More economic genius from the Nats. This time featuring Bill English:
Ministers pressured Solid Energy, Parliament told
Labour has tabled documents in Parliament showing that ministers put pressure on Solid Energy in 2009 to increase its debt levels and pay bigger dividends, despite warnings a falling coal price could crimp its profits.
Finance Minister Bill English … had approved a higher debt level in 2009. Solid Energy’s gearing ratio was 13.8 per cent in 2009, but that rose to 34.4 per cent in 2010 and 41.7 per cent last year.
When the crisis at Solid Energy was disclosed last month, Prime Minister John Key said coal companies typically had little debt. Labour leader David Shearer said ministers had pressed for the extra debt and bigger dividends despite knowing the company was facing financial difficulties. “Bill English knew that coal prices were forecast to decline in 2009 but still urged Solid Energy to increase its gearing [debt to equity] ratio,” he said. “That means ‘go out and borrow more’, despite knowing there was trouble ahead.”
English had said today that he did not know coal prices were going to decline, “but documents obtained by Labour show that he did”, Shearer said.
So last month we had the announcement that:
Solid Energy ‘may not be viable’: English
Finance Minister Bill English says he still doesn’t know if Solid Energy is viable, raising the prospect of the company collapsing. The Christchurch-based coalminer is negotiating with a group of banks in a bid to reduce its $320 million debt.
Solid Energy’s chairwoman has voted with her feet:
Solid Energy chairwoman quits over disagreement with Finance Minister
The chairwoman of Solid Energy quit because she disagreed with Finance Minister Bill English that the company could be saved, an email shows.
I think we should shut down Solid Energy because we should keep the coal in the hole. But this wasn’t the way to do it – another shambles from the Nats, like the great job they did negotiating the SkyCity deal, and the great job they did in Northland.