Archive

Posts Tagged ‘SOEs’

A positive indicator for NZ Post…?

16 December 2013 7 comments

Taken in a shopping mall in the Hutt Valley today;

.

Image0612

 

.

A posting box over-flowing with mail? Could this be a turn-around for NZ Post and a sign of increased business?

As we are all shareholders in the company – let’s hope so!

.

.

= fs =

 

Advertisements

Solid Energy – A solid drama of facts, fibs, and fall-guys

.

Cast of Charachters

~

Clayton Cosgrove, Labour Spokesperson on State Owned Enterprises

~

Don Elder, CEO, Solid Energy, May 2000 – February 2013

~

Bill English, MP, Deputy Prime Minister, Minister of Finance and Minister for Infrastructure, Ministerial Shareholder of Solid Energy

~

Mark Ford, current chairman of Solid Energy

~

John Palmer, CEO Solid Energy, 2006 -

~

Simon Power, former MP; former Minister for State-Owned Enterprises, 19 November 2008 – April 2011

~

Tony Ryall, MP, Minister for Health; current Minister for SOEs; Ministerial shareholder in Solid Energy

~

Dear Leader, Minister for Funny Hats, Minister for Truth

~

The story, thus far

.

.

30 June 2008

Nil dividend paid to government, for year ending 30 June 2008.

Source: 2008 Annual Report

.

.

8 November 2008

General Election

National-led government elected.  John Key becomes  New Zealand’s Prime Minister; Simon Power is Minister for State Owned Enterprises; Bill English becomes Minister for Finance.

.

.

May 2009

“The Government, in its first term, looked at SOE [state owned enterprise] balance sheets and decided many of them could carry more debt… it made a decision to allow Solid Energy to take on more debt,” Mr English said.

Mr English acknowledged that in 2009 he signed a letter to Solid Energy approving a higher debt level.

Source:  Solid Energy was allowed to increase debt

The letter, as follows,

.

letter from Simon Power to solid energy may 2009

Source: CCMAU & Treasury

.

Thus was set in motion a decision that would have serious consequences four years later; the near collapse of an efficient and highly profitable State Owned Enterprise.

Not only did Minister Power demand higher dividends from Solid Energy, and instructed the SOE to borrow heavily  to achieve that goal, Power also demanded that Solid Energy “release all surplus capital to the shareholder as special dividends“.

In case the reader is wondering that that means, in plain english, National Ministers wanted all spare cash to be handed over to the government.

They were looting SOEs.

Accordingly, Solid Energy’s gearing ratio rose from 13.8% cent in 2009 to 41.7% by 2012. National’s demands had been met (see: Ministers pressured Solid Energy, Parliament told ).

Mission accomplished – the pillaging of Solid Energy (and other SOEs)  had begun.

Note: On 26 February 2013, John Key would try to insist that Solid Energy was “out of control” and was borrowing wildly.

He would say, “the Government was worried about Solid Energy’s ambitious investment plans and rosy view of coal prices as far back as 2009 but was unable to order the company to steer a safer course.”

So not only did SOE Minister Simon Power direct Solid Energy to borrow more; pay higher dividends; and hand over all spare cash – but four years later, Key would blame the coal company for the consequences;  it’s inevitable financial melt-down,

The causes of the financial crisis at Solid Energy are the usual suspects in failing businesses – too much debt, unsuccessful investments and no reserves to weather a slump in coal prices.

Prime Minister John Key’s comments yesterday indicated these problems and pointed the finger at an imprudent amount of debt and investments that have not returned any cash yet.

Key said the debt had climbed to $389 million when “typically coal companies do not have a lot of debt on their balance sheets”.

Source: State miner to return to coalface

Powers’ letter also put the lie to National ministers claiming that they were powerless to intervene in Solid Energy’s activities. As Simon Powers’ letter clearly demonstrated, Ministers were  exhibiting a total hands-on control over SOE’s finances, borrowings, investments, and dividend payments.

As Key himself claimed (without evidence) on 25 February 2013,

The government blocked proposals in 2009 from its coal mining company Solid Energy for a billion dollar capital injection to allow it to become “the Petrobras of this country,” Prime Minister John Key says.

National ministers had control alright, no two ways about it.

Power might as well have been sitting in Solid Energy’s Christchurch head office, in the CEO’s chair, with  his fingers in the cash register till.

.

.

30 June 2009

$59.9 million dividend paid to government, for year ending 30 June 2009.

Source: 2009 Annual Report

.

.

30 June 2010

$54 million dividend paid to government, for year ending 30 June 2010.

Solid Energy paid a dividend of $24 million on 30 September 2009. In accordance with the company’s dividend policy, the Board is proposing a dividend of $30 million to be paid by the end of March 2010 bringing total cash dividends paid during the current financial year to $54 million.

Source: Small half year loss for Solid Energy

Source: 2010 Annual Report

.

.

27 August 2010

Treasury Report shoots down Solid Energy National Resource Company’s expansion  proposal

To: Bill English, Gerry Brownlee, Simon Power, Steven Joyce

5. In order for SEL to develop into a NRC, SEL has sought the following:

[…]

• indicative approval for total capital investment (including dividends and cash flow)
of $2-3 billion per annum with cumulative investment of $27 billion…

Source: Treasury Report: Solid Energy National Resource Company Response

Note the figure referred above: $27 billion.  Two and a half years later, Key would refer to that figure.

The question is, does the statement – “SEL [Solid Energy Ltd] has sought the following: indicative approval for total capital investment (including dividends and cash flow) of $2-3 billion per annum with cumulative investment of $27 billionactually state where the $27 billion would be sought from?

Answer: no.

And yet, by 15 March 2013, Key would insist that the Solid Energy chairman, John Palmer, sought $27 billion from the government.

See: Key says Solid Energy papers show $27b plan

John Key’s flexibility with truth is now legendary.

.

.

8 September 2010

Then-SOE Minister Simon Power writes to Solid Energy – states support for developing resources –

.

Office of Simon Power
MP for Rangitikei
Minister for Justice
Minister for State Owned Enterprises
Minister of Commerce
Minister Responsibilble for vthe Law Commission
Associate Minister of Finance
Deputy Leader of the House

08 SEP 2010

Mr John Palmer
Chair
Solid Energy New Zealand Ltd
PO Box 1303
CHRISTCHURCH 8140

Dear Mr Palmer

National Resource Company (NRC) Proposal

I would like to thank you and your Chief Executive, Don Elder, for meeting me
on 31 August 2010 to discuss the Government’s response to the Solid Energy
Ltd (Solid Energy) NRC proposal.

Ministers are encouraged by the vision of Solid Energy in developing the NRC
proposal. We also appreciate the efforts of the Solid Energy Board,
management and staff that have gone into preparing  the proposal.

Shareholding Ministers have carefully considered the proposal and at this stage
do not support the development of a single NRC to maximise the value of New
Zealand mineral resources.

Shareholding Mnisters are, however, supportive of Solid Energy developing its
current natural resources, including lignite and unconventional gas. As
discussed with you, we expect that Solid Energy will develop resources on a
project by project basis.

We also expect to be consulted on significant projects, and have the opportunity
to discuss the proposals with you. The proposals should be supported by a
business case and assessed against standard business case investment
criteria.

Yours sincerely

Hon Simon Power
Minister for State Owned Enterprises

cc: Don Elder, Chief Executive Officer, Solid Energy

Source: Letter from Simon Power to John Palmer (NZ Herald website)

Interesting…  The Minister, Simon Power,  was;

A. Supportive of Solid Energy “developing its current natural resources, including lignite and unconventional gas. As discussed with you, we expect that Solid Energy will develop resources on a project by project basis”. No reference whatsoever of the Minister directing Solid Energy not to invest  “developing its current natural resources“.

B. Insisting that he be kept advised  “on significant projects“.  It would be interesting to know if Solid Energy advised National ministers of all projects? Including the ones that have been heavily criticised by Key, English, and Ryall.

.

.

3 June 2011

Key endorses Solid Energy expansion plans

.

Prime Minister John Key speaks at the opening of the WHK building in Invercargill.

.

“At the moment companies like Solid Energy are growth companies and we want them to expand in areas like lignite conversion,” Mr Key said.

[…]

“We know there is lots of resource there and we know they potentially have the capability [to convert lignite to urea or diesel] and so we will see how that progresses, but the briquette plant is a good starting point.”

Source: PM backs mining south’s lignite

Key is stating  with crystal clarity;  “we want them to expand in areas like lignite conversion” and “…so we will see how that progresses, but the briquette plant is a good starting point“.

Which would be in stark contrast to Key’s statements nearly two years later, when  on 23 February 2013, he condemns Solid Energy’s “… unsuccessful investments” and  ” and pointed the finger at an imprudent amount of debt and investments that have not returned any cash yet”.

Two days later, on 25 February 2013, Keywould again condemn Solid Energy – this time specifically distancing himself from the SOE’s expansion plans,

The government blocked proposals in 2009 from its coal mining company Solid Energy for a billion dollar capital injection to allow it to become “the Petrobras of this country,” Prime Minister John Key says.

It’s hard to keep up with a Prime Minister like John Key.

You have to wonder what his views will be in three, six, or twelve months time?

Key also said  at his  Invercargill speech,

However, Mr Key said companies were controlled by Government regulations and so there were always environmental obligations that needed to be met.

Which, again, totally contradicts what he said on 26 February 2013,

The Government was worried about Solid Energy’s ambitious investment plans and rosy view of coal prices as far back as 2009 but was unable to order the company to steer a safer course, Prime Minister John Key says.

Stories, eh? They’re so hard to keep straight sometimes.

.

.

30 June 2011

$20 million dividend paid to government, for year ending 30 June 2011.

Source: 2011 Annual Report

.

.

9 September 2011

Bill English – Don Elder – Opening new Mataura briquette plant

.

Solid Energy chief executive, Don Elder and Hon Bill English at MatauraThe first sod has been turned in the construction of Solid Energy’s demonstration briquette plant near Mataura in Southland. This was undertaken on Friday September 9 by local MP, Bill English who is also Deputy-Prime Minister and Minister of Finance. (source)

.

