Hughes Gareth: Questions for Oral Answer — Questions to Ministers 
Text is incorporated into the Bound Volume 
Hughes Gareth: Questions for Oral Answer — Questions to Ministers 
[Sitting date: 14 March 2013. Volume:688;Page:8551. Text is incorporated into the Bound Volume.] 
3. 
GARETH HUGHES (Green) 
 to the  
Minister of Finance 
: Why did the Government approve increased debt for Solid Energy on 28 May 2009 despite the latest company report at the time stating that coal prices were falling and “we expect this downward trend to continue through 2009 and into 2010? 
Hon TONY RYALL (Minister for State Owned Enterprises) 
on behalf of the Minister of Finance: The Government did not approve the debt at Solid Energy. It is the responsibility of the board to make investment decisions on the structure of the balance sheet. I would say to the member that in fact coal prices bounced back significantly in the second half of 2009 and peaked in 2011 which I think demonstrates the level of volatility in this area. As Mr Palmer said the board is in the best place to understand the earnings volatility and balance sheet risks of the company. 
Gareth Hughes 
: Does he dispute then the testimony of John Palmer this afternoon and why did the Government ignore the clear opposition by the Solid Energy board to increasing the debt loading that has seen its debt just balloon? 
Hon TONY RYALL 
: I cannot comment on the first part of the member’s question but I can say quite clearly that it is the responsibility of the board to manage the balance between debt dividends and capital investment. The problem here with Solid Energy is that a number of investments were made that have not delivered the returns that might have been expected of those. Coupled with the significant collapse in world coal prices that is why the company finds itself in this position. 
Gareth Hughes 
: Is John Palmer then correct in saying that the National Government encouraged Solid Energy to take on debt to adopt an expansionary strategy and if so was it smart to take $164 million in dividends out of the State-owned enterprise in the same period when debt ballooned from $13 million to $313 million over the same period? 
Hon TONY RYALL 
: The level of dividends that were paid by Solid Energy is extremely moderate in comparison with the cash flows that that company was generating during a period of huge international coal prices. Everybody in this House knew about what was happening in Australia—the huge boom in coal prices profits and investment happening over there. The Government did ask for increased dividends but the dividends that it received would not be at all unusual compared with the 65 percent of net profit for dividends that Mr Mallard indicated in 2008 was appropriate for a company like Solid Energy. 
Gareth Hughes 
: Has the Minister subsequently instructed or requested Solid Energy to see a reduction in debt or a reduction in debt expansion? 
Hon TONY RYALL 
: The Government is working very closely with the banks and the board of Solid Energy in respect of the future of the company. The company has been severely impacted by the significant collapse in coal prices—40 percent during 2012. Its export volumes fell 27 percent in one quarter alone. This is the reason why Dr Elder I think it was described the company as facing a “perfect storm”. 
Gareth Hughes 
: I raise a point of order Mr Speaker. My question was not about Solid Energy or the banks. The question was what the Minister is doing about debt— 
Mr SPEAKER 
: Order! And I have listened very carefully to the question and I am quite happy that the question was adequately addressed with that answer. 
Gareth Hughes 
: Was he ever advised that the high New Zealand dollar was to quote John Palmer this afternoon “A major factor in Solid Energy’s demise.” and is this yet another victim of this Government’s monetary policy? 
Hon TONY RYALL 
: The world coal prices and the returns to Solid Energy are impacted by a whole lot of things but the most significant driver was the collapse in world coal prices. There was actually a 27 percent drop in exports in one quarter alone. That is the reason why this Government is now working closely with the banks in respect of how it gets this company moving into the future. I would say that that member opposite has opposed everything that Solid Energy has done to try to get its books back in order. 
Gareth Hughes 
: I raise a point of order Mr Speaker. I do not think the Minister addressed the question at all. 
Mr SPEAKER 
: Yes he did. If you listened to the answer he clearly did address it. He said it was one of the factors and then went on to elaborate with others. 
Gareth Hughes 
: Why does the Minister continue to blame biofuels for Solid Energy’s demise when it was his Government that removed the biofuels obligation it was his Government that reduced the financial support and it was his Government that has seen the carbon price drop from around $20 a tonne to about $1 a tonne? 
Hon TONY RYALL 
: I simply do not believe that a Government commitment to remove the biodiesels obligation is responsible for the collapse of Solid Energy. I would ask the member to look at what is happening in Australia where I think Mr Tinkler is on the verge of being arrested because he will not front up to the collapse of his coal company. A number of American companies’ values have collapsed by almost 70 percent. This is an international phenomenon that has affected coal companies throughout the world. That is the reason why Dr Elder today described the matching of the collapsing coal prices with the investment decisions that had been made as a “perfect storm”. This Government is responding to that by working closely with the banks and the board of Solid Energy to see what we can do because we have got so many people who rely on this company. 
Gareth Hughes 
: Does the Minister think that the perfect storm he is referring to is in fact National Party policy and National Party decisions and that that is the reason we are seeing Solid Energy in such strife? 
Hon TONY RYALL 
: I am sure the Minister of Finance is very impressed to know that his policies have an impact on the coal companies in the United States coal companies in Canada coal companies in China and coal companies in Australia that have all been dramatically affected by the collapse in world coal prices. The problems with Solid Energy come from the investment decisions not generating the returns that were expected together with the collapse of world coal prices during 2012. This Government is responding to that by working with the banks and the board to do what we can to salvage as much of this company as we can.