Policy dialogue on corporate governance in china
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POLICY DIALOGUE ON CORPORATE GOVERNANCE IN CHINA. Presentation by Patricia Leahy, Director , UK National Audit Office February 2004. Privatisation, competition and regulation. Some potential privatisation benefits. Economy Improved budget and debt position More competitive economy

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POLICY DIALOGUE ON CORPORATE GOVERNANCE IN CHINA

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Policy dialogue on corporate governance in china

POLICY DIALOGUE ON CORPORATE GOVERNANCE IN CHINA

Presentation by Patricia Leahy, Director ,UK National Audit Office

February 2004

Privatisation, competition and regulation


Some potential privatisation benefits

Some potential privatisation benefits

Economy

  • Improved budget and debt position

  • More competitive economy

  • Boost to domestic capital markets

    The business

  • Improved efficiency

  • Increased flexibility to deal with change

  • Greater access to capital markets

    Other stakeholders

  • Lower prices

  • Improved quality of service


Achieving maximum benefits

Achieving maximum benefits

  • Corporatisation alone achieves benefits

  • Privatisation can double the benefits

  • Competition and liberalisation necessary to achieve maximum benefits

  • Regulation needed to allow fair distribution of benefits


Uk experience competition

UK experience – competition

  • BT – privatised intact, duopoly policy, now full competition

  • British Gas - privatised intact, now regulated Transco and commercial businesses

  • Electricity – restructured then privatised, initially limited competition, now fully competitive market


Electricity privatisation in england and wales

Electricity privatisation in England and Wales

Comparison of structure pre and post privatisation

Post privatisation

Pre privatisation

National

Power

PowerGen

Nuclear

Electric

CEGB

Pool run

by

National

Grid

12 Supply Boards

12 Regional Electricity Companies

Customers

Customers


Electricity privatisation in england and wales1

Electricity privatisation in England and Wales

Pros and Cons of initial privatisation structure

  • New competitive markets created in generation and supply

  • Provision at privatisation for supply competition to be extended gradually to all customers

  • Capacity payments meant considerable security of supply

  • Pool prices kept artificially high


Electricity privatisation in england and wales2

Electricity privatisation in England and Wales

Subsequent market changes

  • 1996 - privatisation of nuclear generation – British Energy

  • 1998-99- domestic customers able to choose their electricity supplier

    -National Power/PowerGen forced to sell off generation and allowed to buy Supply Companies

  • 2001- new market based arrangements for trading introduced

  • Future -single UK market to be achieved


Electricity privatisation in england and wales3

Electricity privatisation in England and Wales

Current structure of the market

  • More generators (some 40 major ones)

  • More suppliers (some 20 licensed)

  • Vertical and horizontal integration of many utility companies

  • Large transparent wholesale market


Electricity privatisation in england and wales4

Electricity privatisation in England and Wales

UK Electricity arrangements since 2001

Distribution Company

Transmission

Transmission Charges 25%

Transmission Charges 75%

Distribution Charge

Generation

(Contracted)

Contract Price

Customer

Supply Company

Tariff

Imbalance Payments

Generation

(Available)

Balancing Market

Un-contracted generation receives no revenue

Flow of Electricity

Flow of Payments


Economic regulation

Economic regulation

  • Only needed if effective competition lacking

  • Crucial that independent of Government

  • General principles

    - Transparency

    - Consistency

    - Predictability

    - Accountability

  • Regulatory risk


Privatisation competition regulation impact on stakeholders in the uk

Privatisation, competition, regulation – impact on stakeholders in the UK

  • Management

  • Shareholders

  • Customers

  • Employees


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