The Hon Bill English, MP for Clutha-Southland and Minister of Finance, today marked the official start of work at Solid Energy’s Mataura Briquette Plant, by “turning the first sod” at a small event on site with neighbours, local authorities, and other guests.The $25 million Mataura briquette plant is planned to start production by June 2012. It will produce up to 90,000 tonnes a year of low-moisture and higher-energy briquettes from about 150,000 tonnes of lignite mined from Solid Energy’s New Vale Opencast Mine and trucked to the Craig Road site. The plant will use technology developed in the USA by GTL Energy.

Source: Solid Energy starts work at Mataura Briquette Plant

Which demonstrated to anyone (if demonstration was needed) that National was in no doubt about Solid Energy’s expansionary plans.

.

.

4 November 2011

Treasury Scoping study reveals Solid Energy’s financial problems to Government Ministers

Ministers were  officially  made aware of Solid Energy’s severe financial problems. This would not become public knowledge until  two years later,  on  21 February 2013.

See: Treasury Report T2011/2373: Solid Energy New Zealand Scoping Study Report

The Scoping Study is noteworthy on these points,

  1. The considerable  number of redacted items which the reader has no way of knowing what they refer to. They could be sensitive commercial data. Or they could refer to political matters.
  2. In Paragraph 36, the Report states, “The scoping study also recommends that Solid Energy should have no debt at the time of IPO.”
  3. In Paragraph 46, fourth item, the Report states, “Indentified that the company’s free cash flow has been reinvested in the business, particularly the Renewable Energy and New Developments. As a result  dividend payments to the government have been funded by increasing debt.”

In two sentences, Treasury has just confirmed what all the evidence has pointed to; “dividend payments to the government have been funded by increasing debt“.

The very same increased debt demanded by SOE Minister Simon Powers in his letter in May 2009.

.

.

17 February 2012

Bill English – Asset Sales – Proceeds “just a guess”

Finance Minister Bill English is attracting political flak over suggestions that some figures in yesterday’s budget policy statement for the proceeds of share floats of state-owned enterprises were “a guess”.

The Government has long estimated that the sale of up to 49 per cent of five SOEs would collect between $5 billion and $7 billion.

[…]

Mr English said the Treasury “had to pick a number” so they picked the mid-point of the range.

“If we did get $6 billion, that would be a gain of sale [of $800 million] which is just a product of the accounting.

“I just want to emphasise that it is not our best guess; it’s just a guess. It’s just to put some numbers in that look like they might be roughly right for forecasting purposes.

Source: English admits his SOE figures just a guess

Well. Now we know why it was “just a guess”.

Because by now, the Treasury scoping study on Solid Energy had revealed to National Ministers that the SOE’s finances were a mess. There was no way English could’ve responded to journalist’s queries without either telling the truth – or outright lying (which they do anyway, but he would’ve been caught out on this particular ‘porky’).

.

.

18 May 2012

Subsidy on bio-diesel canned – Biodiesel New Zealand – Price increase for bio-diesel

National removed it’s subsidy on bio-diesel – which Solid Energy was producing through one of it’s subsidiaries, as part of it’s   expansion plans.

Biodiesel prices in Queenstown are likely to rise after a Government subsidy to develop production of the fuel was scrapped.

The subsidy, worth 42.5 cents a litre, was introduced by the National-led Government in 2008, but was not renewed in this year’s Budget.

The Queenstown Biodiesel Consortium has more than 20 companies running more than 70 commercial vehicles on the fuel.

The consortium’s provider, Allied Petroleum, is supplied by Biodiesel New Zealand, a Solid Energy subsidiary that makes the fuel out of canola seed and used cooking oil, in Christchurch.

Source: Biodiesel loses subsidy, prices to rise

This thoroughly  undermined Solid Energy’s business projections for income and profits, as they could no longer rely on the subsidy to produce bio-diesel on a viable basis.

So not only were National ministers stripping Solid Energy of it’s cash reserves and demanding higher and higher dividends – they were now tying it’s hands and undermining potentially profitable ventures.

A year later, on 22 February 2013, English (as well as Key and Ryall) would be blaming Solid Energy’s financial collapse on, “… a drop in world coal prices, and spen[ding] too much investigating other sources of energy”.

It would be safe to say that undermining a company’s commercial venture, by moving the goal posts half-way through, and changing rules,  is also not particularly helpful.

.

23 June 2012

Solid Energy Chairperson, John Palmer resigns

John Palmer is quitting as chairman of state-owned Solid Energy because at the age of 65 he is unwilling to stay on and see it through to partial privatisation.

Mr Palmer, who is also chairman of Air New Zealand, took up a strong public position in calling for the partial privatisation of state-owned companies and he welcomed the government’s plan to sell down stakes in electricity companies and Solid Energy.

Source:  Solid Energy chairman quits over asset sales

Palmer  resigned some 18 months before his contract was due to expire. The question, as always, is,

Was he pushed?

Or did he jump?

Writing on 16 March 2013, Tracey Watkins suggested a Great Big Shove helped Mr Palmer on his merry way,

There is, of course, nothing unusual about SOE chairmen and chief executives being subjected to a lengthy interrogation. But it is rare for committees to offer a platform to SOE bosses who have been manoeuvred out of their jobs by the Government.

See: Solid questions still remain unanswered

I tend to agree with her. This has all the makings of a politically-inspired, fall-quietly-on-your-sword, exit.

.

SOE Minister, Tony Ryall comments on Palmer’s resignation – Acknowledges company’s developments

State Owned Enterprises Minister Tony Ryall announced Mr Palmer’s departure from Solid Energy on Friday.

“While it is disappointing to lose such a senior director, I wish to recognise Mr Palmer’s commitment to the company since his appointment in 2006, and the developments the company has made under his leadership,” Mr Ryall said.

Source:  IBID

Two months later, Bill English would be announcing that Solid Energy had  “…some fairly substantial issues” and would not be saleable.

Another six months after that, and the sh*t would be hitting the Big Fan. “Fortuitously”, Palmer would have been long-gone by the time English announced that Solid Energy was insolvent and  $389 million in debt.

Palmer would return, however on 14 March 2013,  for an encore performance before the Commerce Select Committee, to answer some hard questions.

.

.

30 June 2012

$ 30 million dividend paid to government, for year ending 30 June 2012.

Source: 2012 Annual Report

Note that two months before English announced that  “Solid Energy faced “a number of commercial issues” and was “rethinking its business”, National ministers were  still taking dividends from Solid Energy.

Did English, Ryall, and Key not read the  2012 Annual Report which listed Solid Energy  posting a Net Profit after Taxation (NPAT) of  a  $40.2 million loss – on Page 2, under bold headlines, “FINANCIAL PERFORMANCE“???

Even though he maintains that “we wouldn’t be planning to float it any time soon”, they were still taking money out of what would prove to be a financially stricken company. This alone indicated that English and Ryall were being financially irresponsible in their role as Ministerial shareholders. As such,  Key was either ignorant of what was happening under his nose, or was irresponsible in not taking action.

Perhaps his adopted affectation as a “typical, non-political kiwi-bloke” who didn’t get his hands dirty with politics; grinned and shrugged off problems; and left matters to his sub-ordinates – had become a dangerous vulnerability for him? (See Tim Selwyn’s blogpost on John Key’s political/management style:  Rudderless Within The Great Game)

Either way, 30 June 2012 is an important date. This is when National Ministers should’ve known that something was seriously amiss.

.

.

21 August 2012

English announces “issues” with Solid Energy

In August 2012, Bill English announced that Solid Energy had  “…some fairly substantial issues” and was not ready for sale.

Solid Energy “certainly isn’t” in shape for a partial sell-down, Finance Minister Bill English says.

English today said Solid Energy faced “a number of commercial issues” and was “rethinking its business”.

“We would only take any of these companies to the market if they are in good shape for investment and Solid Energy right now certainly isn’t. It’s got some fairly substantial issues that they have signalled. Whether it ends up being able to be floated would depend on whether they can get in suitable shape for public investors,” English said.

“We wouldn’t be planning to float it any time soon.

[…]

English said Solid Energy needed to be in “considerably better shape than it is now” before it could be floated.”

Source: English: Solid Energy not ready for sale

Perhaps National Ministers should have keep their fingers out of  Solid Energy’s petty cash box?

.

.

9 September 2012

Coalminers redundancies – $200 million revenue shortfall – first mention of a ‘bailout’

Steven Joyce says Government capital for Solid Energy has not been ruled out.

The minister met with the company’s group manager of coal on Friday to discuss the situation. Mr Joyce says he has not promised a bailout, but if Solid Energy has a good business plan there may be funding options.

“Ministers get approached by state-owned enterprises to invest capital at different times. The thing that they would be interested in would be what’s the reason for doing it and what’s the opportunity.

“There’s a number of things that are up in the air with Solid Energy’s business plan at the moment that they need to work through with the new chair.”

Source: No decision on Spring Creek workers – Solid Energy

If National bailed out Solid Energy, they would  – in effect – simply be returning the dividends and spare cash that Simon Powers demanded way back in May 2009.

It would not be “new” money. It would be giving back what was looted from Solid Energy’s coffers, as National desperately tried to balance the government’s books, and return to surplus by 2014/15.

This entire sad, incompetant, wasteful,  exercise has provided no  benefit to anyone. National Ministers have ended up looking inept, manipulative, deceitful, and grasping. All for what?

The sole outcome has been to damage the reputations of businessmen who were hired for their business acumen (and who had been successful in their own fields), and destroy the name of Solid Energy.

In a bizarre twist, by sending Solid Energy into near-bankruptcy, National successfully delayed the partial privatisation of that SOE. Something that asset-sale opponants would welcome with delight.

.

.

21 February 2013

Solid Energy in crisis – debt revealed to the public

The depth of Solid Energy’s financial woes have been laid bare with the Government confirming the company is in talks with bankers over its debt levels.

[…]

State-owned Enterprises Minister Tony Ryall said a number of factors had weighed against the company, in particular world coal prices dropping by 40 per cent.

“It is facing very serious financial challenges,” Ryall said.

