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English hints at wrangling among Solid Energy’s lenders

NBR staff
Mon, 08 Jul 2013

Finance Minister Bill English has indicated that differences among Solid Energy's banks and other lenders are to blame for the fact there is no sign of a resolution to the troubled state-owned coal miner's emergency management regime, five months after it was first imposed.

While the replacement board of directors at Solid Energy have made visible strides to slim down the workforce and rationalise the business, there has been no recent update on negotiations to deal with $389 million of debt racked up by the previous board and management.

English and State-Owned Enterprises Minister Tony Ryall spoke of a "difficult two or three months" to sort out Solid Energy's future when they announced what amounted to a statutory management at Solid Energy on Feb. 21.

Speaking at the Prime Minister's post-Cabinet press conference, English indicated the differing circumstances of numerous lenders was behind the ongoing delay in resolving Solid Energy's future.

"The banks and other lenders have had to get themselves organised and that has taken some time because there are six or seven banks involved," he said. "They come to this with different assumptions and financial arrangements and have to try to resolve amongst themselves a position to put to the government."

English reiterated that, at this stage, the government "has not contributed a dollar and we are not going to bail out the banks from Solid Energy. There is going to be shared responsibility."

His comments came at the end of prolonged questioning by journalists about the previously undisclosed inclusion of a $100 million provision to assist Solid Energy, to be met from the government's Future Investment Fund, where privatisation proceeds are corralled for use in major projects.

Labour SOE spokesman Clayton Cosgrove deduced the provision by examining inconsistent deletions relating to the funding provision in budget-related Cabinet papers, which were publicly released last week.

English's office said earlier in the day that the $100 million provision was only ever intended as a short term, repayable, secured loan and had not been required.

Its inclusion in the FIF only occurred because of "ultra-conservative" Treasury advice that provision for the loan should be provided somewhere in the government's accounts, even if it wasn't drawn down.

It reflected "a period when it looked as if Solid Energy could run out of cash unexpectedly and leave a lot people bereft." However, the company had managed to generate enough cashflow to sustain its operations in recent months.

English struggled to explain why including a proposal for a secured loan should be included in a capital fund for government works, but insisted there was "nothing to hide" and that the Treasury had consistently advised any assistance for Solid Energy should be a loan rather than a capital injection.

"Treasury advised a secured loan, even though they accounted for it as if it could have been other things," he said.

The FIF has already been tagged to deliver funds for troubled SOE's, with some $344 million committed in the 2011 and 2012 budgets for upgraded infrastructure for KiwiRail. However, the government has touted the FIF as a source of funding for projects such as schools and hospitals.

This year's budget put aside $416 million from the FIF to rebuild to Christchurch hospitals.

NBR staff
Mon, 08 Jul 2013
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English hints at wrangling among Solid Energy’s lenders