This chart clearly shows that Solid Energy has been a dog since 2001. I had a look through their annual report and calculated that they had ~40% payout ratio to the government. They paid out ~$220 million in dividends and had after tax earnings of ~$550 million.
But look at the trend in liability growth! Starting from 2008 they had high dividend payout goals of $100 million but never met them due to volatility in the coal price. Solid Energy did not hedge against coal price risk because they were prepared to take the market price.
The most disturbing thing I noticed while quickly compiling this chart was the rapid growth in employees paid over $100,000 – how many of them were paper pushers as opposed to mining engineers capable of delivering lower cost coal extraction and increases in efficiency?
At 1200 FTE, Billy Bunter our Finance Minister isn’t ruling out a bailout. That’s a lot of jobs! They’ve already shut down one mine and have been laying off staff at head office. CEO Don Elder, a Rhodes Scholar, hit the road last month from his $1.1 million dollar a year job.
Solid Energy should not be bailed out. It should fail. This National government has no brains or balls, they have been hoodwinked by the banksters with nonsensical stories of “systemic risk” and “too big to fail”.
The best thing for Solid Energy is to be placed into administration and miner Brent Francis drafted to recover as much value from Solid Energy’s mining assets as possible over a 5 year period. So what if the banks take a bath on their short term loans to a state owned enterprise.
The problem with state owned enterprises is that bankers will always lend money to dogs when they know that the likes of Bill English and Tony Ryall will hold scaredy-cat press conferences and pay them in full.
Taxpayers be damned – we must not let the banksters lose one dollar in writedowns on loans to state owned enterprises!
Oh and for the Green MPs saying this invalidates the need for asset sales, do not pass GO and do not collect your $200,000 in parliamentary salary, benefits and expenses.
Solid Energy would not have been able to borrow so much and get into this position if it was a private company.