Ryall declined to say whether Don Elder received a payout on his departure as chief executive on February 4.

Solid Energy’s debt stands at $389 million and its interim result, which is due shortly, will show additional losses.

Earlier this week Prime Minister John Key said it was very unlikely Solid Energy would be sold in the near future.

Source: Solid Energy in debt crisis talks

Time to duck – the poo has hit the fan.

Watch Ministers scurry for cover; invent fictitious tales; and blame anyone/anything they can think of. John Key’s fingers will be moving at supersonic speeds, pointing at others, to apportion blame.

.

.

22 February 2013

English blames Solid Energy management, bonuses, coal price fall, and expansion projects

Mr English said Solid Energy’s woes have two primary causes: it failed to predict – and adjust to – a drop in world coal prices, and spent too much investigating other sources of energy.

“Four or five years ago they set out on a big programme of expenditure on alternative energy, including researching into lignite down south to coal gasification and other research-based speculation, and that hasn’t turned out the way they thought.”

Source:  No more bonuses at Solid Energy – English

And yet, English and former SOE Minister, Simon Power had actively encouraged Solid Energy to expand. (see comments 8 September 2010 and 3 June 2011)

But if there was a cause for Solid Energy’s financial woes, a $389 million debt most certainly accounted for most of it.

Even the most profitable, efficient, well-managed company will collapse if it is over-geared (borrowed too much) and too much capital is  extracted in dividends (as well as tax).

Therefore, when English blames Solid Energy’s problems on “world coal prices, and spen[ding] too much investigating other sources of energy”; and when Key and Ryall blame Labour; massive debt; bonuses; mis-management; etc – the facts  show otherwise.

.

.

23 February 2013

Key blames too much debt and unsuccessful investments

The causes of the financial crisis at Solid Energy are the usual suspects in failing businesses – too much debt, unsuccessful investments and no reserves to weather a slump in coal prices.

Prime Minister John Key’s comments yesterday indicated these problems and pointed the finger at an imprudent amount of debt and investments that have not returned any cash yet.

Key said the debt had climbed to $389 million when “typically coal companies do not have a lot of debt on their balance sheets”.

Which is  supreme irony – as nineteen days later, a letter will emerge showing that the former SOE minister, Simon Power,  instructed Solid Energy to borrow heavily and pay huge dividends to the National government. National was intent on using Solid Energy as a ‘cash cow’.

Source: State miner to return to coalface

.

.

25 February 2013

Prime Minister discloses Treasury scoping study of Solid Energy

The PM was asked when the government first became aware Solid Energy was accruing big debts, given that such businesses were not normally expected to take on large amounts of debt.

He replied that the government had undertaken a “scoping study” when they were preparing the formulation of the Mixed Ownership Model and that their examination of Solid Energy’s accounts at that time indicated a degree of poor investment, over-valuation of the expected price of coal–which neither the industry nor government agreed with—and related financial problems stemming from this.

Source: PM Press Conference Dominated by Solid Energy Debacle

.

Key claims Solid Energy wanted $1 billion cash injection

The government blocked proposals in 2009 from its coal mining company Solid Energy for a billion dollar capital injection to allow it to become “the Petrobras of this country,” Prime Minister John Key says.

Source: Govt blocked grandiose Solid Energy plans in 2009

Key’s claim is later rejected by ex-Chairman, John Palmer.

Documents released by Key – in an attempt to back up his claims – wound up shooting the Prime Minister in his foot. The documents do not show that Solid Energy (or it’s CEO or Board) asked National ministers for anything.  The documents show only that the government was informed that Solid Energy would have to borrow from somewhere.

As usual, Key had been bending facts to suit himself. (And he thought no one would notice?!?!)

.

.

26 February 2013

Ryall confirms Treasury  scoping study

Tony Ryall confirmed that the scoping study was carried out in “late 2011″,

Hon TONY RYALL: The member can repeat whatever he likes. The simple fact of the matter is when Ministers became aware of the issues raised in the scoping study at the end of 2011 we took the appropriate steps to address the issues that were raised. As the member knows, the company now has a new chair and new board, and we are currently dealing with the banks to resolve those issues.

Source: Parliament Hansards – State-owned Enterprises—Commercial Expertise

Despite that Treasury scoping study on 4 November 2011, National was still extracting dividends from Solid Energy, right up to 30 June 2012 ($ 30 million).

.

Key blames Labour

He said his support for the project in 2011 came four months before a scoping study revealed the true state of Solid Energy’s financial woes, and the former Labour government needed to take some responsibility for the situation.

“They can’t wash their hands that from 2003 on they were intimately involved when they purchased the land for lignite,” Key said.

Source: Govt forced to defend handling of Solid Energy

2003?

How far back does this man want to go in history as he tries to deflect responsibility for his government’s incompetance? It seems strange, but one gets the distinct feeling that John Key never learned how to take personal responsibility as a child.

Continually blaming others is not the mark of a mature individual. After a while, the public begins to notice.

.

Key blames Solid Energy’s expansion plans

Mr Key says his Government was cautious about Solid Energy’s expansion and said it could “take some baby steps”.

Really? Key’s government was “cautious”?

Funny, that’s not how it looked on 8 September 2010, when then-SOE Minister, Simon Power, endorsed Solid Energy’s expansion plans in a letter, stating,

Shareholding Mnisters are, however, supportive of Solid Energy developing its
current natural resources, including lignite and unconventional gas. As
discussed with you, we expect that Solid Energy will develop resources on a
project by project basis.

Or on 3 June 2011, when John Key supported Solid Energy’s expansion, when he gave a speech in Invercargill,

“At the moment companies like Solid Energy are growth companies and we want them to expand in areas like lignite conversion.

We know there is lots of resource there and we know they potentially have the capability [to convert lignite to urea or diesel] and so we will see how that progresses, but the briquette plant is a good starting point.”

Or on 9 September 2011, when,

The Hon Bill English, MP for Clutha-Southland and Minister of Finance, today marked the official start of work at Solid Energy’s Mataura Briquette Plant, by “turning the first sod” at a small event on site with neighbours, local authorities, and other guests.

.

Key blames inability to control Solid Energy

The Government was worried about Solid Energy’s ambitious investment plans and rosy view of coal prices as far back as 2009 but was unable to order the company to steer a safer course, Prime Minister John Key says.

[…]

But after getting advice on the company’s plan, Mr Key said his Government rejected it, “but of course under the SOE Act the company had the right to draw down debt and make investments and could do that without reference to the shareholder”.

Source: Govt worried about Solid Energy in 2009

Two things jump out about that statement,

A.  If  National ministers were so “worried about Solid Energy’s ambitious investment plans ” – why did they not change the Board of Directors? Or issue a new Ministerial Directive?

After all, Simon Power did just that in a letter dated 8 September 2010 (see above), when he issued an instruction to Solid Energy’s Chairman, John Palmer, not to proceed with a specific expansion plan,

Shareholding Ministers have carefully considered the proposal and at this stage
do not support the development of a single NRC to maximise the value of New
Zealand mineral resources.

B. Why did Tony Ryall acknowledge “Mr Palmer’s commitment to the company since his appointment in 2006, and the developments the company has made under his leadership” on 23 June 2012, when John Palmer stood down as Solid Energy’s chairperson – if  “Government was worried about Solid Energy’s ambitious investment plans and rosy view of coal prices as far back as 2009…“?

C.  How can Key state that “the Government was … unable to order the company to steer a safer course” – when legislation states otherwise? As the Crown Ownership Monitoring Unit (COMU) states,

Most SOEs are subject to ministerial direction in relation to the content of certain aspects of the company’s Statement of Corporate Intent and the level of dividend payable to the Crown. Shareholding Ministers may remove board members by shareholder resolution under the Companies Act 1993. Under the Companies Act 1993, an alternative process may be followed if allowed by the company’s constitution.

Source: COMU: State-Owned Enterprises

As stated above, then-SOE Minister Simon Power did just that: issued a Ministerial Directive.

Of course, “steering the company to a safer course” should have included reducing National Minister’s demands for hefty dividends.

That might have helped.

Either Key is grossly ignorant about SOEs and their ministerial oversight – or once again he’s deliberately misleading the public to suit himself.

.

Key Blames Solid Energy

At that point, the company approached his Government seeking a capital injection “in the order of about a billion dollars to turn this company into the [Brazilian state-owned energy company] Petrobras equivalent in New Zealand”, Mr Key said.

Source: IBID

As a 27 August 2010 Treasury report – released on 15 March 2013 – showed,  Key’s claim that Solid Energy approached the government for “a billion dollars to turn this company into the [Brazilian state-owned energy company] Petrobras ” would prove to be false.

As ex Chairman John Palmer was to tell the Select Committee on 14 March,

“Were we talking to the Government about the possibility of capital and receiving that from the Crown? The answer is no.”

.

.

14 March 2013

Former chairman John Palmer  and CEO, Don Elder appear before Commerce Select Committee

Now we start to hear the “other side” of the story – and much of it conflicts with what we’ve been hearing from English, Key, and Ryall.

.

National confirms big dividends paid out

For the first time it is publicly acknowledged – Solid Energy has been used as a cash cow by National, to extract big dividends from 2009 onward,

The government concedes the pressure it put on Solid Energy to increase its debt is partly to blame for the company’s financial failures.

The state-owned coal mining company owes $389 million in debt, and is negotiating a rescue package with Treasury and banks.

Government documents reveal that in May 2009, then-State Owned Enterprises Minister Simon Power wrote to Solid Energy’s then-chair, John Palmer, saying he was disappointed its profitability and dividends were forecast to drop over the next three years.

At the same time, the government wanted the company to increase its gearing (debt to equity) levels to 40 per cent and its dividends to 65 per cent of operating cash flow.

A ministerial briefing paper shows Solid Energy’s gearing level in March 2009 was 10 per cent, and was forecast to reach 27 per cent in June 2010, while its dividend was 50 per cent.

Parliamentary Library figures show Solid Energy’s gearing leapt from 9.4 per cent in June 2008 to 34.4 per cent in 2010, dropping back to 29.6 per cent in 2011 and jumping again to 41.7 per cent in 2012 as coal prices began to slump.

