By Dan Satherley with NZN
Finance Minister Bill English is distancing the Government from reports Solid Energy paid out $11 million in bonuses just eight months ago.
The financially troubled coal mining company is $390 million in debt, and the Government hasn't ruled out a costly bailout to save it.
Talking to Firstline this morning, Mr English said if the company had a culture of high pay and bonuses, that was now "certainly gone".
"There will be questions here no doubt, in time, about the governance and the monitoring of this company," says Mr English.
"The payment of bonuses was all a matter of the board. The SEO model is one where the board makes the decisions and the politicians are at arm's length, and there's good reasons for that.
"All of this started coming to light because we were doing, back in 2011, investigations into this company because of the prospect of selling it to the public. And that brought to the surface, all of these issues, about the middle of 2011, so they'll all have to get sorted out.
"Whatever culture there was there about bonuses and high pay is certainly gone."
Ministers knew about bonuses – Labour
Labour's state owned enterprises spokesman, Clayton Cosgrove, says Government ministers knew in 2011 the company was in serious trouble, and the board would have reported the bonuses to them.
But State Owned Enterprises Minister Tony Ryall did nothing.
"The board had to inform him it was paying out the bonuses," Mr Cosgrove told NZ Newswire.
"Why on earth didn't Tony Ryall jump up and down and make it clear to the board that he totally disapproved of paying multi-million dollar bonuses to executives when the company was going down the toilet?"
Mr Cosgrove, an associate finance minister in the previous Labour government, says Mr Ryall had the power to stop the bonuses.
"If the board had told him it was going to do as it liked, he had the ability to say `no you won't - you're gone'," he said.
"Ministers can haul SOE boards in and they can sack the boards."
Mr Cosgrove says the Government totally failed to monitor Solid Energy and didn't know it was in trouble until it decided to partially privatise it.
That was when the Treasury started looking at it and discovered what was happening.
"It's nonsense to say they didn't know there were problems before that - the coal price shifted a few years ago, they should have called in the board and asked what its plans were."
Solid Energy failed to adjust – English
Mr English said Solid Energy's woes have two primary causes: it failed to predict – and adjust to – a drop in world coal prices, and spent too much investigating other sources of energy.
"Four or five years ago they set out on a big programme of expenditure on alternative energy, including researching into lignite down south to coal gasification and other research-based speculation, and that hasn't turned out the way they thought."
He believes a viable company can be formed from what remains of the company following the talks.
"There will be ongoing commercial discussions between the Treasury, the company and its banks to work out who's going to contribute to restructuring Solid Energy into a viable, ongoing business… We think that it's prudent to find those parts of the business that will viable at current coal prices, and see if we can restructure into an ongoing business."
Two years ago, Solid Energy valued itself at $3.5 billion. Mr English says an investigation into the company in preparation for a potential sale suggested it had been overvalued by $2 billion.