Release Time IMMEDIATE
Date 4 May 2000
Number 41/00
BHP WRITE-OFF OF HBI PLANT
The Broken Hill Proprietary Company Ltd (BHP) today announced a writeoff
of the carrying value of its Western Australian HBI plant following
continued commissioning difficulties. The writeoff is for $1138 million
before tax ($794 million after tax).
The writeoff follows a review of the carrying value of the asset in accordance
with Australian Accounting Standards and BHP policy. Carrying values are
reviewed to ensure they do not exceed the asset's 'recoverable amount'. The
key factors influencing the West Australian HBI recoverable amount include
lower production and sales volumes, lower sales prices, increased average
cost of production and higher capital expenditure to support modifications.
BHP is continuing to pursue a solution in order to improve production
reliability from the HBI plant. The Company has developed a detailed project
plan for the implementation of a number of technical modifications to existing
facilities at a cost of $46 million.
The capital outlay associated with this work, along with future operating cost,
will be expensed. The outcome of trials, to determine technical viability of
the plant, will be reviewed upon completion. If the trials are successful
additional capital expenditure will be required to determine economic
viability.
BHP is committed to thoroughly reviewing the technical options available to
accurately determine the future economic viability of the HBI facility.
The Company expects a final decision on the continued retention of the asset
within the portfolio to be made by the end of the calendar year.
If a decision is taken to cease operations and to shut down the plant,
it will be necessary to recognise 'take-or-pay' contracts and other
liabilities amounting to approximately $1.1 billion before tax in present
value terms before mitigation of exposures.
The total cost of the HBI Western Australia plant was $2.6 billion and the
project has been written down twice as a result of the carrying value review
process. The book value was written down by $590 million before tax ($378
million after tax) in the year ended May 1998 and was written down by a
further $829 million before tax ($531 million after tax) in the year ended
May 1999.
BHP's investment in the HBI Venezuela facility has also been reviewed and
this project passes the carrying value test. The Venezuela project is now
more than 90 per cent complete with the first briquettes expected in June
this year.
* * * *
Contact:
MEDIA RELATIONS: Mandy Frostick
Manager Media Relations
Ph: +61 3 9609 4157
Mob: + 61 419 546 245
INVESTOR RELATIONS: Rob Porter
Vice President Investor Relations
Ph: 61 3 9609 3540
Mob: 61 419 587 456
Pierre Hirsch
BHP Investor Relations - San Francisco
Tel: +1 415 774 2030