Finance Minister Bill English admits the government pressure was perhaps too strong.

Source:  Govt pressure on Solid Energy revealed

National had to come clean, as ex-CEO Don Elder appeared before the Commerce Select Committee to explain what went horribly wrong at Solid Energy. National’s ministers knew that the truth was coming out, and had to pre-empt any public disclosures of massive borrowings and payments of dividends,

Mr English says there was a pushback against the debt increase from Solid Energy, which he expected Mr Palmer and former chief executive Don Elder to explain when they fronted a select committee later on Thursday.

Labour leader David Shearer says the documents show ministers had a greater degree of involvement in Solid Energy’s failure than they were publicly letting on.

Source: IBID

Push back against debt“? By now we all understand that English is lying his arse off to Heaven and back. There was no push back.

The only “push” was to increase dividend payments and gearing up to 40%.

The only reason politicians tell such howling lies is because they do not expect people to remember all the facts; to connect the dots; or for an under-resourced media to tell the whole story as a continuous narrative. Politicians expect people to forget; not hear all the facts; or become confused with too much non-contextual facts and testimony from the main players.

That’s how they get away with it; we’re not paying close enough attention.

.

Don Elder appears before Commerce Select Committee – Confirmation of Govt wanting Solid Energy to increase debt – endorsed expansion

Firstly,  former Solid Energy chairman, John Palmer,  publicly confirmed that the National Government,

  • wanted Solid Energy to borrow more, and pay higher dividends to government coffers,
  • endorsed Solid Energy’s expansion plans

Labour’s finance spokesman David Parker asked whether the company was in any doubt that the Government wanted them to expand production, increase debt and dividends.

Palmer said it was “self evident” that increased gearing meant increased debt.

The Government was supportive of plans to expand, including into lignite.

Palmer’s comments contradicted Bill English’s comments on 22 February 2013 and John Key’s comments reported on 23 February, 2013, where both politicians lambasted Solid Energy for high debt and expansion plans.

According to Palmer, neither English nor Key were worried about Solid Energy’s expansion programme.

Next,

Palmer said that in late 2011 or early 2012, when it was clear what was going to happen, he spoke to minister Tony Ryall about a $200m revenue hole (twice the annual profits), which would have a dramatic effect on the balance sheet.

Which ties in with Bill English’s announcement on 21 August 2012, that Solid Energy had  “some fairly substantial issues… We wouldn’t be planning to float it any time soon”.

Now we know what he was referring to: Solid Energy was broke. He knew it then, but did not disclose the full nature of Solid Energy’s status until forced  by officials.

.

Ex-CEO rejects Key’s assertion of Solid Energy requesting a $1 billion cash injection

“Were we talking to the Government about the possibility of capital and receiving that from the Crown? The answer is no,” Mr Palmer said.

“A specific $1 billion capital injection, I’m reasonably sure we did not ask for it in exactly those terms.”

However he said the company did have discussions with the Crown about potential large investment in lignite processing but it was also talking to potential overseas partners, “because it made no sense to us to think that Crown as the sole shareholder should finance that”.

He also said the company discussed with the Crown a national resource strategy that would have required large investment.

“My recollection is there was no dollars attached to that proposal.”

Source: Solid Energy opposed Government’s debt plan

.

Curious case of politicians and executives receiving identical media-coaching

Meanwhile, National’s taxpayer funded media-staff had been busy coaching politicians and company executives;

.

Don Elder – Blame,  “Perfect Storm”

This was the perfect storm.”

Source: Palmer: Elder deserves applause

Tony Ryall –  “Perfect Storm” – blames downturn in coal prices – blames wrong investments

“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.”

“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.

Source: Ryall blames ‘perfect storm’ for Solid Energy’s crisis

Bill English  – “Perfect Storm”

On TVNZ’s Q+A, on 17 March, English refers – not once, but twice! – to the “perfect storm”,

“That’s right. Look, in retrospect, they would have been better off with lower levels of debt, but as I think Don Elder and John Palmer said at the Select Committee, the board is there to make the decisions about what the actual levels of debt are. Bear in mind, in 2011 their debt had peaked and was declining, and then they got hit by the perfect storm in 2012.”

And a moment later, again,

“…And in 2011 their debt levels were actually declining from that, and then they got hit by the perfect storm…”

Source: TVNZ Q+A

Lotsa ‘stormy weather’ around? I thought we were experiencing a drought.

.

.

15 March 2013

Palmer says  Solid Energy did not want to take on high level of debt suggested by the Treasury

 Prime Minister John Key is facing claims he misled the public after former Solid Energy chairman John Palmer said the company resisted Government pressure to take on more debt – the very thing the Prime Minister said caused the company’s problems.

[…]

Appearing the day after Labour revealed former State-Owned Enterprises Minister Simon Power told the company to take on more debt and pay higher dividends, Mr Palmer said the company opposed that request.

The debt levels or gearing suggested by Mr Power and Treasury officials were higher than “we thought was an appropriate level of gearing given the nature of the industry we were involved in”, Mr Palmer said.

Source: Key under fire over Solid Energy claims

.

Key claims Solid Energy wanted $27 billion

Prime Minister John Key this morning released documents detailing Solid Energy’s ambitious expansion plans which would have required capital investment of $2-3 billion a year until 2021 or a total of up to $27 billion.

Key released the papers in response to Labour’s claims he misled the public about Solid Energy approaching his Government about a $1 billion investment to become the “Petrobras” of New Zealand, a request he says his Government turned down.

[…]

Key this morning said the documents showed the proposal “absolutely required, as Treasury pointed out, somewhere between two and three billion dollars of Government money”.

Source: Key says Solid Energy papers show $27b plan

Remember the Treasury report, dated 27 August 2010, referred above? Key is saying that the Solid Energy proposals would have required “between two and three billion dollars of Government money”.

Yet the 27 August 2010 Treasury report said nothing of the sort. Solid Energy could have obtained that money from the same commercial sources  it was already borrowing from.

And don’t forget, Solid Energy had already been borrowing significant amounts – pushing it’s ‘gearing‘ (debt to equity ratio) up:

Solid Energy’s gearing ratio [borrowings] was 13.8 per cent in 2009, but that rose to 34.4 per cent in 2010 and 41.7 per cent last year.

Source: Ministers pressured Solid Energy, Parliament told

To this day, Key continues to mis-represent the truth.

.

Key – Solid Energy wanted foreign investment and shareholders

“Key this morning said the documents showed the proposal “absolutely required, as Treasury pointed out, somewhere between two and three billion dollars of Government money”.

He said Palmer proposed selling a stake in Solid Energy to an offshore cornerstone investor “and that would involve taking more than 10 per cent of the company and not putting mums and dads first.”.

“I made it quite clear to him that we had campaigned on a mixed ownership model which didn’t involve someone having more than 10 per cent in the company”.

Solid Energy’s proposal “didn’t involve a situation where kiwi mums and dads would be first and so the only way to get that money was through the Government.”

Source: Key says Solid Energy papers show $27b plan

Now this is yet another contradiction from Key. First he tells us that Solid Energy executives wanted $1 billion (or was it $27 billion?) from Government.

But in the next breath – on the same day – he say Solid Energy wanted foreign investors/shareholders to buy 10% stakes in the SOE.

So which was it Dear Leader?! Government funding? Foreign investors/shareholders? Pixies at the bottom of the garden?

One can only conclude that former CEO, John Palmer, was correct, when he rejected any assertions that Solid Energy was looking to borrow money from government,

“I cannot recall that we have ever asked him explicitly for $1 billion dollars.”

Source: Key Must Front Up With $1 Billion Evidence

It was also interesting to note that Key derided Solid Energy’s plans for 10% foreign investors/shareholders blocks by stating that it contravened National’s policy of putting “kiwi mums and dads would be first“.

Which contradicts a statement that John Key made in a speech in 2005, on 4 March, where a private partner was something that National would welcome,

“In respect of Solid Energy, if an opportunity arose to introduce a private sector partner, we would consider that seriously.”

Source: John Key Speech: State Sector Under National

And how does Key reconcile that with other Public Private Partnerships (PPPs) such as Wiri Prison,

Corrections Minister Anne Tolley says a contract has been signed allowing the SecureFuture consortium to design, finance, build, operate and maintain the new 960-bed public-private partnership (PPP) prison at Wiri, South Auckland.

The new prison will deliver value for taxpayers and support the Government in reaching the target of a 25 per cent reduction in reoffending by 2017.

The 25 year contract is worth approximately $840 million, which is 17 per cent less than if the prison was procured through conventional means, representing a $170 million saving for taxpayers.

Fletcher Construction will build the new facility which will be operated by Serco and maintained by Spotless Facility Services. Construction will begin soon, with the prison set to open in 2015.

“The PPP will allow Corrections to draw on the experience and expertise of SecureFuture’s international partners,” says Mrs Tolley.

Source: Beehive – Contract signed for new PPP prison at Wiri

How many “mums and dads” invested in Wiri Prison?

There are many more PPPs of this nature where “mums and dads” have nil investments, and instead are the sole preserve of corporate investors – many from offshore.

.

Palmer denies Solid Energy wanted to borrow $1 billion from government

“Were we talking to the Government about the possibility of capital and receiving that from the Crown? The answer is no,” Mr Palmer said.

“A specific $1 billion capital injection, I’m reasonably sure we did not ask for it in exactly those terms.”

Source: IBID

Palmer is correct. According to the 27 August 2010 Treasury Report (referred to above),  Solid Energy did not ask Government for that money. The money could have been borrowed from any source – just as Solid Energy had already been doing.

This was also confirmed by a spokesperson for Bill English,

“We told them all to improve their performance and that, if they wanted to expand, they had to pay for it off their own balance sheet, rather than asking the cash-strapped taxpayers for money.”

Source: Ministers pressured Solid Energy, Parliament told

So it has becoming apparent that our Dear Leader Key is attempting to re-write recent history to suit his own agenda by shifting the blame elsewhere…

.

