1. State ownership in Slovenia and the strategy for management of SOEs European Semester Conference, 5 June 2015, Ljubljana Svetoslava Georgieva DG Economic and Financial Affairs European Commission

2. AGENDA The role of SOEs in the SI economy – why is the strategy important? Facts & Figures from the strategy Implications and potential traps Next steps 2

3. State involvement in SI is high compared to other member states and in sectors that are typically private owned SOEs are present across sectors Book value of equity in SOEs/SCEs (%of GDP)Share of SOEs/SCEs in sectoral value added (% of total sectoral value added), 2013 State ownership among the highest Source: OECD, 2015 Country report for Slovenia, European Commission Source: 2015 Country report for Slovenia, European Commission 3

4. SOEs underperformed compared to peers in SI and in other member states …and less profitable compared to peers.SOEs are more indebted… Debt leverage ratio of SOEs/SCEs and privately owned companies in SI (2013) Source: 2015 Country report for Slovenia, European Commission Profitability (ROCE) of SOEs/SCEs and foreign owned companies relative to domestic privately owned companies (2004-2013) Source: 2015 Country report for Slovenia, European Commission 4

5. Risks linked to the complex network of state ownership could be reduced by divesting non-core assets Source: 2013 Country Focus, Slovenia: State-owned and State-controlled Enterprises in Slovenia, European Commission 5

6. Indirect state ownership and cross-links between SOEs are not considered in the strategy 15% of state-owned and state-controlled companies reviewed (75% in terms of book value) REVIEWED 15% of companies NOT REVIEWED 85% of companies Source: European Commission, SI Chamber of Commerce 6

7. The majority of the assets reviewed are classified as strategic or important, some sectors remain out of scope Book value of equity (in EUR 000) by sector Major sectors classified as strategic or importantSome sectors were not fully reviewed Source: European Commission 7

8. New commitments account for 1.5% of the total state assets reviewed Classification of state assets Book value of equity (% of total included in strategy) 8 New portfolio assets by sector Book value of equity (in EUR 000)

9. The classification of assets is largely influenced by the choice of criteria and thresholds Highest weight of criteria 11 and 14 Classification sensitive to selection of criteria and thresholds The ranking of companies does not change in the different scenarios Source: European Commission Book value of equity (% of total) Scenario analysis of classification methodology Preliminary conclusions Scenario 1: Excluding criteria 11 & 14 Scenario 2: Excluding reference to strategic documents which are still work in progress 9

10. Certain aspects of the strategy may pose some challenges and important implications for the economy… Potential trapsPossible implications Only part of the state portfolio reviewed Blocking minority in companies No strategic investors in important assets Keeping value chains under state control Social conditions for asset sale Updates should be envisaged (OECD guidelines) Links between SOEs and the financial sector remain Reduced pool of potential investors Negative impact on price Delays in the process Harming competitiveness Not compatible with EU state aid rules Not taking into account future developments 10

11. …linked to risks of incurring further costs to the state and slowing down private investment recovery Private investment dropped below all benchmarks Source: European Commission 13bn of direct and indirect costs to SI Cumulative 2007-2014 EUR bn Total fiscal and economic implications13.4 as % of GDP36% with direct fiscal impact (debt, deficit or both)8.3 as % of GDP22% with wider economic impact (foregone profits)5.1 as % of GDP14% Source: 2015 Country Report for Slovenia European Commission, SI Chamber of Commerce 11

12. Next steps 12 June 2015 Sept/ Oct 2015 Nov/ Dec 2015 CSR on SOEs management adopted Monitoring mission Report on progress

13. Hvala!