Friday, March 22, 2013

A basket case

Last year the government was publicly pimping Solid Energy for sale as part of its privatisation programme. Meanwhile, Treasury had concluded that the company was a basket case on the brink of insolvency:

Ministers were saying publicly that Solid Energy was being prepared for sale, even as Treasury officials warned of possible solvency issues.

Documents released by the Treasury this afternoon show that the company was placed under ''intensive monitoring'' in June last year because it was pushing ahead with an aggressive expansion, with bullish assumptions for the price of coal, even as prices were plunging.


''We are concerned that if management is unable to fully achieve their objectives, potential breaches to debt covenants and in a worst case scenario potential solvency issues could emerge in the medium term,'' officials said in a briefing to Ministers on June 5.

Which suggests that the government was less than honest about both its sale programme, and the $5 - 7 billion it had already banked from it. It also raises the question of why they waited so long to act, when the problems were obvious and pressing a year ago.

The full documents are here. It looks like they'll take a while to trawl through, but Vernon Small and Gareth Hughes seem to be competing over Twitter to see who can find the juicy bits first.