Key attempts to spin Assumption into “Fact”

“I think it is pretty self explanatory that when you come to the Government with such a very large proposal, we’re the 100% owner, that’s what’s required.”

Source: Details of Solid Energy’s expansion bid released

So let’s get this straight…

(i)  Solid Energy management presented  an expansion plan to National Ministers

(ii) The plan includes figures for said-expansion.

(iii) National Ministers had been encouraging of Solid Energy’s expansion plans (see comments 8 September 2010 and 3 June 2011)

(iv) There was no mention made of where borrowings would be made from – though up till now, Solid Energy had borrowed from private sources, and not the Crown. (See comments 27 August 2010)

(v) And from all that, the Prime Minister suggested that “ it is pretty self explanatory that when you come to the Government with such a very large proposal ” that Solid Energy expected finance from the  Crown?

I have one question: how on Earth did Key manage to amass a personal wealth of $50-$55 million when he  makes up  such fancifuul  “leaps of logic”?!?!

.

And the cover-up starts?

The head of the committee that grilled Solid Energy’s former bosses says he is unconvinced a full inquiry is needed.

Opposition MPs are pressuring for a full inquiry into the collapse of the state-owned coalminer, which is now reliant on government support to manage its $389 million debt pile.

Commerce select committee chairman Jonathan Young allowed yesterday’s appearance by former Solid Energy chairman John Palmer and former chief executive Don Elder to run for an hour longer than was originally expected.

Young, the National MP for New Plymouth, said this morning that he believed the committee now had “a very clear picture” of what had happened to Solid Energy, which was hit by falling coal prices, a strong New Zealand dollar and poor investment decisions.

In recent days it has emerged that the Government leaned on the company to take on more debt, after it warned it may pay less dividends.

Young said that “in hindsight we can look back and see if they didn’t have debt they would be in a better situation”.

Despite this, Young said he was yet to be convinced that a full select committee inquiry was needed into the collapse, saying there were “multiple levels of inquiry” already under way, with the company talking to its financiers, and the Government “looking at all of the issues”.

He told TV3′s Firstline: “I am personally yet to be convinced that we are going to uncover anything new or different that wouldn’t be uncovered” anyway.

Source: Solid Energy probe call rejected

“…the National MP for New Plymouth, said this morning that he believed the committee now had “a very clear picture” of what had happened to Solid Energy…”

That statement boggles the mind; drops the jaw to the ground; and is so, so, wrong on many levels. But wholly expected from a National member of Parliament; chairing a Select Committee; stacked with five National MPs out of nine committee members (see: Commerce Select Committee members); supposedly ‘investigating’ wrong-doing/ineptitude by National ministers.

Let’s see… what part of that is wrong? A government investigating itself and coming up with a verdict of nothing-to-see-here-folks-move-along-please? How is Young’s assertion that the Government was “looking at all of the issues” supposed to reassure us?! By what measure of common notions of justice is a  Government  “looking at all of the issues” supposed to be a non-partisan, transparent, and objective investigation into this issue?

It would be like directors of failed companies (many of whom are either in jail or waiting to be tried in Court or sentenced) investigating their own actions and coming up with the same comments as Young made,

“In hindsight we can look back and see if they didn’t have debt they would be in a better situation…”

Directors are “looking at all of the issues”.

“We are  personally yet to be convinced that we are going to uncover anything new or different that wouldn’t be uncovered”

Yeah, right, Mr Young. You can stop putting lipstick on that pig.

Listening to  the main players – especially John Key, Bill English, and Tony Ryall – there are too many conflicting statements to believe that an Inquiry is not needed. National ministers are simply unable to get their stories straight and have contradicted each other (and themselves) on numerous occassions.

Young asserts that the committee now had “a very clear picture” of what had happened.

Bollocks.

The only thing even remotely “clear” about all this is that remains remain to be asked – and answered.

As Tracey Watkins wrote on 16 March 2013,

“But something clearly went seriously wrong if those talks were not enough to stop the collapse of an SOE on an unprecedented scale.

Beneath the flurry of claims and counter claims that is the question which has still not been properly answered.”

See: Solid questions still remain unanswered

Indeed.

.

.

17 March 2013

Bill English – TVNZ Q+A

The following is a transcript from  Corin Dann interviewing Finance Minister (and half shareholder in Solid Energy) on 17 March 2013,

CORIN

All right, if we could move on to Solid Energy. Can you give us an update on where things are at with the banks? When will we know whether the government is going to have to bail out Solid Energy?

BILL

Well, that will be some months yet. There’s discussions going on with the banks now about stabilising Solid Energy. Some of the information around its cash flows is a bit more positive than we might have expected. But we will get a period of two to three months through to the end of June where we can look at all the options for recovering value for the taxpayer in the first place and, secondly, to decide whether there is an on-going viable business in the middle of this-

CORIN

Are you saying it’s making a bit more money than you thought now and that it might be able to get itself out of trouble?

BILL

Well, I wouldn’t go that far. All I’m saying is the cash flow numbers are just a bit more positive than we expected. I mean, if you look back, Solid Energy made some very substantial investments in some of its mines. Some of those worked out, such as in Stockton; some of them didn’t, such as in Spring Creek. But where they have invested, they’ve got capacity for production and for value, and if coal prices are at some kind of reasonable level, then there is a business there.

“All I’m saying is the cash flow numbers are just a bit more positive than we expected. ” – In which case, Mr English, keep your sticky hands of that cash.

I sincerely hope that if National Ministers attempt to gouge SOEs again, that Board Directors resign on masse and publicly disclose political attempts at such interference.

The public is entitled to be reassured that politicians will not use SOEs as “cash cows” simply to balance their books.  Especially after two unaffordable tax cuts – a glorified ‘lolly scramble’ – left a gaping hole in government accounts.

CORIN

Do you want the banks to take some of the heat on this?

BILL

Yes, I think that’s really important. They’ve lent money, and as lenders, they take risks. And if they lend to a company that’s affected by a very sharp downturn in coal prices and then loss of a quarter of their export sales, they’ve got the same risks as banks who leant to resource companies all around the world that have got in trouble.

CORIN

You can see the irony in that, though, because you told them to borrow more.

BILL

Well, and you were talking about it as a revelation. We did a press conference back in 2009 about the need for our SOEs to take on-

And it took Labour to advise the public, Mr English. Bill English, Key, and Ryall were more than happy to keep that 2009 letter from Simon Power under wraps.

That was part of National’s ‘spin’ that the massive borrowings and  debt were a ‘creature’ of Don Elder’s and John Palmer’s making. But as Corin Dann pointed out;

CORIN

But you know that timing is everything with these things, and that was a revelation coming at this time, given your government had tried to distance itself from this issue. You even blamed Labour for it, for what they said in 2007.

BILL

No, I don’t agree with that. In 2009, the government was facing a decade of deficits because of the Labour Party and the recession. And we quite reasonably said that our taxpayer-owned companies should contribute more cash to the coffers. That’s the point of owning them. And Solid Energy had paid barely- had paid almost no dividends for the previous five or six years, and they had very low levels of debt compared to their asset value. So, look, in retrospect-

Here we go again; more blame-gaming,

In 2009, the government was facing a decade of deficits because of the Labour Party and the recession.

English blames the recession?

In which case why did National Ministers extract 163.9 million in dividends from Solid Energy, during the worst recession since the 1920s/30s?

Is this what National calls “prudent fiscal management”?

Notice also that  English lied by  blaming “ a decade of deficits because of the Labour Party” – even though Cullen was posting surpluses from 2002-08 Labour-led period?! And paid down sovereign debt from 33.4% of  GDP to 17.4% GDP? (See previous blofpost:  Bill English – do you remember Colin Morrison?)

This is symptomatic of a National-led government that is desperate to avoid all responsibility.

CORIN

But there was a good reason for that, wasn’t there? Because they were a coal company.

BILL

That’s right. Look, in retrospect, they would have been better off with lower levels of debt, but as I think Don Elder and John Palmer said at the Select Committee, the board is there to make the decisions about what the actual levels of debt are. Bear in mind, in 2011 their debt had peaked and was declining, and then they got hit by the perfect storm in 2012.

Look, in retrospect, they would have been better off with lower levels of debt“…   “In retrospect“?!?! Little wonder that Solid Energy’s board and management resisted National’s demands for higher and higher dividends (as English concedes in his next statement).

That statement – ”Look, in retrospect, they would have been better off with lower levels of debt“  – totally destroys the argument put forward by Key, English, and Ryall that Solid Energy’s debt and subsequent crisis was of it’s own making.

Quite simply, National was desperate for cash to pay for the 2009 and 2010 taxcuts, and were prepared to bleed SOEs dry to get it’s hand on their money. Even if those SOEs had to borrow to do it.

This is ministerial incompetance at best – or outright economic sabotage at worst. (No wonder ACT and Libertarians maintain that politicians can’t run businesses. Correction: National politicians can’t run businesses.)

CORIN

But you were telling all SOEs to raise their debt to a 40% gearing, and Solid Energy told you they were not comfortable with that, and there was a good reason: because they were a volatile coal company. Surely that was too much pressure you were applying to them.

BILL

Well, clearly not, because their debt peaked at under 35%, which was the level the board set, which was lower than what the government was expecting. And in 2011 their debt levels were actually declining from that, and then they got hit by the perfect storm. So, yes, would they have been better off with no debt? Yes, just like lots of businesses and households would be better off with no debt. Then they got hit by these circumstances which may well have put the company into trouble even if it had no debt.

Yes Mr English, Solid Energy did get hit by “a perfect storm”. A storm largely made up of rapacious politicians.

It appears that by not gearing up to the full 40% demanded by National, that Don Elder and John Palmer may have done their best to prevent the collapse of Solid Energy.

CORIN

The issue also, of course, has been around their investments. Now, your government must take some responsibility, surely, for the oversight of what they were investing in. You were the one down in Southland turning the first sod with the lignite plant. You knew what they were up to.

