Solid Energy to face further scrutiny

Last updated 17:35 20/12/2013
don elder
THINK BIG: Former Solid Energy chief executive Don Elder.

Relevant offers


British American Tobacco offers to buy Reynolds in US$47 billion deal Ikea NZ Facebook page set up: Is it finally coming to NZ? Auckland Council and contractors ordered to pay $120,000 to the family of killed rubbish truck worker 71yo asked to stand on hot water cylinder to plug in phone after bizarre UFB install Tuanz welcomes Vodafone offer to keep internet users connected The video that exposed Samsung's problems in China Sky box that Spark boss Simon Moutter returned to Sky wasn't his only one Harnessing the power of Pokémon Go Mystery hotel brand to take over Old T&G building New Zealand's net migration back at record breaking levels at almost 70,000

The auditor-general is to conduct further inquiries into the virtual collapse of state-owned mining group Solid Energy, including why it was far more confident about energy prices than experts were.

Solid Energy recently agreed a debt-for-equity swap with its lenders to reduce a debt pile of close to $400 million, with the Government warning the alternative was liquidation.

The Government, and Solid Energy's former management repeatedly blamed "a perfect storm" of too much debt and plunging coal prices.

Labour today released a letter from Auditor-General Lyn Provost confirming that her office was to do "additional work" on the financial problems at Solid Energy, acknowledging that there were unanswered questions.

Issues which will be addressed include:

● what risks the board considered in relation to significant investment in the Stockton mine on the West Coast, which accounted for the majority of its debt

● what risks did it consider in relation to its foray into non-coal ventures

● what did the company do consider the risk of falling coal prices

● how did the management respond to falling prices

● what was the rationale for management and the board adopting a higher price path for coal prices than others in the industry

The Government in 2011 appointed UBS to test how ready Solid Energy was to life on the public markets, in the hope of selling up to 49 per cent of the company.

Investment bankers discovered Solid Energy's views on coal prices were much more bullish than those of the wider mining sector.

When Solid Energy was asked to explain why, management refused to do so.

The review, which will look into activities for the five years up to June 30 will not look into the monitoring of Solid Energy by the Treasury or shareholding ministers, as this was covered by an earlier Deloitte report.

While it would be on the lookout for extravagant spending, as Labour has alleged, it would not be a specific focus as the company had imposed "significant" cost-control measures under its news management.

Provost said she aimed to have the work completed by the time Parliament's commerce committee conducts its financial review of Solid Energy in February.

Labour state-owned enterprise spokesman Clayton Cosgrove said the auditor-general was taking an "extraordinary" step. It was "great news for the more than 700 people who have lost their jobs due to the near collapse of the SOE".

Ad Feedback

- Fairfax Media

Special offers

Featured Promotions

Sponsored Content