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New Zealand Economic and Financial Overview 2015

Government Enterprises

State-Owned Enterprises and Crown Entities

Most of the Government's trading activities are carried out by SOEs, which are required to operate on the basis of principles and procedures contained in the State-Owned Enterprises Act 1986 and the Companies Act 1993. Under the SOE Act, the Boards of SOEs have complete autonomy on operational matters, such as to how resources are used, pricing and marketing of output. SOEs operate in competitive environments on the same basis as any other private sector entity. SOEs have no responsibility for carrying out non-commercial activities and the Government is required to negotiate an explicit contract if it wishes an SOE to carry out such activities.

Boards of directors govern SOEs. Each year, boards are required to present to the shareholding Ministers a statement of corporate intent and an outline of business objectives, defining the nature and scope of activities and performance targets. These are closely monitored and SOEs are expected to achieve performance targets and pay dividends on a basis comparable to their private sector competitors. The shareholding Ministers have the power to determine the levels of the dividends paid by the SOEs but have not needed to do so since the SOE Act came into effect in 1986.

The SOEs borrow in their own names and on their own credit, in almost all cases without a guarantee or other form of credit support from the Government. All SOEs have been informed that Government policy requires that they disclaim in loan documentation the existence of such guarantees or credit supports.

Government Share Offer Programme

Between 2011 and 2014, the Government undertook a programme of reducing the Crown's shareholding in selected SOEs, while maintaining a controlling interest of at least 51%. Initial Public Offerings (IPOs) of 49% of the shares in Mighty River Power Ltd, Meridian Energy Ltd and Genesis Energy Ltd were completed in 2013 and 2014. These companies are now dual listed on the New Zealand and Australian stock exchanges. The Crown's shareholding in Air New Zealand Ltd was also reduced from around 73% to around 53% through an off-market sell-down. The other company originally in this programme, Solid Energy Ltd, has encountered financial difficulties and is currently undertaking a restructuring plan in conjunction with its major lenders.

Proceeds from the programme have been allocated to the Future Investment Fund to finance new or improved infrastructure and to reduce the need to borrow from overseas lenders.

Crown Entities

Crown Entity is a collective term for bodies owned by the Crown that are not departments, Offices of Parliament or SOEs. Crown Entitites range from Crown Research Institutes to regulatory bodies, such as the Commerce Commission and the Securities Commission.

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