BILL

Well, and it’s yet to be seen just whether that particular investment has on-going potential or not. Clearly, some of them don’t. Some of them may do. That’s what’ll happen over the next two to three months. But what you’ve got to keep in mind here is that under the SOE model, politicians are not there to run the companies. We do not make the investment decisions. The boards make the investment decisions, and the weakness in the model is that there’s no market scrutiny of those board decisions, and that is why the partial sell-down of the electricity companies will help with the monitoring and the performance of those companies.

But what you’ve got to keep in mind here is that under the SOE model, politicians are not there to run the companies. We do not make the investment decisions. ” – Really, Mr English? And yet Simon Power felt he had the ministerial authority to write to Solid Energy demanding higher dividends.

In reality, under the State-Owned Enterprises Act 1986, shareholding Ministers can and do issue directives to SOE Boards. So English is being disingenuous when he tries to indicate that Ministers are powerless. They are not powerless,

13.  Powers of shareholding Ministers in respect of new State enterprises
  • (1) Notwithstanding any other provision of this Act or the rules of any company,—

    • (a) the shareholding Ministers may from time to time, by written notice to the board, direct the board of a company named in Schedule 2 to include in, or omit from, a statement of corporate intent for that company any provision or provisions of a kind referred to in paragraphs (a) to (h) of section 14(2); and

    • (b) the shareholding Ministers may, by written notice to the board, determine the amount of dividend payable by any company named in Schedule 2 in respect of any financial year or years,—

    and any board to whom such a notice is given shall comply with the notice.

    (2) Before giving any notice under this section, the shareholding Ministers shall—

    • (a) have regard to Part 1; and

    • (b) consult the board concerned as to the matters to be referred to in the notice.

    (3) Within 12 sitting days after a notice is given to a board pursuant to this section, the responsible Minister for the company concerned shall lay a copy of the notice before the House of Representatives.

Source: State-Owned Enterprises Act 1986 – Section 13

They have the power.

It’s the responsibility for their stuff-ups that seems to elude them.

CORIN

And are you confident there will be much better decision-making, that these MOM companies, in general, are going to have better board making decisions?

BILL

I think mixed-ownership companies will, but there’s a real challenge for government with the lessons from Solid Energy. When you look ahead, the companies that the government will own all have their challenges – NZ Post with the shrinking postal market, TVNZ and the digital media environment, a coal company if there is still a coal company. And we are going to have to change the way we work with these companies to ensure that we don’t lose taxpayers’ money. Because the taxpayers’ money in these companies doesn’t come out of the sky; it comes from the PAYE and the GST paid by NZ households. And we have a strong responsibility for the stewardship of that money.

Source: TVNZ Q+A

.

.

22 March 2013

The NZ Herald reported that “seven years’ worth of documents about Solid Energy have been released by Treasury… It has been released after a number of Official Information Act request centred around how much the Government knew about the financial troubles the state owned coal miner was in“.

Source:  Big Solid Energy document dump from Treasury

[Note: This blogger has viewed only a fraction of documents. There’s no telling what other revelations and incriminating evidence is contained therein. Perhaps something to be re-visited on a quiet, wintry evening?]

.

.

25 March 2013

Papers confirm Govt pressure on Solid Energy

A week after English’s attempt to ‘spin’ the collapse of Solid Energy and blame everyone under the sun, Radio NZ reported,

Official papers confirm the Government put pressure on Solid Energy to increase its debt and then appeared later to criticise it for borrowing too heavily as it got into difficulty.

The state-owned coal company is in debt to the tune of $390 million.

The papers released on Friday also show that despite strongly disagreeing with the company’s business plan, the Government left it late to act.

In 2009 the then State-Owned Enterprises Minister, Simon Power, wrote to Solid Energy chair John Palmer recommending the company raise its gearing ratio – a measure of debt – to 40%.

By June 2012, when it was clear the company was in trouble, the ratio had risen to 37% and, according to the Treasury, Solid Energy had taken on significant debt.

It was only at that point, after arguing with the company for three to four years about its business plan, that the Government decided to make changes.

Source: Papers confirm Govt pressure on Solid Energy

By  this time, public attention and media focus had waned. There were other issues and problems to deal with, and National ministers could breath a sigh of relief. They were “off the hook”.

Let us recall that Treasury’s scoping report, released on 4 November 2011, confirmed everyone’s suspicions that National had cash-stripped Solid Energy;

 ”…dividend payments to the government have been funded by increasing debt“.

Source: Treasury Report T2011/2373: Solid Energy New Zealand Scoping Study Report

The ‘up-shot’ of all this?

  • A billion dollar state own enterprise had been milked as a “cash cow” and left to collapse.
  • English, Ryall, Key, et al – off the hook.
  • There would be no ministerial accountability; no resignations; no one held to account.

And for good measure,

  • Blame Labour for everything.

.

.

8 May 2013

Bill English preps public for Solid Energy’s write-off?

In a Radio NZ story (see: English questions viability of Solid Energy), Bill English contradicted his earlier assertion that Solid Energy would not be allowed into receivership,

“We’re not going to keep propping up businesses where we don’t think there’s a long term future. Where we think there there is, we put strong support in. So Kiwirail would be a good example.Where the government’s  already invested around a billion in them in the last 3 or 4 years and they will… all of their,um, surpluses will be reinvested in the business, probably for the next decade. So the taxpayer won’t take anything out of them. But there may be… it’s possible that there’s other businesses, as has been revealed say in the  Solid Energy case where their particular mix may not be viable so we have to look at  whether they can be restructured or whether in the long run there’s a viable proposition there. But at the moment Solid Energy is the only business where that’s in question.”

Listen RNZ interview: Bill English on Morning Report

By questioning the viability of Solid Energy, English is preparing the public for the day when National announces the demise of the company.

Having gutted it of cash and forced it to borrow millions for unsustainable dividends, National is now ready to administer the coup de grâce to finish it off. (If the Nats could eliminate all witnesses to their bare-faced thieving, I bet you they’d be considering it…)

Meanwhile, a week later…

.

.

14 May 2013

$1 billion for KiwiRail

Radio NZ revealed that KiwiRail was receiving government funding to keep operating,

Overall the Government has committed about $1 billion to the effort, and Finance Minister Bill English has said the Government is unlikely to take a dividend for the next decade so KiwiRail can reinvest any profits in the rail service.

Source:  Solid Energy problems pose risk for KiwiRail

See also: Beehive.govt.nz: Next steps in KiwiRail’s Turnaround Plan

How is it that Solid Energy,  a once viable company – earning millions in revenue from overseas exports of coal (admittedly not a very environmentally-friendly product) – may be allowed to go into receivership?

Meanwhile, National is quite happy to keep investing in KiwiRail, which has never generated a profit in modern times. (Though admittedly, KiwiRail is  an environmentally-friendly transport enterprise with a positive future, as we pass the oil peak.)

.

.

A message to businesspeople:

National Ministers are attempting to sheet blame for Solid Energy’s financial crisis to it’s former Chairperson, John Palmer, and CEO, Don Elder.

Key, English, and Ryall  have  resorted to mis-presentation of facts; omission of facts;  exageration; and in some instances, outright lies.

This should serve as a clear warning to businesspeople. Think carefully before accepting managerial or Board positions during a National-led government.

Because if things go wrong – even if caused by political interference – then they will have no hesitation to smear your reputation.  They will hang you out to dry, whether you are at fault or not.

A message to Voters:

National has a reputation as “prudent fiscal managers”.

For the life of me, I cannot understand how they have earned that reputation.

To allow a billion dollar SOE to crash and burn; run into the ground; and now   facing bankruptcy suggests to me that Key, English, Ryall, Brownlee, Joyce, Collins could not run a corner Dairy without getting into financial trouble.

I don’t think these clowns could run a sausage sizzle without losing money by the end of the day.

Perhaps, as a test,  those voters who are disbelieving should keep voting National? Let’s see what other SOE will collapse on their watch, eh?

What the hell. After all, it’s only our property. And tax dollars.

This blogpost was first published on The Daily Blog on 17 May 2013.

.

*

.

References

Solid Energy: Annual Reports Index

Crown Ownership Monitoring Unit – SOE Disclosures

Treasury: SOE/Solid Energy Disclosures

Previous related blogposts

That was Then, This is Now #18 (24 Feb 2013)

National caught out over Solid Energy – changes story on coal prices, debt, and other matters (13 March 2013)

Additional links (to replace dead links)

https://web.archive.org/web/20130208164845/http://solidenergy.co.nz/publications-and-resources/annual-reports/solid-energy-annual-report-2008.pdf

https://web.archive.org/web/20130208164835/http://solidenergy.co.nz/publications-and-resources/annual-reports/solid-energy-annual-report-2009.pdf

https://web.archive.org/web/20130208164806/http://solidenergy.co.nz/publications-and-resources/annual-reports/solid-energy-annual-report-2010.pdf

https://web.archive.org/web/20130208164754/http://solidenergy.co.nz/publications-and-resources/annual-reports/solid-energy-annual-report-2011.pdf

https://web.archive.org/web/20130208021727/http://solidenergy.co.nz/publications-and-resources/annual-reports/solid-energy-annual-report-2012.pdf

https://web.archive.org/web/20140709063612/http://www.solidenergy.co.nz/publications-and-resources/annual-reports/solid-energy-annual-report-2013.pdf

Acknowledgement and appreciation to “BLiP”

.

.

= fs =

Mighty River Power, Members of Parliament, and Conflicts of Interest

26 March 2013 16 comments

.

.

On 27 June last year,  on the last episode of TVNZ7’s ‘Backbenches’, Minister for Courts, Associate Minister of Justice, and Associate Minister for Social Development, Chester Borrows, admitted his intention to  buy shares in partially-privatised state owned enterprises.

In an  exchange between ‘Backbenches’ Host Wallace Chapman and Chester Burrows,

CHAPMAN:  “Will you be buying shares in Mighty River Power?”

BORROWS:  “Yes, probably.”

CHAPMAN:  “Ok.”

BORROWS:  “I’m a mum and dad investor, well I’m half of a mum and investor partnership.”

CHAPMAN:  “So you will be.”

BORROWS:  “Yep.”

On 2 July, when I blogged this issue (see: Conflicts of Interest?), I asked three questions,

  • Is this a vested interest in partial-privatisation?
  • Is this a conflict of interest?
  • Is this verging on self-serving corruption?

