Minister's get-tough letter puts heat on SOEs

Simon Power. Photo / Mark Mitchell

The Government is planning a shake-up of state-owned enterprises after criticising them for what it says is poor financial performance.

In a letter to all board chairpersons, SOE Minister Simon Power said the Government had "cause for concern" about "relatively poor and declining" results at 15 companies, and believed change was required.

Mr Power said profits for the second half of last year were down 50 per cent.

The letter "invites" the board leaders to a meeting with shareholding ministers - Mr Power and Finance Minister Bill English - on April 9.

It effectively puts board members on notice that their jobs are up for review, saying the first priority is increasing the commercial expertise of the boards - the reason ACC Minister Nick Smith gave for sacking his board chairman, Ross Wilson, this week.

New appointments are due in late April or early May. Mr Power said he would not comment on whether major changes would be made.

The ministers want to set clear financial targets, which boards will be held accountable for achieving.

They also want greater financial openness, and a continuous disclosure requirement similar to that covering stock exchange-listed companies could be applied to large SOEs.

The letter indicates the Government will not let SOEs ease the pain of the recession by not paying dividends.

It plans to discuss its dividend expectations with each SOE, and reserves the right to direct them to pay a dividend as a last resort.

"The relatively poor (and declining) financial performance of SOEs, coupled with the challenging economic conditions, has brought us to the conclusion that change in the SOE portfolio is urgent and essential," the letter says.

In the year to June 31 last year, the 18 SOEs, excluding Ontrack, made profits of $639 million.

Yesterday, taxpayer-owned power company Meridian Energy - usually a big dividend payer to the Government - reported a 15 per cent fall in profit.

Mr Power said he and Mr English were concerned about all SOEs, which range from property valuer Quotable Value to the power generators.

"I think shareholders representing $24 billion of taxpayers' money have an obligation to make sure entities are obtaining a decent financial return."

Wayne Brown, chairman of Transpower and the telecommunications and broadcasting SOE Kordia Group, said the letter from Mr Power was a perfectly appropriate pursuit of commercial objectives and was what he expected from an owner.

"It's not a problem for me."