14 Mar 2013

Govt rejects claim it helped Solid Energy into strife

6:09 am on 14 March 2013

The Government has rejected accusations that its demand that Solid Energy borrow more heavily helped cause the state owned coal company to run into financial difficulties.

The state owned enterprise is in talks with its bankers and the Government to bail it out after its debt reached $389 million.

The Labour Party has released documents it obtained under the Official Information Act which show the Government was urging Solid Energy to borrow more as long ago as May 2009.

A letter from the State Owned Enterprises Minister at the time, Simon Power, also shows the Government was demanding bigger dividend payments from the company.

In the end, it paid $130 million in dividends from 2009 compared with $64 million in the previous eight years under the former Labour-led Government.

Labour Party leader David Shearer says the documents confirm the Government's demand was a factor in getting Solid Energy into the mess it now faces.

However, the current State Owned Enterprises Minister, Tony Ryall, says requiring the company to pay a higher dividend is not the root cause of Solid Energy's problems.

He says the company's investments in unprofitable businesses and a slump in coal prices are responsible for its difficulties.

Mr Shearer says the matter will be raised when Solid Energy's former chair John Palmer appears before Parliament's commerce select committee on Thursday.

Former chief executive Don Elder is also due to appear at the committee hearing.