By JAMES GARDINER
The first state asset sale since the Labour-Alliance Government took office is under way, raising questions about its pledge to end privatisations.
Mapmaking state-owned enterprise Terralink is on the block, after advice from receivers PricewaterhouseCoopers that it cannot be successfully restructured.
The business will be advertised overseas in a process that is likely to take several months.
Shareholding ministers Michael Cullen (Finance) and Mark Burton (SOEs), while declining to comment on the decision, have refused to rule out further sales if other state-owned businesses get into trouble.
A spokeswoman for Dr Cullen said the decision to sell was made by the receivers and had not required further cabinet or ministerial approval.
A spokesman for Deputy Prime Minister Jim Anderton said the Alliance - which has been even more firmly opposed to asset sales than Labour - had no comment.
The ministers appointed Gary Traveller and colleague Richard Agnew receivers on January 15 after Terralink ran into a cash crisis when it failed to meet contractual obligations to computer giant EDS.
That work - said to be worth $12 million to $15 million - was a subcontract to a larger deal EDS had with another state entity, Land Information NZ (Linz), to work on a $150 million Landonline project converting the nation's official mapping and survey information from paper to computer.
Ironically, Terralink and Linz were once in the same Government department. When they separated in 1996, it was Terralink that was supposed to run on private-sector lines.
As a result of the receivership, 67 of Terralink's 280 staff have lost their jobs and more may follow. The decision by the receivers to sell the business may mean the contractual obligations to EDS are not fully honoured. Terralink has loans totalling $2.85 million from the Government.
National's finance spokesman, Bill English, said the decision to put Terralink on the market showed that the Government was in disarray over what to do with SOEs.
"They are selling up a mess at the same time they are setting up a loser in the form of the People's Bank and are cutting into TVNZ's profits to the tune of $100 million to deliver the programmes Broadcasting Minister Marian Hobbs wants us to watch."
The Government's ad hoc decision over Terralink would be of concern to the SOE managers and directors running $16 billion of other assets, said Mr English.
Mr Traveller said a sale became the only option because of uncertainty over the amount of money Terralink might be liable to pay EDS in contract penalty payments.
PricewaterhouseCoopers' own role in the debacle has also raised eyebrows. It was appointed receiver after it advised the Government not to loan Terralink more money. As well as handling the sale, it has made millions out of the Landonline project that sent Terralink broke.
It is also bidding for a second contract worth up to $30 million on the same project.
Herald investigations have found that Terralink was not the only company to make a costly botch of its involvement in the project. Pricewaterhouse and Linz shared the cost of a $10 million blowout on Pricewaterhouse's intitial contribution to the first stage of Landonline - an amount that would have wiped out a company like Terralink with assets of only about $3 million.
The overall project is running considerably late and higher charges imposed on the public for searching and registering land titles, transfers and survey plans with the department will stay in place much longer than originally intended.
Terralink is New Zealand's smallest state-owned enterprise and the first to be placed in receivership.
Neither EDS nor Mr Traveller has been prepared to say whether penalties imposed on EDS by Linz were passed on to Terralink.
Linz Landonline programme manager Terry Jackson said he did not know what was in the contract between EDS and Terralink, but he could not rule out the possibility of liquidated damages for late delivery.
"Prudent contracting, I presume, would say that it might be in there. It's a normal part of large contracts."
A spokesman for Mr Burton said penalties were built into Terralink's contract with EDS but he did not know whether those arose from penalties imposed by Linz.
Pricewaterhouse is due to receive the final payment this month from Linz for its stage one contract.
It is one of three companies bidding for the second phase of the project, worth a further $25 million to $30 million. That is subject to a cabinet decision in the next three months.
Mr Jackson said penalties were imposed on EDS but would not say how much money was involved. Nor would he say whether penalties had been applied to the Pricewaterhouse contract.
Mapping the catastrophe
The first phase of Landonline, estimated at $120 million, was divided into three contracts:
* PWC designed and built the computer software that allows Land Information New Zealand to receive and process title and survey transactions electronically from lawyers and surveyors.
The contract cost to the taxpayer was estimated at $20 million plus a $5 million share of the overrun.
* International computer giant EDS has a five-year contract estimated at $50 million to supply and manage computer facilities for Landonline.
* EDS also had a two-year contract, also estimated at $50 million, to convert title and survey information from paper to electronic format.
It was that conversion for which it subcontracted Terralink to carry out part of the work.
Troubled Terralink put up for sale
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