Solid Energy confirms backdoor privatisation

Solid Energy’s assets can be privatised well below the supposed 51 per cent public ownership limit and the Government can’t argue otherwise,  Labour’s Economic Development spokesperson David Cunliffe and State Owned Enterprises Spokesperson Clayton Cosgrove said today.

The Commerce Select Committee’s report on the 2010/11 financial review of Solid Energy New Zealand Ltd has just been released.

During its annual financial review the Committee questioned Solid Energy on partial-privatisation plans. Solid Energy has major projects in the pipeline, such as Southland lignite extraction, with huge environmental implications.

“During this examination Solid Energy made clear it could get around the Government’s stated majority limit and control rule,” David Cunliffe said.

Chairman John Palmer told the committee that specific projects could be separated out for fully-private funding, and floated as a 100 per cent subsidiary, either on or off the balance sheet.

“It is as obvious as a coal brick in a snow field that Solid Energy understands there are ways around the 51 per cent limit,” David Cunliffe said.

Mr Palmer further advised the committee that future subsidiary sales were ‘decisions for the board’.

“Selling subsidiaries off the balance sheet effectively means the Crown could end up with less than 51 per cent of the initial asset,” Clayton Cosgrove said.

“That’s like selling a horse bit by bit and leaving nothing but the saddle.”

Solid Energy also told the committee that under partial privatisation it would no longer be bound by the ‘natural limitations of an SOE’.

Those limitations include Treaty rights, social obligations, the important no-surprises policy, requirements to consult on major transactions, and the minister’s reserve powers to direct the entity under s13 of the State Owned Enterprises Act 1986.

“This means these companies effectively won’t be SOEs– they’ll be just like any other company maximising their profit,” said Clayton Cosgrove.

“In the case of Solid Energy, this is hugely concerning because of the enormous environmental costs of its future projects including increased dirty coal mining,” said David Cunliffe, who chairs Labour’s clean tech cluster of portfolios.

“Thousands of New Zealanders marched on Parliament today to oppose National’s plan to sell our state asset.  All New Zealanders also need to stand up to stop this madness before it’s too late,” David Cunliffe said.

The 2010/11 financial review of Solid Energy New Zealand Limited (4 May 2012) is available here.