Receivers called in for SOE

By Phil Boeyen, ShareChat Business News Editor

Monday 15th January 2001

A state-owned enterprise dealing in mapping and geographical information services has been put into receivership after suffering from escalating costs and an inability to meet contract deadlines.

The SOE, Terralink, was established in 1996 and was formerly part of the Department of Lands and Survey. The Government says putting the business into receivership has been made at the request of the Terralink board.

"The board has notified us that the company has insufficient cash reserves to pay its debts as they fall due and that it would therefore be imprudent to continue to operate," says Finance Minister Michael Cullen.

"Terralink's current problems arise from a contract entered into in June 1999 with EDS as part of the Landonline initiative. The contract underestimated the costs and timeframes associated with this type of project and is now causing Terralink significant losses and risks."

SOE Minister Mark Burton says the Crown, on behalf of the taxpayer, had to take a commercially prudent approach to its investment in SOEs.

"Crown ownership does not mean that the Crown steps in to provide financial support to SOEs when that is clearly not in the interests of the shareholder. Both the board and the Crown therefore sought independent advice from PricewaterhouseCoopers on the best way forward."

"Their expert advice was that, aside from the EDS contract, Terralink is a profitable and valuable business. However, due to the continuing risks associated with the contract, the Crown should not advance further funds to Terralink. The Board therefore requested that receivers be appointed," Mr Burton says.

Terralink employs around 200 fulltime staff with another 80 staff contracted to work on the EDS project. The Ministers claim staff reductions will be kept to a minimum.

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