All manner of people, policies and practices are being blamed for the near-collapse of Solid Energy, the state-owned coal company that is burdened with $389 million in debt. According to the Labour Party, it is the fault of a Government "asleep at the wheel". According to the Prime Minister, it all stems from a Labour Government initiative seven years ago to make state-owned enterprises more enterprising. Fingers are also being pointed at Solid Energy's recently departed chairman, John Palmer, and chief executive, Don Elder.

In this flurry of accusation, the slump in international coal prices and the high New Zealand dollar, the main causes of the company's woes, have been cast to one side. So, too, has the fact that much of the criticism relies heavily on hindsight.

The Government's take is that since 2009 it has been worried about and has sought to rein in Solid Energy's ambitious investment plans. These, it says, sprang from the Labour Government's green light to state-owned enterprises to be more entrepreneurial. But that go-ahead had some significant restrictions. The Treasury's misgivings led it to write guidelines that insisted the Government must know of any propositions well in advance and give its prior approval. Any initiatives were also to be closely watched by the Treasury's Crown Ownership Monitoring Unit.

Nonetheless, John Key says that, whatever the Government's doubts, he was unable to order Solid Energy to steer a safer course. He is being somewhat disingenuous. The Government can quite easily get what it wants from state-owned enterprises by threatening board sackings. And Mr Palmer, who has also chaired Air New Zealand through troubled times, had been installed as a safe pair of hands.


The Government may well have been perturbed by, and rejected, Solid Energy's grandiose plans to transform itself into a Petrobras of the South Pacific. But both it and the Treasury were seemingly content for the company to pursue other, less ambitious avenues.

That is because they seemed sensible. It was understandable that Solid Energy would seek to diversify. Global warming has placed the future of coal under a cloud. Many countries have chosen to embrace other forms of energy, whether wind, solar, nuclear or hydro. Even China has announced recently that it will lessen its reliance on coal. In that context, it was reasonable for Solid Energy to attempt to turn itself into an energy company by investing in wood pellet, biodiesel and lignite processing plants. The motive was a more profitable and enduring enterprise than one that simply extracted and exported coal.

This policy was enacted at a time of strong global coal prices, driven by demand in China. At the time, and for several more years, that country seemed immune from the international downturn. If coal is subject to the cyclical nature of international commodities, nobody foresaw that matters would change quite so dramatically. Miners in the United States and Europe were also caught out. Nobody also foresaw that the New Zealand dollar would soar, adding a further troublesome ingredient.

In many ways, Solid Energy is the victim of bad timing. It is nonsensical to link its woes to a 2007 Labour Government policy. It is also far too harsh to lay all the blame on Dr Elder and Mr Palmer.

Far more relevant is the fact that the Key Government, which has been in power for four years, backed their thinking. The outcome is that Solid Energy is likely to again restrict its activities to coal production.

That may be viable, certainly in the short term, but it ignores the factors that persuaded the company to spread its wings.