. It survived because of subordinated equity investment from the government and stringent bank loan extensions.
“The primary job when I came on board was to repay debt,” Elder recalls. “That meant we didn’t do anything new. The objective was to mine out the existing coal resources and cash up whatever we could.”
The core management team, which is much the same today, had already started to edge the company around progress for which he claims no credit. But nevertheless, Elder has been central to leading the revival of Solid Energy’s fortunes.
First steps back to profitability were accompanied by series of commissioned studies into the economy, the energy sector, and the impacts of competing energy interests – all taking an unprecedented 20-year focus. The studies indicated substantial opportunities for growth in coal. Further, says Elder, they suggested that taking other courses of action could lead to the economy becoming energy-constrained within five years.
Outsiders were sceptical. Inside Solid Energy the feeling was different. “We were confident we had done the work so we stuck to our guns and developed growth-oriented rolling 20-year business plan,” says Elder who values in-depth study and planning.
Elder is former Rhodes Scholar. Both he and his wife have doctorates from Oxford University. He spent several years as visiting lecturer and associate researcher to number of universities. From 1990 to 2000, while holding senior management positions in private company, he also represented the Canadian Association of Consulting Engineers and was involved in negotiation and lobbying campaigns up to ministerial and international level. The experience gained in the process has rubbed off. Elder prizes considered action. It is better for management team to miss deadline, he says, than to proceed with incomplete thinking and make bad decision.
The rolling 20-year business plan is now crucial to maximising Solid Energy’s profit. As Elder puts it: “Ninety percent of the value doesn’t come from digging coal from the ground, it comes from knowing everything you can about that coal, long before you mine it. Where it is, how much there is, what its qualities are, how you will extract it, what blends you will sell where and to whom, and how you will get it there. We can give you precise answers to all those questions for coal we’ll be mining in 2009 or 2013. It’s all about applying knowledge and technology to add value in the business.”
The company has invested heavily in technology and employs scores of people who are not coal miners. And Elder’s response to anyone who suggests the desk jobs he’s created are expensive overheads is an unequivocal: “That’s absolute nonsense, that’s where the value is being added!”
Solid Energy extracted more than two million tonnes of coal for export last year. The figure is likely to double in five years.
Domestic consumption is also rising fast, buoyed by the Huntly coal-fired power station becoming ‘base line generator’ which in the near future will consume some two million tonnes of coal year.
Solid Energy’s debts have been fully repaid and total staff numbers have climbed to 500 plus about 300 external contractors who work on Solid Energy sites.
The company is still state-owned. But, says Elder, managing Solid Energy is no different to managing private sector business. “I don’t think of it as government company. We have very clear mandate that our responsibility is to be good business. As successful as any comparable private sector company.” And the Government, he says, does not influence decision-making “in any shape or form”.
But what about environmental concerns and the Government’s avowed commitment to reducing greenhouse gas emissions? Elder is candid. “That’s one of the important issues for Solid Energy. When you’ve lived in parts of the world where the air has permanent haze, coming back here you think, I don’t want to be part of anything that takes New Zealand that way.”
He acknowledges that coal is finite resource and produces more carbon dioxide than any other non-renewable fuel for the same amount of energy produced. The company’s response has been to develop full environmental policy. “We now put focus on what I call the right to mine. That says that the net environmental effect of all our operations will be positive. It would be easy for us to say we will exercise environmental responsibility. What we are saying is, we will actually have an overall positive effect – and hold ourselves accountable to that.
“We have developed methodology to look at everything we do. You can’t change the fact that in the short term, mining has negative impact on the environment. So we will do other things that have positive effect.
“For example, if we had hundred hectares of forest that is now mine, we might take thousand hectares of forest somewhere else where stoats and ferrets have led to depleted native bird and wildlife populations, and we will restore it. Much of our environmental policy is built on the concept of supporting bio-diversity.”
Of course, whether coal mining can ever be compensated for is open to debate, which Elder acknowledges. But there is no denying this CEO and his team have done some serious thinking about New Zealand’s environment – and it’s helped to change the culture of the company.
“When I joined we had siege mentality. There was sense of pride and determination in what we were doing, but it wasn’t much fun. That’s changed. What we have now is real sense that we are part of the community. Right through the company, from those working at the coalface to corporate head office, people are proud of what we do. That’s great feeling. From management point of view I fundamentally believe that if you don’t enjoy what you do and you’re not proud of it you shouldn’t be doing it.”
So what keeps Elder focused? “To be happy with my work, I need to have three things. I have to be doing something that’s worthwhile, I have to be doing something that makes difference and I have to have something I look forward to. Call it mantra if you like. All those things have to be occurring all the time or I lose interest in what I’m doing. I have them all the time at Solid Energy!”
The diverse challenges of the coal industry add appeal. “Almost every aspect I can imagine in business, we are involved in. We’re in the natural resources sector. We’re in the transport sector, with road, rail and shipping. We’re in the energy sector. We have relationships with pretty much every major producer in the country, as well as with universities, schools, hospitals, and so on for processing energy and