The Government was worried about Solid Energy's ambitious
investment plans and rosy view of coal prices as far back as
2009 but was unable to order the company to steer a safer
course, Prime Minister John Key says.
Mr Key yesterday hit back at Opposition claims his Government
was "asleep at the wheel" over the troubled state-owned coal
company, linking its problems to the previous Labour
Government's instruction for state-owned enterprises (SOEs)
to look for new opportunities.
Cabinet yesterday discussed the problems at Solid Energy
which last week revealed it was close to collapse under the
burden of $289 million in debt, and hundreds of jobs are at
risk. The company blamed low international coal prices and
demand and also said a series of investments in alternative
energy projects were failing to pay their way.
Mr Key said investment bank Macquarie was conducting a
"forensic" analysis of the company but also revealed his
Government was uncomfortable about Solid Energy's investment
plans as far back as 2009.
At that point, the company approached his Government seeking
a capital injection "in the order of about a billion dollars
to turn this company into the [Brazilian state-owned energy
company] Petrobras equivalent in New Zealand", Mr Key said.
He linked those ambitious plans to Labour SOE Minister Trevor
Mallard's 2007 call for SOEs to expand into new businesses.
"I think that was the starting point at which Solid Energy
started to think about what could the structure of the
company look like."
But after getting advice on the company's plan, Mr Key said
his Government rejected it, "but of course under the SOE Act
the company had the right to draw down debt and make
investments and could do that without reference to the
While his Government made its feelings known about the
company's more ambitious plans, Mr Key was unable to say what
discussions were held about the subsequent investments that
were made, including the Spring Creek mine, and wood pellet,
biodiesel and lignite processing plants.
Despite the company being profitable and having a strong
balance sheet due to high coal prices at the time it made the
investments, the Government was "not as comfortable" as the
"If you're looking at the way you would run a prudent
long-term coal business then the industry experts would tell
you to do it in a different way to the way the board executed
Neither former chief executive Don Elder or former chairman
John Palmer, who oversaw the company's move into alternative
energy investments, were available for comment yesterday.