The Solid Energy package

October 2nd, 2013 at 10:00 am by David Farrar

Adam Bennett at NZ Herald reports:

The Government has loaned stricken state owned coal miner $100 million and extended a further $30 million standby facility as part of a restructuring package announced this morning.

Finance Minister Bill English and Minister for State Owned Enterprises Tony Ryall said the package had been agreed between the company, the Government and key lenders.

“As we have said previously, ministers were not prepared to expose taxpayers to on-going losses if Solid Energy’s core business was not considered viable,” English said.

“However, we also said that we were prepared to provide support for the company if there was a reasonable chance it could be made viable, and we expected the lenders to also contribute to that recovery,” he says.

This is a good outcome for the 1,000 or so staff of Solid Energy. However it is risking a further $100 million of taxpayer money. Hopefully the loan will be repaid in time, as Solid Energy adjusts to the new environment.

This for me reinforces why absolutely the Government should not own competitive commercial companies like Solid Energy. Taxpayers should not have to be exposed to the risks involved with such investments.

Chairman Mark Ford said the proposal “would allow the refocused coal mining business to trade its way back to profitability over the next few years, but that this would have to be supported by ongoing efficiencies and cash generation and improvements in the international coal market”.

“We believe that the company has a good operating future and we hope that with the continued support of our shareholder and our funders, we can re-establish the company as a major employer and economic contributor in our key coal mining regions.

The moment it is stable again, we should sell it – and not just 49% of it. If we had sold it three years ago, the taxpayer would be hundreds of millions of dollars better off.

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11 Responses to “The Solid Energy package”

  1. jaba (2,146 comments) says:

    this is an outrage .. Clayton Cosgrove is unhappy

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  2. Harriet (5,132 comments) says:

    Yeah I can’t see how the Greens are going to throw Labour’s unionised voters out of jobs after the election.

    Maybe Cunliffe and Wussle should be asked if it’s for sale, for closure, or for keeping.

    That’ll fuck ‘em.

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  3. nickb (3,696 comments) says:

    National…providing welfare to corporates since ever

    [DPF: You’re being an idiot. It isn’t corporate welfare when it is a taxpayer owned company. try some thought rather than slogans next time]

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  4. virtualmark (1,540 comments) says:

    This for me reinforces why absolutely the Government should not own competitive commercial companies like Solid Energy. Taxpayers should not have to be exposed to the risks involved with such investments.

    This, for me, reinforces why the SOEs should be partially privatised via listings on to the NZSX. If Solid Energy had been subject to continuous disclosure obligations, and tracked by equity analysts and large institutional investors then there would have been no debate about its valuation or its prospects – the market would have clearly indicated the value of the company.

    Neither would there have been much debate about Solid Energy’s lignite plans. I believe the market would have clearly signalled that this was a high (commercial) risk idea which would have been quickly euthanised by any board subject to market discipline.

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  5. liarbors a joke (1,069 comments) says:

    Why isn’t Don Elder hanging from a tree…bonus after bonus after bonus was paid out under his watch and as per usual all forgotten about..good ‘ole Joe Taxpayer will cover it….rort..

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  6. virtualmark (1,540 comments) says:

    National…providing welfare to corporates since ever

    So nickb, what would you have done? Come on, man up and put your own judgements on the line so we can see how smart you are.

    Would you allow Solid Energy to go to the wall, at the cost of the remaining jobs and the future prospects? Are you really sure your union buddies would support that? I thought you lefties were all nostalgic about how West Coast miners were the foundation of the Labour movement, comrades. But you seem very keen to throw them under a bus.

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  7. kowtow (8,776 comments) says:

    Burn coal: heat homes economically,provides safe steady and reasonably priced electricity and keeps miners and associated industry in employment.

    Win ,win.

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  8. KiwiGreg (3,259 comments) says:

    “This is a good outcome for the 1,000 or so staff of Solid Energy.”

    Yeah, it’s only going to cost the rest of us $100,000 per “job”.

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  9. WineOh (630 comments) says:

    “The moment it is stable again, we should sell it – and not just 49% of it”

    Bill English last night nixed any possibility of doing a mixed-ownership-style partial sale of the business, really leaving only a full sale or continued Crown ownership on the table.

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  10. Martin Gibson (247 comments) says:

    Fischer–Tropsch process baby! Why wreck our balance of payments funding middle eastern nations because we’re too wet to burn our own fossil fuels? Parallel plastic cracking and algal diesel. Use a bit of the money to plant waterways and stop foetal damage from drugs and alcohol and labour and the greens will lose their core support in a decade.

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  11. nickb (3,696 comments) says:

    [DPF: You’re being an idiot. It isn’t corporate welfare when it is a taxpayer owned company. try some thought rather than slogans next time]

    Thanks for the abuse DPF – is the sacred National Party really still beyond question after 5 years in government?

    I think your argument is based on a faulty premise. If shareholders in the private sector want to bail out a company, then they can choose to do so, by, for example, extra share issues to inject capital.

    In the current case, the government is using taxpayers funds for a bailout when the taxpayers have no say in the matter.
    Yet you are trying to rationalise this as being somehow not corporate welfare as the company is government owned? This is not a situation where private shareholders are deciding based on risk factors to inject further capital into a company. It is a government bailing out a failing enterprise that should be left to fail and it shouldn’t own in the first place. I thought the National Party supported free enterprise and opposed socialism. Obviously I live in some parallel universe.

    $100m is an enormous sum to prop up what is obviously a business on the brink of insolvency with no guarantees of recouping the government’s money. But if you think this is a responsible use of taxpayer’s money then all power to you. I don’t think it is being “idiotic” disagreeing.

    One thing is for sure – National will continue with its path of corporate welfare and picking winners. Just look at the nest being feathered for tens of millions cash being handed over to ETNZ. All in the name of getting a boat race to NZ.

    I really do hope Labour are re-elected next year. At least they are honest about the rationale behind their taxing and spending.

    Would you allow Solid Energy to go to the wall, at the cost of the remaining jobs and the future prospects? Are you really sure your union buddies would support that? I thought you lefties were all nostalgic about how West Coast miners were the foundation of the Labour movement, comrades. But you seem very keen to throw them under a bus.

    Ha ha… you must be new here.

    But yes, I would let it “go to the wall”. If a business couldn’t survive in the private sector, why should government-owned businesses be propped up from failing? Seems to me like it is just throwing good money after bad.

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