Miner struggled to find new chairman when Palmer resigned
State-owned Solid Energy struggled to find a new chairman when John Palmer announced his intention to leave early last June, because of the parlous state of the business, Treasury papers show.
"The current position of the company is also adding complexity to the process of appointing a new chair of the Solid Energy board," Treasury commercial transactions group manager Chris White wrote to ministers on August 9 last year.
"The specific requirements of the role and the current position of the company are impacting on the willingness of people to serve."
The note is part of Cabinet paper document dump on the Treasury's website today, which chart the expansion plans adopted by former chief executive Don Elder after his appointment more than a decade ago and the questions about some of the company's assumptions which first emerged in a scoping study by brokerage UBS in October 2011.
The company's response to the scoping study was deemed inadequate in February last year, when Deutsche Bank has hired to give another assessment. While this was occurring, coal prices were falling.
Mr Palmer signalled his intention to leave the board early last June, the same month Cabinet put Solid Energy under an intensive monitoring regime. Both the company's draft business plan and statement of corporate intent were rejected by ministers that month as "an inadequate response to changing market conditions".
In August, Treasury recommended an "investigating accountant" be appointed to provide a stream of financial advice about the company independent of Solid Energy. The board appointed PwC to the role in November.
A timeline shows that Solid Energy's revised business plan also failed to pass muster in August and the company was granted an extension of time to allow a new chairman to conduct a strategic review.
Mr Palmer officially resigned at the end of August, when Mark Ford was named new chairman.
Since then most of the board and hundreds of workers have left and Dr Elder quit in February. By then Solid Energy was nursing some $389 million of debt, which it was unable to service from coal sales and Mr Ford warned of a "significant" first half loss.
(BusinessDesk)
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Comments and questions2
So in February last year the shareholder was clearly aware that things were turning to custard but no inkling to bond holders and dividends of $50 million paid in 2011 and $54 million the year before. It seems that concerns actually went back to 2011 at least. Once again Treasury has played a blinder ... remember the $1.7 billion its assessment of South Canterbury Finance cost us all? The sooner we sell the damn SOEs the better. At least bond holders wouldn't be treated like mushrooms!
Over this entire period, SOEs have been subject to a continuous disclosure regime that mirrors that of listed companies. If this had been a listed company there is no way the parlous financial state could have been concealed from stakeholders. This shows just how weak the Continuous Disclosure obligations on SOEs actually are. You can dress SOEs up in sheeps clothing, but underneath they really are wolves. Government ownerrship is a weak substitute for even a widely held firm. There would be better monitoring if they truly were owned by New Zealanders each with one of four million shares than the current arrangements where they are not 'owned' by citizens at all, but are held in a 'trust' governed and.monitored by such a conflicted bunch of interests that it is impossible to know what is truly going on.