Norman Russel: Questions for Oral Answer — Questions to Ministers 
Text is incorporated into the Bound Volume 
Norman Russel: Questions for Oral Answer — Questions to Ministers 
[Sitting date: 26 February 2013. Volume:687;Page:8156. Text is incorporated into the Bound Volume.] 
5. 
Dr RUSSEL NORMAN (Co-Leader—Green) 
 to the  
Prime Minister 
: Does he stand by his statement reported in the  
Southland Times 
 in June 2011 that “At the moment companies like Solid Energy are growth companies and we want them to expand in areas like lignite conversion”? 
Rt Hon JOHN KEY (Prime Minister) 
: 
 Yes and I also said at the time: “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”. I note that my comments were made 4 months before an independent scoping study on Solid Energy was completed in October 2011. This raised questions about the company’s coal price assumptions and its strategic direction which led to escalating action by the Government and a change of business strategy by Solid Energy. 
Dr Russel Norman 
: Why then did he say yesterday “we didn’t agree with the massive expansion of the company.” when manifestly not only did he agree with the massive expansion he actually encouraged a $2 billion investment into lignite? 
Rt Hon JOHN KEY 
: See again this is where the members want to come into this House and misrepresent comments and make them out to be there and try to fool some people. Here is the answer. The exact question I was asked was in relation to the natural resources expansion of $1 billion and this Government did reject that for all of the right reasons. But in terms of the expansions that Solid Energy made under its own balance sheet that is right the Government allowed that to take place. I will make the point though that it is worth remembering this time line. In 2003 there was the acquisition by Solid Energy of Nature’s Flame wood pellet business. In 2004 Solid Energy began investigating its coal-seam gas. In 2005 it started the acquisition of land in Southland for lignite development. In 2006 it began the investigation of coal to liquid conversion and it started the development of underground coal gasification technology. In 2007 it started the research into lignite briquetting. In 2007 it expanded its renewable businesses into biodiesel. In 2006 Trevor Mallard took to Cabinet a paper that— 
Mr SPEAKER 
: That is plenty long enough. 
Dr Russel Norman 
: Why did he encourage Solid Energy’s expansion into the billion-dollar lignite project when he had never ever seen a business case for this investment? 
Rt Hon JOHN KEY 
: Well I think it is worth remembering that Treasury says a business case note is not required because the only specific proposal that was advanced by Solid Energy was the briquette plant and that was beneath the required threshold. Treasury sets a threshold of $125 million—or did; this Government actually reduced that to $50 million and the briquette plant was $20 million to $30 million. I happened to hold the view that there is the potential for lignite. There are many ways actually lignite conversion could take place and Solid Energy could have advanced those either because it made super-profits in certain areas or because it formed a partnership with other partners which was certainly one option it was considering. To sit there and say that it had to do it purely by itself on its own off its own debt is actually not an accurate statement. 
Louise Upston 
: Has the Prime Minister seen any statements offering advice on the role that the Government might play in encouraging State-owned enterprises like Solid Energy to get into new business areas? 
Rt Hon JOHN KEY 
: Yes I have. I have seen this statement: “While the government is now actively encouraging SOEs to consider this opportunity ministers don’t intend telling them how they might do this. It will be up to SOEs to come up with robust business plans that can preferably be funded off their own balance sheet and that meet the criteria.” Of course those profound words came from the Minister for State Owned Enterprises at the time the Hon Trevor Mallard—No. 21 these days. 
Mr SPEAKER 
: Supplementary question Dr Russel Norman. 
Dr Russel Norman 
: Thank you Mr Speaker. [ 
Interruption 
] 
Mr SPEAKER 
: Order! I have called Dr Russel Norman for a supplementary—[ 
Interruption 
] Order! Dr Russel Norman supplementary question. 
Dr Russel Norman 
: Is it not prudent that the owner of a company faced by plans by that company to spend up to $2 billion on new investments would ask that company for a business plan to justify those investments? 
Rt Hon JOHN KEY 
: If the company was coming to the Government with a proposal for a $2 billion investment of course it would require that because it would trigger the Government’s threshold of $50 million. But in fact that is not the case. What is true is that this company back in 2003 embarked on a diversification programme of a number of assets under a Labour Government. It carried on all the way through until we became the Government in 2008. In 2008-09 this company was producing record profits was being revalued up and the coal prices were high. The Government I think was entitled to accept the assurances made by the directors and by the management that they were going in the right direction. By 2011 this Government then said because of part of the mixed-ownership programme that it should undertake a scoping study. What that actually proved was that there were a number of issues and it comes to the very point of why New Zealanders rejected Labour’s opposition to the mixed-ownership model— 
Dr Russel Norman 
: I raise a point of order Mr Speaker. This has nothing to do with attacking the Labour Party. 
Mr SPEAKER 
: I think that the answer has been very sufficiently given and need not go on. 
Dr Russel Norman 
: Given the Prime Minister’s ringing endorsement of Solid Energy’s expansion plans into lignite which at the time were indicated of a multibillion-dollar order on the public record why did he endorse those plans publicly when he had never received a business plan from Solid Energy? 
Rt Hon JOHN KEY 
: It is quite self-explanatory if you look at the comments I have made. I have said to the House this afternoon I genuinely believed that there is the potential for a business opportunity for lignite conversion. The Greens do not agree with that because they are fundamentally opposed to lignite. But it is really important that the member does not try to misrepresent the situation. Solid Energy never came to the Government with a $2 billion proposal. Solid Energy did come to this Government and propose a vastly expanded Solid Energy into a natural resources company. This Government rejected that. This Government undertook a scoping study in 2011. This Government actually stood up to the issues that we saw in that scoping study— 
Mr SPEAKER 
: Order! That answer is quite sufficient. 
Dr Russel Norman 
: Is the Prime Minister asking Parliament to believe that in June 2011 when he came out and gave a ringing endorsement of the lignite plans by Solid Energy he was unaware that those plans involved a multibillion-dollar investment and he was very happy to give a ringing endorsement of those plans even though he had never seen a business plan? 
Rt Hon JOHN KEY 
: Firstly the member comes to the House and again makes assumptions that there is a ringing endorsement. That is not correct. No I have not seen a plan to the best of my memory from Solid Energy for a $2 billion expansion. What I have seen and what I was aware of is that the company was keen on expanding its lignite conversion. It had lignite opportunities in Southland. It had many ways it could potentially do that. It started that programme under Labour as I have been saying during the weekend. Clayton Cosgrove is saying it is nothing to do with Labour. They are up to their necks in it. [ 
Interruption 
] 
Mr SPEAKER 
: Order! Would the Hon Annette King allow the supplementary question please. 
Dr Russel Norman 
: How can the Prime Minister ask us to believe that he did not give a ringing endorsement for the lignite plan when his actual statement when he was in Southland was that “we want [Solid Energy] to expand in areas like lignite conversion.”? How could the management and board of Solid Energy take that as anything other than support from the Prime Minister of New Zealand? 
Rt Hon JOHN KEY 
: Because the fact that someone may think that there is a business proposal and an opportunity to expand in an area does not quantify that. I might happen—[ 
Interruption 
] Well I might happen to think that people should vote for National but it does not mean the numbers should be 50 percent or 65 percent; it just means I happen to think they would do that. I have never seen a $2 billion proposal. What I do know is that it started under Labour and this Government has been working hard to resolve those issues. 
Dr Russel Norman 
: I seek leave to table an Official Information Act response from Treasury of 13 February 2013 which says: “Solid Energy never submitted a business case to the Treasury on lignite developments.” 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is no objection. It can be tabled. 









Document by leave laid on the Table of the House.