Ryall blames 'perfect storm' for Solid Energy's crisis

Tony Ryall

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.

bcunningham@nbr.co.nz


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If coal prices did not collapse and had increased, it would have been a perfert board demanding higher bonuses.

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and?

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'Perfect Storm' - weasel words at their most weasliest in an attempt to downplay admitted errors.

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Poor risk management and decision making in a commodity industry well known for its volatility. Weasel words, indeed.

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Perhaps what the socialists/leftie-tards need to understand is that when in business there is no guarantee of being successful from month to month.Yes true!

Only in a government funded employment job do the pay checks keep rolling in regardless of contribution, profitability, productivity, market forces and cirumstances... and this is where most of the noise is coming from... from those with cosy pay checks.

The leftie-tards who have only ever received a paycheck from the government might be surprised at this news - but being in business does not automatically equate to being profitable, or being able to keep the doors open.

Things change, in fact the only constant is change.

Past behaviour is a likely indicator of future behaviours, but this only holds true for people - so you're being watched Mr. Passport for cash Jones.

Markets, economic conditions and realities are never static and money NEVER grows on trees.

Perhaps if Solid Energy had 49% sold to private/commercial interests, then those who have to cash the cheque would have acted quicker to curb costs? But that would most likely involve reducing staff numbers and what kind of shrilling would the unions/left make then?

The left should stop using the resulting misery for those who were made redundant as a political football so they can try and score a few political points. It's crass and those people don't deserve it.

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As you would expect from a National Party fanboy ... repulsed by any notion of human co-operation or organised government, blaming everyone else for the problems we have. What a sad outlook. First, none of these so called rock-solid assets would be available for sale if ordinary people hadn't come together and co-operated to build up a small country's infrastructure. In fact, the whole human story is one of co-operation and working together. Second, because this country has swallowed the neo-liberal economic religion like no other country on earth the high priests of this miserable doctrine think somehow it follows that it will magically deliver. Well, Solid Energy shows up what lightweight pretend businessmen they really are, playing in the sand pit at kindergarten... How could you be in the coal business and not have a clue about where the price of their primary commodity would go? All while they built a shrine to themselves in ChCh and paid 100s of themselves handsomely, and when the politicians came calling and told them to bend over they all did and threw the workers under a bus. Just a little bit of collateral damage... Oh well, never mind, they were working-class trash anyway and because 'our jobs/class are so much more important' even though we never go out of the office. Solidarity, your lot have had their time and about time, the current economic doctrine has screwed this country delivering misery to the many and great wealth to the few and don't give us any more of your meaningless attempts at a lesson in business. It's just white noise.

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Seens like they didnt have any RM around the scenario of the a_se falling out of coal prices - such as selling coal futures or buying coal puts when it was obvious coal demand had dried up n run away n subsequently coal price in the toilet

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Seems there could be a comparison here with the purchase of the overpriced NZ Rail from Toll. Michael Cullen lost complete control of the public purse at that time. Hope with Solid Energy we don't end up with the same ongoing massive debt levels Michael Cullen from Labour Party has committed the nation to absorb, past, present and in the future.

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Oh sure; a 'Perfect storm'... that and blatant government pressure and interference...

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"Perfect storm" of financial chicanery started in 2007 ... bit of a dated excuse now!

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