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JLG - May 2005 The State acting as an Owner : The French Reforms Jean-Louis GIRODOLLE Vice-Director French Government Shareholding Agency
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2 JLG - May 2005 2 Synopsis Introduction A dedicated entity : The French Government Shareholding Agency (« Agence des Participations de l’Etat ») A clear owernship policy, aimed at modernizing and transforming SOEs 1 2
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3 JLG - May 2005 3 Synopsis Introduction A dedicated entity : The French Government Shareholding Agency (« Agence des Participations de l’Etat ») A clear owernship policy, aimed at modernizing and transforming SOEs 1 2
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4 JLG - May 2005 4 Introduction (1/2): The French State : a significant and active shareholder A sizeable portfolio 50 significant groups or entities controlled Market value of listed companies portfolio €45bn ; 10 stakes have a value above €1 bn Total consolidated assets of companies controlled by the APE amount to €530bn, to be compared with €950bn total assets of the 33 industrial companies of the CAC 40
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5 JLG - May 2005 5 Introduction (2/2): The French State : a significant and active shareholder A leading actor on the European privatization market Disposals by the State : IPOs, secondary offerings, trade sales,… Since 1993, over €60bn, over 5% of GDP 23% of total State disposals in Europe Corporate transactions : rights issues, over 500 non core asset disposals
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6 JLG - May 2005 6 Synopsis Introduction A dedicated entity : The French Government Shareholding Agency (« Agence des Participations de l’Etat ») A clear owernship policy, aimed at modernizing and transforming SOEs 1 2
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7 JLG - May 2005 7 A dedicated Agency (1/4) Background : Fast changing context for SOEs : globalization, deregulation Major corporate governance failures : Credit Lyonnais, France Tel, EDF Process : 2002 : report by a group of businessmen, Governement decision to establish a dedicated Agency within the Treasury 2003 : implementation : Start-up approach in building the project
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8 JLG - May 2005 8 A dedicated Agency (2/4) A mix between government culture and the model of private holdings : Task force under the authority of the Minister for Economy & Finance Self-management budget (€9m) within the Treasury framework Increased human resources Mixed culture of skills
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9 JLG - May 2005 9 A dedicated Agency (3/4) A clear leadership within the State : Agency established as sole shareholder of French major SOEs : Governance : coordinates SOE board members activity, votes at general shareholders meetings,… Financials : audit committee, dividend policy,… Strategic operations : M&A, restructuring, privatizations No interference with other State functions : Regulators The State as a client (procurements, concessions,…)
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10 JLG - May 2005 10 A dedicated Agency (4/4) Increased transparency and public information: Annual report to public and Parliament Informations about Agency activity available on Ministry of Finance website (www.minefi.gouv.fr) and soon on a dedicated website (www.ape.minefi.gouv.fr)www.minefi.gouv.frwww.ape.minefi.gouv.fr Consolidated financial statements established for the first time in 2004 (for fiscal year 2003)
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11 JLG - May 2005 11 Synopsis Introduction A dedicated entity : The French Government Shareholding Agency (« Agence des Participations de l’Etat ») A clear owernship policy, aimed at modernizing and transforming SOEs 1 2
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12 JLG - May 2005 12 A clear ownership policy (1/5) Implementation of best corporate government practices in SOEs (“code of good practices” between Agency and SOEs): Boards fully enpowered Committees Independant auditors Professionalized State representatives
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13 JLG - May 2005 13 A clear ownership policy (2/5) Promotion of transparency in SOEs : Clear relations with the State, based on contracts Greater financial transparency : international accounting standards (IFRS) financial communication
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14 JLG - May 2005 14 A clear ownership policy (3/5) Active role of Agency as a shareholder : Enhanced relations with top management Annual strategic dialogue Regular reporting Agency systematically represented in audit and strategic/investment committees Close scrutiny on major investment/disposal projects
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15 JLG - May 2005 15 A clear ownership policy (4/5) Promotion of a modernized corporate culture and framework of SOEs : Promotion of high quality management, shareholder value orientation and international culture in line with the international practice = a major change with the traditional approach of some SOEs with an engineer culture more oriented towards technological perfection than financial performance Change of the by-laws of some SOEs (from State entities to companies : DCN/military shipyards, EDF, GDF, ADP, Postal Bank)
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16 JLG - May 2005 16 A clear ownership policy (5/5) Increasing and capturing shareholder’s value : Focus on operational performance and efficiency Industrial partnerships in order to create value : Air France-KLM, Renault-Nissan, integration of Wanadoo and Orange into France Telecom, Sagem-Snecma,… Privatization considered not only as a cash generating process but also as an opportunity for the development of solid companies State financial support (recaps) when rational, under the control of the European Commission
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17 JLG - May 2005 17 Conclusion : Agenda 2005-2006 Utilities : EDF (electricity), GDF (gas) Paris airports : Aéroports de Paris (ADP) Future Postal Bank Railways : SNCF (freight activity restructuring, non core assets disposals) …….
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JLG - May 2005 The State acting as an Owner : The French Reforms Jean-Louis GIRODOLLE Vice-Director French Government Shareholding Agency
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