Adam Bennett at NZ Herald reports:
Solid Energy withheld financial information from Treasury when challenged on its business plans in what an independent report says was a pattern of disrespect the company showed to officials monitoring its performance.
Treasury yesterday released a review by accounting firm Deloitte of its monitoring of Solid Energy which appears likely to be broken up and sold off after overextending itself and almost failing under the weight of $390 million in debt and low coal prices.
Deloitte said it did not believe “that the failure of Solid Energy has highlighted a material failure in Treasury’s monitoring processes”.
However, the report goes on to raise questions “whether Treasury’s response was forceful enough or occurred soon enough given that the company provided cause for concern over an extended period”.
Deloitte said several Treasury staff it interviewed “identified a sense of tension from the chair and chief executive particularly when challenged on more fundamental aspects of their business and strategy”.
The problem is that the sack the Board option is a very heavy step to take.
Deloitte was also given examples of the company’s “lack of respect for commercial expertise that set the scene for difficult interactions, particularly surrounding core issues with Solid Energy’s governance”.
The first written evidence of this was in April 2011 when a Treasury analyst requested financial information underpinning Solid Energy’s evaluation of one of its projects.
Deloitte understood Mr Palmer told Treasury the request was unprofessional and Solid Energy would not provide the information.
“Following robust disagreement from Treasury, the chair instructed the Solid Energy management team to provide the analysis. It is our understanding it was never provided.”
The Deloitte report comes just a few weeks after Treasury released documents showing Mr Palmer fought against Treasury’s wish to have an independent advisor appointed to the company’s board last year as the state owned coal miner’s problems mounted.
Deloitte’s report concludes that the removal of Mr Palmer and Dr Elder “may have been warranted.”
However it noted that for Treasury to initiate such action “would have required it to effectively form the view that it lacked confidence in a board and executive with a sound track record in a technically complex industry”.
Perhaps something needed for the future is an agreement between Board and share-holder, where they agree on what sort of information will be provided to Treasury on request. While the Board can be the only governing body, it is important Treasury has enough information so it can independently advise Ministers on the company’s performance and plans.