Thursday, March 14, 2013


Why is Solid Energy in so much trouble? Yes, there's the drop in coal prices, and the badly-managed diversification plan, but on top of that it seems that National pillaged the company, forcing it to borrow in order to pay larger dividends to offset its tax-cuts for the rich:

Yesterday, however, Labour Party leader David Shearer produced a May 2009 letter sent by then State Owned Enterprises Minister Simon Power to Mr Palmer, telling him the Government wanted the company to increase its gearing or debt levels.

Mr Power also indicated he wanted Solid Energy to pay higher dividends to the Government.

That was in spite of noting in the same letter that the company was forecasting a decline in its financial performance - including profit and dividends - for the next four years because of falling coal prices.

Responding to questions from Mr Shearer in Parliament yesterday, Mr English confirmed his Government "did make the decision to allow Solid Energy to take on more debt" during its first term but "decisions about how much debt to incur were made by the board".

Right. So English thinks that the board's decision was "independent" despite pressure from the Minister. And if you believe that, I have a round building in Wellington for sale.

This is the sort of shit private owners do: forced borrowing, extra dividends, run the company into the ground. And its one of the reasons NZ companies are so shit and people don't want to invest in them: strip-mining a company like this kills profits int he long term. But government owners are meant to be smarter than this. Sadly, under National, they're not.

Solid Energy's problems go way deeper than this of course. At the end of the day, its a business with no future, and its going to have to deal with that sometime. But being treated like a piggy-bank by the government of the day didn't help, and its one of the reasons hundreds of people are now out of work. And we need to hold the politicians responsible for that.