26 Feb 2013

Govt pushed on actions to halt company's decline

10:25 pm on 26 February 2013

The Government has faced questions in Parliament about what actions it took to halt the financial decline of state-owned coal company Solid Energy.

Solid Energy is one of four energy firms the Government wants to partially privatise. However, the coal miner in crisis talks with its banks and the Treasury about a bailout as it grapples with $389 million worth of debt and is not in a condition to be sold.

Prime Minister John Key said on Tuesday the Government sought a scoping study in 2011 to prepare for Solid Energy's partial sale and that revealed financial difficulties.

Mr Key said the Government has actively worked with Solid Energy since then to try to improve its financial situation.

Labour MP Clayton Cosgrove questioned State-Owned Enterprises Minister Tony Ryall in Parliament on Tuesday about what has been done since that study and said the minister had at least three options.

"One, shareholding ministers may from time to time direct the board of a company to take actions via the statement of corporate intent process. Two, he could have sacked the board - they resigned - he didn't sack them. And three, he could have called the chair in and provided direction."

Mr Ryall told the House the Government did take action when the problems became apparent in 2011.

Finance Minister Bill English concedes that the Government may not make as much as initially thought from its partial asset sales programme due to problems facing Solid Energy.

Mr English said on Tuesday that is likely to affect the $5 billion to $7 billion the sales were originally expected to raise over three to five years.

"It's possible these numbers could move around because in the end, all the forecasts have to deal with reality. And the reality will be determined by how people actually value it."

Mr English said if the Government is able to put Mighty River Power up for sale once the Supreme Court rules on the issue of water rights later this week, it will find out at that point how much the state-owned companies are worth.

Labour says the Government will have to drop its projected earnings for the partial asset sales, leaving the programme in tatters.

Meanwhile, Labour has rejected any suggestion it is to blame for Solid Energy's financial problems.

Prime Minister John Key says the Government opposed a plan by the company to expand and diversify its business, but was powerless to stop it. He also attributed some of the blame on a speech in 2007 by then-Minister of State-Owned Enterprises Trevor Mallard who encouraged such expansion.

Labour's spokesperson for state-owned enterprises Clayton Cosgrove told Radio New Zealand's Morning Report programme that Mr Mallard's speech had no bearing on Solid Energy's current problems and John Key's argument was a flimsy attempt by the Prime Minister to avoid questions about the company.

Govt failed to oversee company - Greens

The Green Party says the Government failed in its duty to oversee Solid Energy and its investments.

Co-leader Russel Norman told Morning Report Mr Key supported Solid Energy's expansion, encouraging it into a lignite project in Southland without seeing a business case for it.

Dr Norman said the Government undermined two of Solid Energy's green energy investments and it had to write down $35 million worth of investment in green energy.

He said the company was affected by the scrapping of the biofuel subsidy and its wood palette business was affected by the collapse of the carbon price.