It will be interesting to find (if at all possible to uncover), how many National/ACT/United Future members of Parliament will end up owning shares in Mighty River Power, and other part-privatised SOEs?

A recent Sunday Star Times story told readers that members of Parliament and government ministers would follow a self-imposed “moratorium” on not buying any shares in SOEs for 90 days,

Cabinet ministers have agreed to a voluntary “moratorium” preventing the purchase of shares by all ministers, and some of their staff, until 90 days after the initial sale.

Finance Minister Bill English’s office said: “Cabinet also agreed that ministers and the staff in those offices . . . should use their best endeavours to ensure that their partners and dependent children adhere to the same moratorium.”

Acknowledgment: Fairfax Media – Call to ban ministers from share float

That is simply not good enough. A politician could easily instruct a solicitor to buy shares on his/her behalf. Or purchase shares via a ‘shell-company‘. There are as many ways to dodge scrutiny as the human mind can imagine.

The implications of government MPs and Ministers owning shares in state assets which they themselves have decided to privatise is a serious matter.

The only three ways to avoid such a spectacular conflict of interest is,

  1. Pass legislation banning MPs or their spouses from ever owning shares in SOEs (not very practical)
  2. Make the Pecuniary Interests register a permanent feature for all politicians to fill out for the rest of their lives. (possible – though a real pain in the arse)
  3. Scrap the asset sales programme. (Much easier.)

If politicians such as Borrows purchase shares in SOEs, it will further lower their reputations in the eyes of the public. “They’re in it for themselves” will become a reality in the minds of people, rather than just a vague suspicion.

We’re treading on thin ice here and the prospect of real political corruption takes one step closer to reality.

.

*

.

Additional References

Call to ban ministers from share float (24 March 2013)

Previous related blogposts

Conflicts of Interest?

.

.

= fs =

That was Then, This is Now #14

20 June 2012 1 comment

Law passed in secret to sell State Assets 100% , Meegan Manuka MR NEWS Counter Spin 2012

Something worth a look,

.

.

Meegan Manuka’s assessments of certain aspects of National’s machinations over the SOE Act 1986 is is scarily accurate. For example, at 1:50 into the video-report, she informs us,

.

“…that priority will be given  to New Zealand investors. Now I know that’s not true because if you research the Trans-Pacific  Partnership Agreement there’s a clause in there that says that we cannot give priority to New Zealanders because that’s discrimination against the offshore investors…”

.

Ms Manuka’s assertion is backed up from a Government document, the OUTLINES OF THE TRANS-PACIFIC PARTNERSHIP AGREEMENT,

.

Investment.

The investment text will provide substantive legal
protections for investors and investments of each TPP country in
the other TPP countries, including ongoing negotiations on
provisions to ensure non-discrimination, a minimum standard
of treatment, rules on expropriation, and prohibitions on
specified performance requirements that distort trade and
investment.

.

And unsurpringly, Ms Manuka’s research was backed up my msm,

.

Full Story

.

But Prime Minister John Key said legislation was not needed to guarantee priority shareholdings.

“You need to practically have it – it’s essentially the application of the policy and New Zealanders will judge us on how well we execute that policy, but it’s not necessary to have it in legislation.”

.

Key’s statement that “it’s not necessary to have it in legislation” is mind-boggling. How else will Government  “guarantee priority shareholdings” if legislation does not exist to enforce it?

The only answer to Key’s bizarre statement is that National has no intention of enforcing “guaranteed priority shareholdings” because it knows that,

(a) As Ms Manuka stated, any such law would conflict with the TPPA, and

(b) the government cannot guarantee that New Zealand investors are financially able to purchase billions of dollars worth of shares

The issue of SOE privatisation is similar to that of farm-sales to overseas inestors, where John Key has stated that Government cannot ‘discriminate” between local and overseas offers to buy assets,

Which then influenced National’s  decision on the Crafar farm-sale, to overseas investors. As John Key said,

“He [Mr Peters] is in a state of denial. New Zealand has strict legislation where it comes to the sale of farmland. If government had decided to overrule the decision of the Overseas Investment Office we would have to give reasons – and that reason can’t be ‘because they’re Chinese.’” – Source

And,

Ministers were satisfied that Milk New Zealand met all of the relevant criteria under the Overseas Investment Act 2005. Ministers can only have regard to the criteria and factors outlined in the Overseas Investment Act 2005. Every application is decided on its individual merits and the outcome would be the same even if New Zealand did not have a Free Trade Agreement with China,” they said.” – Source

As with previous pledges and promises from National, it seems fairly evident that John Key has no intention of following through on his committment to “guarantee priority shareholdings“.

Be prepared for another back-down, with the usual ‘spin’ of excuses, buck-passing, and vacant smiling. As Bruce Bissett wrote in Hawkes Bay Today,

Double standards? Yes, of course. This is National, after all.

The next election can’t come soon enough.

And thank the gods for Gen Y. They’re here to fix up their parents’ mess.

.

* * *

.

Additional

Next step in Trans-Pacific Partnership agreement

Ministry of Foreign Affairs and Trade: Trans-Pacific Partnership (TPP) Negotiations

Ministry of Foreign Affairs and Trade: Broad Outlines

.

Leaders of TPP member states and prospective member states on the sidelines of the APEC summit in Yokohama, Japan, 11 November 2010.

.

Map of Trans-Pacific Partnership Agreement signatory nations

.

.

How Can A Minister of Finance Get It So Wrong???

28 February 2012 4 comments

.

.

Five days ago, Finance Minister Bill English released a statement on the part-privatisation of several State Owned Enterprises. It is worthwhile re-printing his statement in full, and responding to it, point-by-point,

.

Running up $5-$7b more debt not the answer

by Hon Bill English, Finance
23 February 2012

Opponents of the Government’s mixed ownership programme need to explain to New Zealanders why it would be better to borrow an extra $5 billion to $7 billion from overseas lenders, Finance Minister Bill English says.

Speaking to an Auckland Chamber of Commerce and Massey University business lunch today, he said the challenge was how the Government pays for forecast growth in taxpayers’ assets over the next few years.

“Taxpayers own $245 billion of assets, and this is forecast to grow to $267 billion over the next four years. So we are not reducing our assets. Our challenge is how we pay for their growth, while getting on top of our debt.”

The rationale for offering New Zealanders minority stakes in four energy companies and Air New Zealand is quite simple, Mr English says.

“First, the Government gets to free up $5 billion to $7 billion – less than 3 per cent of its total assets – to invest in other public assets like modern schools and hospitals, without having to borrow in volatile overseas markets.

“Our political opponents need to honestly explain to New Zealanders why it would be better to borrow this $5 billion to $7 billion from overseas lenders at a time when the world is awash with debt and consequent risks.

“We would rather pay dividends to New Zealanders on shares they own in the energy companies than pay interest to overseas lenders on more borrowing.

“The fact is, the Government is spending and borrowing more than it can afford into the future. So it makes sense to reorganise the Government’s assets and redeploy capital to priority areas without having to borrow more.

“Most nights on television, we see the consequences of countries in Europe and elsewhere borrowing too much. We don’t want that for New Zealand.”

Secondly, under the mixed ownership programme New Zealanders will get an opportunity to invest in big Kiwi companies so they can diversify their growing savings away from property and finance companies.

“Counting the Government’s controlling shareholding, we’re confident 85-90 per cent of these companies will be owned by New Zealanders, who will be at the front of the queue for shares.”

Thirdly, mixed ownership will be good for the companies themselves, Mr English says.

“Greater transparency and oversight from being listed on the stock exchange will improve their performance and the companies won’t have to depend entirely on a cash-strapped government for new capital to grow.

“We already have a living, breathing and successful example of mixed ownership in Air New Zealand, which is 75 per cent owned by the Government and 25 per cent by private shareholders.”

In his speech, Mr English reiterated the Government’s economic programme this term would focus on rebuilding and strengthening the economy.
It’s main priorities are:

  •     Responsibly managing the Government’s finances.
  •     Building a more productive and competitive economy.
  •     Delivering better public services within tight financial constraints.
  •     Rebuilding Christchurch.

“So there will be no big surprises from this Government,” Mr English says. “We have laid out our economic plan and Budget 2012 will focus on implementing that plan.”

Source

.

Firstly, let’s call a spade, a spade here. Whilst National ministers use the euphemistic term, “mixed ownership model”, the issue here is partial-privatisation of state owned enterprises.  National’s spin-doctors may have advised all ministers and John Key to always use the phrase “mixed ownership model” – but the public are not fooled.

To begin, I take great exception to English’s opening statement,

Opponents of the Government’s mixed ownership programme need to explain to New Zealanders why it would be better to borrow an extra $5 billion to $7 billion from overseas lenders…”

Opponants of National’s part-privatisation do not “need to explain” anything. It is up to National to explain why it feels the need to part-privatise tax-payer owned corporations that are efficient and give a good return to the State.

Demanding that the  opponents of the Government’s mixed ownership programme need to explain” their opposition is the height of arrogance.  Governments in western-style democracies are accountable to the public – not the other way around.

English then goes on to say,

Taxpayers own $245 billion of assets, and this is forecast to grow to $267 billion over the next four years. So we are not reducing our assets. Our challenge is how we pay for their growth, while getting on top of our debt.”

Pardon?

“…we are not reducing our assets” ?!?!

Selling 49% of Genesis, Meridian, Solid Energy, Might River Power, Air New Zealand (from 75% to 51%) down to a 51% holding is “not reducing our assets” ?!?!

Bill English’s command of his namesake language is strange at best. I believe this is what George Orwell wrote about in his dystopian novel, “1984“, when he described “doublethink“,

To know and not to know, to be conscious of complete truthfulness while telling carefully constructed lies, to hold simultaneously two opinions which cancelled out, knowing them to be contradictory and believing in both of them…”

English laments that “our challenge is how we pay for their growth, while getting on top of our debt”.

This involves two distinct issues;

Paying for the growth of state assets.

