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New Zealand Economic and Financial Overview 2016

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 within the frameworks in the SOE Act 1986 and the Companies Act 1993. Under the SOE Act, the boards of SOEs have complete autonomy on operational matters, such as how resources are used, pricing, and marketing of output. SOEs operate in competitive environments on the same basis as private sector companies. SOEs do not have responsibility for carrying out non-commercial activities. The Government must negotiate a contract with the SOE if it wishes the SOE to carry out non-commercial activities.

Each year, SOE boards are required to present to their 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.

Solid Energy New Zealand Limited (Solid Energy)

One of the SOEs, Solid Energy, has encountered financial difficulties in the past few years. It is currently subject to a Deed of Company Arrangement. A Deed of Company Arrangement is a binding arrangement between the company and its creditors governing how the company's affairs will be dealt with if the business is to continue in some form.

Crown Entities

Crown entities are organisations owned by the Crown that are not departments, Offices of Parliament or SOEs. Crown entities range from Crown research institutes to regulatory bodies, such as the Commerce Commission and the Financial Markets Authority.

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