Solid Energy is at a crisis point, with a Government bailout almost inevitable, mine closures possible and further job cuts likely in another restructure to try to salvage the debt-ridden coal mining company.
The state-owned enterprise yesterday revealed it was in talks with its banks and the Government over its future after its debt rose to $389 million and a further “significant loss” would be in its half-year result.
The company posted a $40 million loss last year…
Solid Energy’s financial condition has deteriorated over the past two years, a slump it attributed to a 40 per cent fall in coal prices and low returns on investment attempts in areas such as biofuels.
So state-owned Solid Energy geared itself for debt which it used to pay massive salaries to its executives and boost dividends to the state. Now it’s collapsed and the taxpayer will bail it out.
Good old long-suffering taxpayer.
I guess that’s the advantage of having your companies state-owned: they bring the benefit of government monopolies and freedom from commercial imperatives to bear on steadily and progressively diminishing the value of the assets they oversee—transforming their capital over time from assets into dead losses. And all the losses they make every year are socialised.
Good old long-suffering taxpayer, who loses twice over—once in the blundering mismanagement of assets ever-dwindling in value; twice in the losses for which he is always and every time on the hook.
Meanwhile, dullards scream for more companies like this, the lietmotif of all such entities being that they produce fewer resources than they consume.
And this is supposed to be an era that values “sustainability.”
[Hat tip, sort of, to Dim Post’s post]
11 comments:
No, the advantages of having state owned companies are the following (I agree that few of them apply to Solid Energy)
* Managing significant externalities that are not easily managed by other means (e.g. the environmental effects of large power generation; the use of fixed natural resources such as land and water on a large scale).
* Controlling government risk. This is an argument for the state being involved in industries for which it is legally or politically the guarantor of last resort (e.g. major banks) – trying to neutralise the usual “privatise the profits, nationalise the losses” approach.
* Managing situations where commercial pressures are weak, e.g., large monopolies or oligopolies (e.g. the national electricity grid);
* Financial factors: where the government cost of long-term borrowing is much lower than the cost to the private sector.
* Ensuring universal access (e.g. roads, hospitals).
* Improving quality for consumers by controlling a major player in an otherwise competitive private sector – especially where set-up costs may be high and a cluster of incumbents dominant; this alternative to regulatory control led to the creation of KiwiBank, and years before that, State Insurance.
PC:"transforming their capital over time from assets into dead losses"
Yup. If you want a poor, stagnant country just carry on like this.
Gawd Rimu. Those things read more as a manifesto of hopes & wishes rather than how things really work. If you take the opposite side of each you will be enlightened as to what really happens & has happened.
The whole problem arises from having KPI's that tick the bonus boxes while ignoring the real money. Big private business often does it as well because the same type of self serving idiot is in charge. You can only pretend to fool basic book keeping for so long.
I think the west is going to have to take a huge hit to get back to a base we can build from. It will be very ugly for a lot of people.
3:16
Solid Energy hasn't been well managed. But to be balanced you would have to consider the relative success of many state-owned Scandinavian companies.
I think the west is going to have to take a huge hit to get back to a base we can build from. It will be very ugly for a lot of people
What is going on is nothing less than the final demise of communism - Russia and China having converted themselves to capitalism twenty years ago, communism only remains in the "Welfare West" - Europe; USA, and the white commonwealth.
Communist economies competing against Asia and Africa simply doesn't work. There's nothing that NZ can do better than China or India - and before you start thinking about "high value knowledge intensive exports" the Khan Academy has done more in a couple of years than NZ's tertiary system has managed in a century.
So of course NZ will crash, and of course it will be ugly! Good thing too: resisting capitalism is the economic equivalent of trying to navigate a 747 while believing the earth is flat!
NZ had only two choices: to manage a transition to a self sufficient economy - or to continue on with our welfare spending until it all ends in a nasty brutal crash. Our closet communist state-house-kid PM has clearly opted for the crash, just as his openly communist predecessors did before him.
Muslims appear to be taking over this blog
Unrelated question : Did Nik Haden get prosecuted for not filling out a census form in 2007?
Thats the Libertarianz Nik Haden, the one who wrote a budget piece that the gove didn't appreciate.
I know its off topic but the topic seems to have derailed way back so I think if this is "Not PC" its a go.
Please get Nik to answer the question its important.
And on Topic: a global corporate govt in the shape of the NWO will be a nightmare! A global monopoly of 12 families owning all energy, food etc everything. Advantages =NONE.
So this is not clear if Nik Haden got fined(prosecuted) for burning his Census form why is Richard recommending we all burn our Census forms?
Why did Nik Haden not contest the Census on "no contract" or other problems with the Act instead of the fact the Census now is a human rights violation?
'Our closet communist state-house-kid PM has clearly opted for the crash'
Of course he did. Beacuase that is what is going to make him more wealth. Why should he give two poohs about the rest of you?
AMit
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