22 March 2013

Govt incompetence allows Solid Energy to ruin itself

The Key Government’s hands off approach to managing the economy allowed the formerly profitable Solid Energy to run itself into the ground, Green Party Co-leader Dr Russel Norman said today.

The Government has received briefings over the last few years highlighting huge concerns from Treasury regarding Solid Energy. The Treasury released this material, comprising advice to Ministers, relating to the monitoring of Solid Energy on its website today.

“As early as 2009, officials warned Ministers with increasing intensity that Solid Energy was over-valued, had too much debt, and was over-optimistic about its future,” said Dr Norman.

“That should have sparked immediate action from National but all they did was demand larger dividends, which encouraged Solid Energy to take on more debt.

“In 2011 Solid Energy considered it was worth $3.3 Billion dollars while Treasury pointed out that independent analysis suggested it was worth half that.

“To any competent administration Treasury raising concerns regarding the value of Solid Energy to the tune of over a billion dollars should have led to action.

“Despite concerns raised by Treasury over Solid Energy’s top heavy management structure, the Spring Creek Mine and Solid Energy’s debt structure, this Government failed to act.

“The reason behind the Government’s inaction is because the Key Government itself is a major part of the problem.

“While failing in its duty of oversight the Key Government was more than happy to push Solid Energy to take on ruinous debt and kept the inflated value of Solid Energy in its books for the asset sales,” said Dr Norman.

“About the only thing the shareholding Ministers in this incompetent Government did manage to do was sign off the huge bonuses demanded by the directors of Solid Energy in order to prepare itself for privatisation.”

Link to Solid Energy documents: http://www.treasury.govt.nz/publications/informationreleases/solidenergy

ENDS

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