The SOE challenge

The Herald reports:

The chairman of Solid Energy says at least part of the state-owned coal miner should be sold off to raise billions of dollars needed for new projects, including more mines.

John Palmer – who is also chairman of partially privatised Air NZ – said Solid Energy needed up to $10 billion in additional capital over the next five years, and should be partially privatised if National wins a second term in office.

That was the best way to provide the money, given the state of the Crown accounts, he told the Herald yesterday.

“I don’t think it makes a lot sense for the Crown to put several billion dollars into a company like Solid Energy where it can retain all of its existing ownership and leverage and external capital can provide the opportunities for growth. It’s very much a win-win situation.”

Solid Energy is not a monopoly like Transpower or NZ Post. It is not a utility- it is a competitive business undergoing commercial activities that are not guaranteed to be profitable.

If Solid Energy can not access extra capital, it will not be able to reach its potential, which may mean less tax revenue and less jobs in NZ.

But do we want the NZ taxpayer borrowing money to invest in Solid Energy, and assuming all the risk? I think Palmer makes a good case for that risk to be shared around.