Key under fire over Solid Energy claims

APNZ

14 Mar, 2013 04:30 PM3 mins to read

Mr Palmer and former Solid Energy chief executive Don Elder made their highly anticipated appearance before Parliament's commerce committee this afternoon to answer questions about what led to the company's near collapse under $389 million in debt. Dr Elder told the packed committee room that the company's recent problems were down to a "perfect storm" of unprecedented coal price falls last year and the strong Kiwi dollar. He said it wasn't just New Zealand coal companies that were feeling the brunt of a drop in the price of coal, but US companies were also in serious trouble. He said the situation with Solid Energy needed to be looked at within an international context. Dr Elder offered an apology to workers on the West Coast who lost their jobs.

Former chairman says coal firm did not want to take on high level of debt suggested by the Treasury

Prime Minister John Key is facing claims he misled the public after former Solid Energy chairman John Palmer said the company resisted Government pressure to take on more debt - the very thing the Prime Minister said caused the company's problems.

Mr Palmer and former chief executive Don Elder made their highly anticipated appearance before Parliament's commerce committee yesterday to front up over the state- owned coal company's misfortunes.

Appearing the day after Labour revealed former State-Owned Enterprises Minister Simon Power told the company to take on more debt and pay higher dividends, Mr Palmer said the company opposed that request.

The debt levels or gearing suggested by Mr Power and Treasury officials were higher than "we thought was an appropriate level of gearing given the nature of the industry we were involved in", Mr Palmer said.

Mr Palmer also said the company had never approached the Government seeking a $1 billion capital injection, as suggested by Mr Key shortly after it was revealed late last month the company was struggling under $389 million in debt.

"Were we talking to the Government about the possibility of capital and receiving that from the Crown? The answer is no," Mr Palmer said.

"A specific $1 billion capital injection, I'm reasonably sure we did not ask for it in exactly those terms."

Labour's SOE spokesman Clayton Cosgrove pounced on Mr Palmer's comments as evidence Mr Key had misled the public over what led to the company's near-collapse to obscure the fact that his Government's oversight of it was poor.

"I don't know how many times the Prime Minister gets to make things up without someone using the 'L' word.

"John Key cited the increase in gearing as one of Solid Energy's downfalls while at the same time his Government was requiring an increase in gearing across the board and a greater dividend."

Mr Palmer confirmed the Government was well informed, said Mr Cosgrove, and did not ask the company to change its strategy.

Yesterday afternoon SOE Minister Tony Ryall was saying Solid Energy's problems were not due to its debt.

"The problems with Solid Energy come from the fact that the board made a number of investments that didn't generate the returns that they were expecting and together with the most significant collapse in world coal prices," he said.

But Labour leader David Shearer said Mr Ryall's comments were "the complete opposite" to Mr Key's comment that a key contributor to Solid Energy's woes was that it "added gearing to a company that historically had not had gearing".

Mr Ryall said the opposition was being "deliberately mischievous".

"The Prime Minister did receive advice about the financial implications of Solid Energy proposals for a significant expansion into a national resource company," he said.

"Had the ministers been supportive of the proposal it would have required the Crown to contribute in excess of a billion dollars. In the event, ministers were not supportive and a formal proposal didn't eventuate."