14 Mar 2013

Labour says Govt forced Solid Energy to borrow more

12:02 am on 14 March 2013

The Labour Party says the Government forced Solid Energy to increase its borrowings despite knowing the company was facing financial difficulties.

The Government has had to admit in Parliament that it forced the state-owned coal company to take on more debt, at a time when it knew coal prices were declining.

But Finance Minister Bill English says it wasn't clear that coal prices were declining, and the Government can't be held responsible for how much debt Solid Energy eventually took on.

Mr English also defended the Government taking a $30 million dividend from Solid Energy in September 2011 when it was apparent the company was in financial trouble.

Labour leader David Shearer says the Government knew the company was in trouble but treated it like a cash cow.

He says it put pressure too much on Solid Energy to provide greater dividends.

Mr Shearer says Solid Energy's debt levels went from $13 million in 2009 to more than $300 million in just three years.

He questions how the Government could force Solid Energy to take on the debt, at a time when it knew coal prices were declining.

Solid Energy is now $389 million in debt and in talks with its bankers and the Treasury about a possible bail-out.

Prime Minister John Key has said that for 18 months the Government was at loggerheads with the company about its direction.

Contempt alleged

Separately, the Labour Party is threatening to take a contempt of Parliament case against Solid Energy and the company's strategy manager Bill Luff.

Labour says the state-owned coal company and its manager have been more forthcoming with the media about the company's financial performance than they were to a Parliamentary committee last week.

Mr Luff was one of four Solid Energy executives who attended last week's meeting and were unable to explain the company's $389 million debt because they were not at the company when key decisions were made.

However, Mr Luff told Morning Report on Wednesday that the markets for alternative energy projects the company invested in just didn't materialise.

Labour MP Clayton Cosgrove says it is astounding that the company is admitting what went wrong in the media, when it said it couldn't answer any questions at Parliament last week.

"They couldn't answer anything before our committee but they can put up wonderful defences and provide all sorts of information," he says.

Solid Energy's former chief executive Don Elder and former chair John Palmer are due to appear before the commerce committee on Thursday for questioning about the company's debt.