Genesis, Meridian, Solid Energy, Might River Power,  and Air New Zealand are all profitable enterprises in their own right. In the 2010 financial year, these  assets made a combined profit of $581 million dollarsNone of these five SOEs are loss-makers.

They can each pay for whatever growth programme they require, using their profits.

Where National interfered in SOE operations, the results were highly distorted,

Genesis paid out no dividend and had a zero yield on its operating profit of $293 million.

It had a 30.5% shareholder return on total assets.

Meridian had a dividend yield of 10.4%, achieved by paying out 428.8% of its profit. The increase came from the $300 million special dividend it received during the sale of Tekapo A and Tekapo B stations to Genesis, which was forced by the Government to borrow to pay for the purchase.” – Source

The reason that there is a  “challenge [in] how we pay for their growth”  is simple: National demands high dividends from these  SOEs (often by forcing them to borrow) leaving little for the companies to reinvest in their own growth.

Under-funding is a problem only because National has created the problem.

Getting on top of debt.

Linking  New Zealand’s $18-plus billion dollar debt to funding the growth of SOEs is  deliberate sophistry (ie; a deliberate deception).

The reason we have out-of-control debt is because,

As a society and as an economy, we had no control over the first two crises to hit us.

But we sure had control over our taxation policy, and doling out generous tax cuts to millionaires and wealthy businesspeople was a luxury we could not afford. (Many maintain that National was “rewarding” certain affluent socio-economic groups for electoral support at the ballot box.)

Next. English states,

First, the Government gets to free up $5 billion to $7 billion – less than 3 per cent of its total assets – to invest in other public assets like modern schools and hospitals, without having to borrow in volatile overseas markets.

???

National appears confused (as with most of its ad hoc policies) as to the proceeds it may gain from the partial sales. Only a year ago, Key stated authoritatively,

“If we could do that with those five entities … if we can make some savings in terms of what were looking at in the budget and maybe a little on the upside you’re talking about somewhere in the order of $7 to $10 billion less borrowing that the Government could undertake.” – John Key, 26 January 2011

Then again, as recently as eleven days ago, English let slip that,

I just want to emphasise that it is not our best guess; it’s just a guess. It’s just to put some numbers in that look like they might be roughly right for forecasting purposes.  That’s an honest answer.” – Bill English, 17 February 2012

The best description of Key and English on asset part-sales: clueless.

It is also worrying that National is selling state assets to pay for  “other public assets like modern schools and hospitals, without having to borrow in volatile overseas markets“.

Every householder will tell you that if  you have to sell of your furniture; whiteware; tv, family car, to pay to maintain your home – then you are in deep financial trouble.

What National is doing is “selling the household furniture to pay for painting the house”.  Selling off assets to pay for maintenance is not sustainable – eventually you run out of stuff to sell. It is a really dumb idea.

But more than that, it indicates that National is not “earning” enough, by way of taxation revenue to pay for it’s house-keeping. If we have to borrow or sell assets to do simple things like paint schools or properly resource hospitals – then it is a fairly clear indication that taxation revenue is insufficient for day-to-day operations of public services.

It also indicates that we are paying for the 2009 and 2010 tax cuts by selling state assets.

This is not “fiscal prudence” – this is foolish profligacy.

Bill English again demands, in his speech,

Our political opponents need to honestly explain to New Zealanders why it would be better to borrow this $5 billion to $7 billion from overseas lenders at a time when the world is awash with debt and consequent risks.”

No,  Mr English. Perhaps you should “honestly explain to New Zealanders” why you believe it makes greater commerciall sense to part-sell  profitable assets that are returning a higher yield on investment, than what the government pays to borrow?


The Government is estimating a $6 billion reduction in net debt after the sale of the state-owned enterprises – but concedes the savings on finance costs will be less than what it would have booked from dividends and retained earnings if it kept them.

Treasury  forecasts released today in the Government’s budget policy statement outline the forecast fiscal impact of selling up to 49 per cent in each of the four State-owned power companies – Mighty River Power, Meridian, Genesis Energy and Solid Energy – and by reducing the Crown’s current shareholding in Air New Zealand.

They assume a price of $6 billion – the midpoint in previous estimates of a $5 billion to $7 billion sale price – and a corresponding drop in finance costs of about $266 million by 2016.

But the trade-off is the loss of an estimated $200 million in dividends by 2016 and the loss of  $360 million in forecast foregone profits in the same year.

Documents supplied today state that the overall fiscal impact of selling a partial stake in the SOEs is a reduction in net debt, but the Government’s operating balance will also be smaller, because foregone profits would reduce the surplus.” – Source


Yet, only a year ago, Bill English was forced to concede that state owned power companies were indeed, highly profitable. In fact, he was complaining bitterly about State-owned generators  “earning excessive returns”,

Generally the SOE model has been quite successful in that respect. But if you look at those returns being generated particularly out of the electricity market, the Government has taken the view that that market is not as competitive as it should be.” – Source

The State will be losing money on the deal; earning less dividends from the SOEs than the cost of borrowing. The sums simply don’t add up.

There also seems to be some confusion (no longer a surprise) as to what National intends to do with sale proceeds.

On the one hand Bill English sez he wants to reduce debt,

We are firmly focused on keeping the Government’s overall debt as low as possible and that is the most important consideration over the next few years.” – 16 February 2012

And a week later, English is spending it,

First, the Government gets to free up $5 billion to $7 billion…  to invest in other public assets like modern schools and hospitals…”  – 23 February 2012

I guess Mr English is hoping that no one is paying attention?

Further in his speech, English makes this rather candid admission,

The fact is, the Government is spending and borrowing more than it can afford into the future. So it makes sense to reorganise the Government’s assets and redeploy capital to priority areas without having to borrow more.”

And there we have it, folks: the clearest statement yet from our Minister of Finance that the partial-sale of our state assets has little to do with giving “mum and dad” investors a share in our power companies; or making them more efficient; or paying down any of our $18+ billion debt; or putting a new coat of paint on your local school – the government is desperate to raise cash because it  “is spending and borrowing more than it can afford “.

The tax cuts of 2009 and 2010 were never “fiscally neutral” as National kept insisting.

The “tax switch”  left a $1.4 billion “hole” in the government’s revenue and this is how they are attempting to “plug that hole”.

We have been conned.

The tax cuts will be funded by the sale of state assets that we, as citizens of this country, already own. And because the bulk of tax cuts benefitted the highest income earners/wealthy – who are also in a better position to acquire shares in Genesis, Meridian, Solid Energy, Might River Power,  and Air New Zealand – the transfer of wealth from low and middle income earners will be two-fold.

The legacy of John Key’s government will be to make the rich richer, and for the rest of us, we can look forward to,

  • more expensive power
  • losing half ownership of our taxpayer-created state assets
  • and the top 10% to increase their wealth even more

But, to be generous, I will leave the last word to the Hon. Bill English,

.

"Would you be willing to increase the mortgage on your house to go and borrow the money to buy shares on mighty river power?" Bill English, 16 February 2012

.

.

February 7 (Part Toru)

8 February 2012 6 comments

.

Continued from February 7 (Part Rua).

.

With the main Party speakers finished, others from the rally had an opportunity to make their views known. It was open, transparent and democratic (take note, National Government),

.

february 7 protest at planned SOE sales

.

Madd Hatter spoke of the danger to the environment caused by fracking – including contamination of underground water-tables which has caused extensive pollution in the United States,

.

february 7 protest against SOE privatisation

.

And the thing is? She’s 100% right. Fracking uses toxic chemicals which contaminates water tables – water which people use for drinking, cooking, feeding to farm stock, etc. Doesn’t it strike governments as somewhat daft that we’re poisoning ourselves?

Hell, why not just cut out the middle-men (oil drilling companies) and  issue every citizen with a litre of  disulphides, benzene, xylenes, methane,  and naphthalene to drink?

Meanwhile, the crowd listened, continuing to  hold signs that expressed our collective disgust at what this shabby government was intending to foist upon us,

.

february 7 protest against SOE privatisation

.

february 7 protest against SOE privatisation

.

And the media continued to record the event,

.

february 7 protest against SOE privatisation

.

february 7 protest against SOE privatisation

.

The protest continued,  making their point peacefully,

.

february 7 protest against SOE privatisation

.

february 7 protest against SOE privatisation

.

february 7 protest against SOE privatisation

.

february 7 protest against SOE privatisation

.

february 7 protest against SOE privatisation

.

A sentiment 99% of us would whole-heartedly agree with,

.

february 7 protest against SOE privatisation

.

Mana’s flag flew proudly in the chill breeze,

.

february 7 protest against SOE privatisation

.

february 7 protest against SOE privatisation

.

february 7 protest against SOE privatisation

.

february 7 protest against SOE privatisation

.

The red and black Tino Rangatiratanga flag flew proudly as well. This flag is quickly becoming the de facto syymbol for the poor, the dis-possesed, and the alienated in our society. It is the flag of resistance that corporate interests and their political cronies do not want to see,

.

february 7 protest against SOE privatisation

.

Dawn Shapira came from Huntly specifically to join the Rally. She rode all the way on the back of a motorbike – and says that she felt it. (Her return trip will be done in better comfort, in a bus.)  That’s dedication. That’s committment. And 80% of New Zealanders share her anger at John Key’s planned asset sales,

.

february 7 protest against SOE privatisation

(L) Dawn Shapira and (R) Tania Tewiata

.

Finally, the most important folk at this protest were not the politicians; nor the media; nor the organisers. Instead, the VIPs were the children – they are the ones who will inherit the society that we build (or sell off) for them. Will we leave them a mess, or success?

.

february 7 protest against SOE privatisation

.

***

.

Media reporting

  • Radio NZ reported 30 to 40 people in their audio report, but increasing the number to 60 on their website. This is a somewhat conservative estimate, and I put the number somewhere around 100 to 150.

Copyright (c)  Notice

All images are freely available to be used, with following provisos,

  1. Use must be for non-commercial purposes.
  2. Where purpose of  use is  commercial, a donation to Russell School Breakfast Club is requested.
  3. For non-commercial use, images may be used only in context, and not to denigrate individuals.
  4. Acknowledgement of source is requested.

.

.