Key's $1b Solid Energy request in doubt

The documents released yesterday reveal how relations between John Palmer and Treasury soured as the company's financial position deteriorated. Photo / Sarah Ivey

Just-released Solid Energy documents contain no reference to PM's suggestion firm asked Govt for money.

Newly released papers raise fresh questions over Prime Minister John Key's claim that Solid Energy asked for $1 billion of taxpayers' money to fund its transformation into a massive resources company.

Key made the claim earlier this year when it was revealed the state-owned coal miner was on the verge of collapse under the weight of almost $400 million in debt.

Former chairman John Palmer, who approached the Government with the plan in 2010, denied asking for the money but later said he understood why Mr Key might have said the proposal involved "those sorts of costs".

But Solid Energy documents released by Treasury yesterday detailing the proposal contain noreference to a request for the money.

Solid Energy's business proposal said the Government's willingness to forgo dividends from Solid Energy and Kupe were essential for the project to proceed, and it would require extra equity of up to $1 billion on top of that to fund the expansion.

However, it did not seek that from the Government in the proposals, saying: "All this can be achieved ... without requiring a direct Government equity contribution (other than forgoing dividends from Solid Energy and Kupe for up to 5-10 years)."

Another paper in 2010 shows Solid Energy was wary of direct Government contributions, saying that securing external funding was needed to ensure it did not have to seek Government equity, and relying on investors other than the Government would "reduce the risk and perception of future political interference".

The documents released yesterday reveal how relations between Palmer and Treasury soured as the company's financial position deteriorated. The relationship appeared to reach rock bottom in August last year when Palmer resisted Treasury's request to appoint an independent adviser to the board.

In an August 14 email to ministerial officials including at least one in the Department of the Prime Minister and Cabinet, Treasury official John Crawford reported he had just had a conversation with Palmer, "which has not ended where I would have wished".

Crawford reports Palmer "does not see it as being appropriate that Treasury participates in the board's decision making.

"Secondly, he does not see the need for an independent adviser providing advice to the board (or shareholders) in respect of the major decisions they face."

Crawford said he told Palmer "that we do not have confidence in management" making key decisions about the company's future, "given it is the same management that has got us into the current situation".

Palmer resigned on August 18, just three days after his correspondence with Crawford and a few days before the company announced a net loss of $40.2 million and writedowns of $111 million.