Government denies 'bad management' was to blame

Finance Minister Bill English. Photo / Jason Oxenham, New Zealand Herald

Finance Minister Bill English has denied bad management by the Government led to the decline of Solid Energy.

The struggling state-owned coal company went into voluntary administration this week, owing more than $300 million to the banks.

No workers were laid off during the voluntary administration period, and operations would continue on a "business as usual" basis, the company said.

The continuing slide in the price of hard coking coal on the international market has been blamed for the decline of the debt-laden company, but Opposition parties have pointed the finger at the Government, saying it must take some responsibility for Solid Energy's current misfortune.

But Finance Minister Bill English today dismissed those accusations, saying it was not bad management on National's part that pushed the company over the edge.

"No I don't agree with that," he said on TV3's The Nation this morning. "It's the coal price that's sunk this company, and the assumptions it made five or six years ago about where their coal price would be.

"They thought it would be twice as high as it is now, in fact their estimates were higher than the market. So as the Government came to grips with what the company's plans were there was disagreement between the company and the Government and the Treasury, there were changes in the board, changes in the management, and we've been in a process ever since dealing with this ever dropping coal price."

However, he told the programme he did accept the Government "put commercial pressure" on Solid Energy.

"But the way it spent its money back in that period was on fairly large-scale, if not grandiose, schemes about alternative energy, building a very large staff of head office and over-heads, as we came to grips with that in the early stages of the mixed-ownership process ... due diligence on the company through up all these issues ... and at the same time coal price started dropping.

"We've taken every step we can, as the company has, particularly the staff in the coal mines, to try and secure its viability, and actually they've done a pretty good job because the alternative was liquidation."

Earlier this week State Owned Enterprises Minister Todd McClay and Mr English said that entering temporary voluntary administration, and freezing a portion of Solid Energy's debt, provided the best chance for parts of the business to continue to successfully operate in the future under new ownership.

But Solid Energy acting chairman Andy Coupe admitted it was "unlikely" that any sale, or sales, would cover its outstanding debt.

And Act Party leader David Seymour said New Zealand taxpayers "deserve an apology" after the Government invested in trying to prop up the struggling company.

"Obviously the company should have been sold when it still had some value," Mr Seymour said.