Crown support for Solid Energy short term 'unused'

Photo / Christine Cornege

The $100 million in asset sales proceeds earmarked to assist debt-laden Solid Energy is a short term standby facility which hasn't been used and would see the government get its money back if it were, says Finance Minister Bill English's office.

English's office provided the comments to BusinessDesk in response to a claim by Labour's state-owned enterprise spokesman Clayton Cosgrove that the government had tried to cover up its commitment to the trouble state coal miner.

He is also accusing the government of mistakenly showing its hand while negotiating with Solid Energy's banks over the company's $389 million debt, by failing to delete all references to the $100 million support facility when releasing Cabinet papers prepared for the May budget.

However, English's office said it "not sure what point Labour is trying to make."

"There was an amount set out in the supplementary estimates on budget day as a secured, short term standby facility to ensure Solid could continue paying its bills while negotiations about its future continue.

"It is certainly not a long term capital investment facility and it hasn't been used to date. If it was called on it would be secured against the company's assets and the Crown would get its money back."

The $100 million is to be sourced from the Future Investment Fund, a government piggy-bank created to hold the proceeds of asset sales so that they could be transparently applied to a range of strategic national investments.

The latest budget earmarked $416 million to rebuild Christchurch's pubic hospitals, along with $80 million for irrigation schemes, as well as apparently $100 million for Solid Energy, which fell on the mercy of its shareholders and bankers in January as plummeting global coal prices and overly ambitious debt-funded new energy technology projects combined to threaten its commercial stability.

While the government has made play of the FIF's intended use to fund schools, hospitals and other big ticket public assets, this is not the first time a troubled SOE has been identified as a beneficiary of FIF funds. The 2011 and 2012 budgets between them contained funding of $344 million for upgrades to the national rail system through KiwiRail, the national rail carrier renationalised during the term of the last Labour-led government.