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Key Admits Increased Debt Behind Solid Energy’s Downfall

David
SHEARER

Labour Leader
14 March 2013 MEDIA STATEMENT

Key Admits Increased Debt Behind Solid Energy’s Downfall

John Key must explain why his Government pressured Solid Energy to increase debt when just a few weeks ago he claimed that was the very reason the company is now in dire financial trouble, says Labour Leader David Shearer.

“The Prime Minister has some explaining to do when he returns from South America. He should start by taking responsibility for the role he and his ministers have played in the downfall of the once profitable Solid Energy.

“On the 25th of February, John Key said in a press conference that one of the three major problems contributing to Solid Energy’s financial predicament was that ‘they added gearing to a company that historically had not had gearing’. http://www.scoop.co.nz/stories/HL1302/S00125/pm-press-conference-dominated-by-solid-energy-debacle.htm (15 minutes in)

“But documents obtained by Labour show that it was his own ministers who pressured Solid Energy into increasing its gearing (debt to equity) ratio back in 2009. Research by the Parliamentary Library shows that the net gearing ratio for Solid Energy rose from 13.8% in 2009 to 41.7% last year.

“What’s worse is that Bill English and other ministers were putting that pressure on when they knew that coal prices were tanking. They also continued to milk the company for huge dividends at the same time.

“In Parliament yesterday, Bill English tried to deny knowledge of the coal price problem but a ministerial letter to Solid Energy in May 2009 shows that he knew there was a ‘significant decline in forecast coal prices’.

“John Key and his ministers are trying to cover their own tracks by pointing the finger at the board and CEO. But they’re absolutely in the gun on this issue.

“SOEs Minister Tony Ryall this morning even claimed that the Government didn’t put ‘too much pressure over debt at all’. Yet the letters prove ministers were pushing the company to increase its gearing. And debt did increase from $13 million in 2009 to $313 million three years later. Solid Energy is now $389 million in the red.

“While there are a number of reasons for that decline, John Key and his ministers must take their fair share of the blame,” said David Shearer.

ENDS

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