The Govt faces another difficult choice in allocating scarce capital. Should it back businesses which are being overtaken by new technologies (such as NZ Post) or should it back enterprises which are pioneering new technologies? Finance Minister Bill English has said the Govt is working hard to understand the capital demands of its operations and to allocate capital where it can best be used. This is why there’s a need to “kick the tyres” on capital-raising measures or partial floats for some of the commercial businesses the Crown owns. Some authorities believe Solid Energy is the state-owned company which, properly capitalised, could become the fastest-growing enterprise on the Crown’s balance sheet.

Solid Energy which last year made a profit of $110m told Parliament’s Commerce Committee the 15bn tonnes of lignite deposits in Southland and Otago could make NZ self-sufficient in diesel and urea, continue the supply of these for over 500 years, and create exports. The SOE is working with a Melbourne-based company to build a pilot plant to process lignite in NZ, which would be capable of expansion to a 1m tonnes-a-year facility. The Melbourne firm already has an operating reactor converting one tonne of Gippsland Basin lignite into about 2 barrels of oil and 0.6 tonnes of high ranked coal. Solid Energy is assessing the viability of a lignite-to-urea fertiliser plant in Southland with Ravensdown. NZ currently imports up to 700,000 tonnes of urea fertiliser a year.

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