6 September 2011 Dutch SOEs Policy and portfolio ICPE Meeting -State Ownership Authorities

6 September 2011 Dutch SOE's2 Table of contents 1. Dutch SOE Policy retrospective 2. Current SOE Policy 3. Four “Pillars” of SOE Policy 4. Portfolio 5. SOE department

6 September 2011 Dutch SOE's3 1. Dutch SOE Policy retrospective: “State-Ownership” Prior to the early 80s, public services were mainly offered by governments Due to an enormous budget deficit, the central government faced serious restructuring challenges In addition, since the late seventies the market-oriented school gained influence: this spurred an era of liberalisation and privatisation (Thatcher, Reagan) The Dutch Minister of Finance at that time screened the public sector for services suitable for privatisation Approximately 40 government organisations were identified as privatisation objects

6 September 2011 Dutch SOE's4 “Privatisation, unless” During the 90s, the emphasis was predominantly on privatisation, also beyond the aforementioned approximately 40 public services This emphasis was translated in the policy “privatisation, unless”; Underlying was the belief that public services could be managed more efficiently by market parties, constrained by law and regulation Targeted government organisations were converted into businesses, restructered and subsequently privatised after some years As a result, over 50 companies were privatised throughout the period 1980 – 2005; yielding a total revenue of approximately € 14 bln.

6 September 2011 Dutch SOE's5 A glance of privatised companies

6 September 2011 Dutch SOE's6 2. Current SOE Policy (I) “Public unless” In 2007 the policy of “privatise, unless” changed to “public, unless” due to: 1. Increasing concerns in society about market-solutions 2. The portfolio consisted of more complex SOE’s; low hanging fruit was reaped Consequently, the government’s emphasis was no longer on privatising, but on establishing long term relationships with SOE’s

6 September 2011 Dutch SOE's7 (II) Public unless; “active shareholdership” The Ministry of Finance has increasingly become a active shareholder thereby predominantly focusing it´s SOE ownership on 4 core “pillars”: Corporate strategy; Investment policy; Capital structure; Executive’s remuneration policy; The Minister identified the public interests associated with every single SOE The aforementioned pillars should be aligned with the identified public interests

6 September 2011 Dutch SOE's8 (III) Latest developments, “partial privatization” Initially privatisation used to be motivated by large budget deficits & the market-oriented school of thought However, due to the large expected investment needs in the energy sector, privatization is being reconsidered currently (GasUnie & TenneT; energy transportation) In addition the government is reassessing the necessity of state shareholdership in serveral participations (e.g. Holland Casino & de Staatsloterij; gambling)

6 September 2011 Dutch SOE's9 3. Four Pillars of SOE Policy (I) Pillar Strategy Strategy of the SOE is the cornerstone of the SOE policy It needs to be consistent with the public interest of the SOE Does the strategy need to be limited to the public interest? No, because: Advantages of synergy; KNM (Metal processing) BNG (Financial Service) Maintaining strategic position; Schiphol (Infrastructure) TenneT (Energy) Enterprises in transition; KPN (Telecom) TNT (Post and Express)

6 September 2011 Dutch SOE's10 (II) Pillar Investment Policy The articles of association determine which investments need shareholder approval To asses the investments the Ministry developed a standard framework Most important criteria: Strategic rationale in line with public interest Process Business case/valuation Impact on capital structure and dividend Governance, implementation and exit possibilities

6 September 2011 Dutch SOE's11 (III) Pillar Capital Structure Equity is retained for future investments and as a buffer for volatility in profits. The buffer should however not be larger than necessary; if there is excess equity in a participation, this should be distributed to the shareholders There is a limit to the maximum potential distribution; a minimum credit rating target set by the Ministry should be maintained (financial institutions AAA, non-financials A)

6 September 2011 Dutch SOE's12 (IV) Pillar executive’s remuneration policy Supervisory board proposes a remuneration policy, the shareholder has a right of approval of remuneration policy Goal is to have a remuneration policy that is (more) suitable to the public context in which SOE operate (reduction of maximum pay) A framework was developed to asses proposals Parliament has approved the framework, but remains critical if enough reduction has been achieved

6 September 2011 Dutch SOE's13 4. Portfolio Currently 37 SOEs in portfolio

6 September 2011 Dutch SOE's14 Sectoral composition of portfolio

6 September 2011 Dutch SOE's15 Assets portfolio (2009)

6 September 2011 Dutch SOE's16 5. SOE departement Total employees: 14 Teams per SOE Specific “knowledge teams”, examples:  Remuneration  CSR (latest pillar)  Valuation