If anything useful has been learned from the Labour Party's pursuit of Solid Energy, it is that there are severe limits to the present Government's asset sales. The Prime Minister admits that while it was not willing to finance the state coal company's big expansion plans, nor was the Government willing to let the company find a private investor of sufficient scale to finance its ambitions. For the sake of political safety, the partial asset sales were to be strictly designed for small domestic shareholders, not for a parcel of 10 per cent or more that an enterprising investor in Solid Energy would need.
Late last week, the Prime Minister's office released briefing documents it received in 2010 on the company's proposals. They were released in response to Solid Energy chairman John Palmer's denial that the company had asked for an injection of $1 billion from the Government, as John Key recalled. The record shows that Solid Energy was seeking cumulative investment of $27 billion at $2 billion to $3 billion a year.
But the documents are more interesting for what they reveal about the company's ambitions. Coal was still a booming industry in 2010, one of the few to be surviving the global financial crisis, thanks almost entirely to China's continuing steel production. The boom encouraged the board of Solid Energy to do some grand strategic planning.
Looking to the future, it felt the world was entering a transition from fossil fuels to renewable technologies. In the interim, the board believed "super profits" would accrue to those able to exploit a range of natural resources that New Zealand has in abundance. It proposed to metamorphose into a diversified developer of all of them - not just coal but oil and gas, methane hydrates, lignite conversion to urea and diesel, iron sands mining and even steel production.
Borrowing a Key phrase, it believed it could drive a "step change" in the country's economic performance.
The former Ministry of Economic Development agreed that prices of the minerals were on the rise and "super profits" were in prospect, though the ministry's estimates suggested the company's were "off the bullish end of the chart".
As a state-owned enterprise, Solid Energy did not think it should need to compete for rights to these minerals. It wanted preferential access so that New Zealand might gain the greatest commercial return from the resources. The Treasury disagreed, advising ministers that granting Solid Energy preferential rights would "freeze out competition and chill inward investment in these sectors as well as probably breach international trade agreements".
But the Treasury believed the value of the resources could be tapped, and the Government's financial risk reduced, if private interests were brought into play and the Crown company faced competition for access to the resources.
In 2010, when the Government was still forming the mixed ownership model it took to the 2011 election, this was too much to contemplate. It rejected the notion of the national resources company, encouraged Solid Energy to develop its existing resources, including lignite and "unconventional" gas extraction, but offered no additional investment.
Within two years, China's steel production had slowed, coal prices slumped, Solid Energy's investments were not paying off and a share float is no longer in prospect. The board's plans might have been "off the bullish end of the charts" but private investors ought to be invited to make that judgment.
When global energy demand recovers, the Government should sell whatever stake it takes to make the most of the country's untapped wealth.