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The State acting as an Owner : The French Reforms

The State acting as an Owner : The French Reforms. Jean-Louis GIRODOLLE Vice-Director French Government Shareholding Agency. Synopsis. Introduction. A dedicated entity : The French Government Shareholding Agency (« Agence des Participations de l’Etat »). 1.

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The State acting as an Owner : The French Reforms

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  1. The State acting as an Owner :The French Reforms Jean-Louis GIRODOLLE Vice-Director French Government Shareholding Agency

  2. Synopsis Introduction A dedicated entity : The French Government Shareholding Agency (« Agence des Participations de l’Etat ») 1 A clear owernship policy, aimed at modernizing and transforming SOEs 2

  3. Synopsis Introduction A dedicated entity : The French Government Shareholding Agency (« Agence des Participations de l’Etat ») 1 A clear owernship policy, aimed at modernizing and transforming SOEs 2

  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

  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

  6. Synopsis Introduction A dedicated entity : The French Government Shareholding Agency (« Agence des Participations de l’Etat ») 1 A clear owernship policy, aimed at modernizing and transforming SOEs 2

  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

  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

  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,…)

  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) • Consolidated financial statements established for the first time in 2004 (for fiscal year 2003)

  11. Synopsis Introduction A dedicated entity : The French Government Shareholding Agency (« Agence des Participations de l’Etat ») 1 A clear owernship policy, aimed at modernizing and transforming SOEs 2

  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

  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

  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

  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)

  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

  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) …….

  18. The State acting as an Owner :The French Reforms Jean-Louis GIRODOLLE Vice-Director French Government Shareholding Agency

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