State owned enterprises minister Tony Ryall blames the distressed financial state of Solid Energy on a “perfect storm” of events.
Mr Ryall says a wrong choice of investments, along with a worldwide collapse in coal prices, led to the coal mining company’s current state.
Former chairman John Palmer and former ceo Dr Don Elder today spent two hours in front of parliament’s commerce select committee.
They admitted there were errors in decision-making during their time which saw the company invest in new areas of growth, including biofuels and conversion of lignite to fuel and urea.
Mr Ryall says the government cannot be blamed for the company’s alleged mismanagement because it was the board’s decision to make a number of investments which did not generate the expected returns.
“It is the responsibility of the board to manage debts, dividends and investments. It’s the responsibility of ministers to take accountability both publicly and in parliament.”
He admits the government has a certain degree of responsibility, but only under the State Owned Enterprises Act.
That section of the act state shareholding ministers of SOEs “shall be responsible to the House of Representatives for the performance of the functions given to them by this act or the rules of the state enterprise”.
“A wrong choice in investments, together with the most significant collapse in world coal prices in 2012 led to a perfect storm. The perfect storm has created the situation this company is currently in,” Mr Ryall says.
He repeated the same sentiment twice more as he spoke to media immediately after the select committee appearance.
He says the financial stress suffered by Solid Energy is not unique to the state-owned enterprise or to New Zealand.
“All around the world coal companies have had significant collapses in their financial viability. A number have lost two-thirds of their value just in six months last year.”
In July last year, increased hydropower generation and a drop in downstream demand saw coal prices in China fall to a 20-month low.
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