State-owned coal miner Solid Energy chair John Palmer gave the strongest hint yet that the government will either float less than 49 per cent of the company or allow it to fully privatise major new projects, such as lignite coal developments, by selling them as subsidiaries.
Appearing before the commerce select committee for Solid Energy's annual review, Palmer said Solid Energy's capital needs and risk profile were quite different from state-owned electricity companies, which are also to be partially privatised, with the government retaining at least majority control.
Solid Energy's capital expenditure requirements could mean a "sell down to less than 49 per cent, which would allow access to capital, might be part of the solution."
Equally, Solid Energy could choose to create a subsidiary company and sell 100 per cent of that, without breaching the legislated requirement passing through Parliament at present to maintain majority Crown ownership.
Both Prime Minister John Key and Finance Minister Bill English have intimated in recent weeks that Solid Energy's part-sale is presenting different headaches for the team considering how best to organise an Initial Public Offering in the coalminer.
In part, that's because Solid Energy has multi-billion dollar investment plans at an early stage of development to mine low-grade lignite coal deposits in Southland which could be converted to fertiliser, diesel and briquettes to produce revenues in the trillions of dollars, according to the company's chief executive, Don Elder.
"There's probably nothing to prevent projects themselves being IPO-ed where the Crown as the core asset holder can maintain its position, and that allows the developments to take place," said Palmer. "A project could potentially be funded in its entirety by that method."
Palmer said if such a subsidiary were consolidated onto the Solid Energy balance sheet, "it would fall into the equity line in some form, but if the shareholding is unchanged (in the parent company), it improves the value of the Crown's 51 per cent shareholding."