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Swedish Government Presentation

This presentation discusses the objective and vision of the Swedish government in managing its state portfolio, focusing on value creation and transparency. It highlights the government's role as an owner, the value of the portfolio, responsible ministries, and the tools for portfolio management. It also covers active ownership examples and the phase of e-transformation in enhancing operating performance and shareholder value.

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Swedish Government Presentation

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  1. Foster Suki: Sentence case is used throughout the presentation in the slide titles. This presentation doesn’t bear the UBSW logo so it’s ok. Swedish Government Presentation

  2. Objective and Vision Parliament objective • Professional management of state portfolio Government’s vision • Valuable corporations create valuable jobs 0080791AL

  3. Exec asked for increased spacing and moved down Implementation • Introducing private sector discipline • Shareholder value • Active ownership • Exit not an option • Commercial ownership tools • Transparency is the key to unlock “the black box” 0080791AL

  4. Changing the Government’s Role as Owner Earlier Now • Ownership responsibility spread between several ministries • Closely related to political issues • Conflict of interest at all levels • Ownership concentrated to Ministry • Independent units with only one focus • Separation of sector political aspects and ownership • Competence, focus and resources 0080791AL

  5. Value of Portfolio Estimated market value of managed portfolio (e billion)(1) 0080791l.xls*Value of portfolio?Chart 1 60 60 50 40 30 20 20 8 10 3.5 1.8 1.7 1.7 1.2 0.8 0.5 0 Invik Ratos Custos Latour Investor Öresund Kinnevik Lundbergs Government Industrivärden Note: 1 As of 30 June 2000 0080791AL

  6. The Swedish Government’s Portfolio Total value: e 60 billion 0080791l.xls*Swedish state's portfolio (2)?Chart 2 Others 23% Telia AB AssiDomän AB 31% 1% Vasakronan AB 2% LKAB 2% Akademiska Hus AB 3% Posten AB Vattenfall AB 3% 14% V&S Vin & Sprit AB Nordic Baltic 4% Svenska Spel AB Holding AB 10% 7% Note: 1 As of 4 September 2000 0080791AL

  7. The Larger Companies—Total Sales Total sales e37 billion 0080791l.xls*The larger companies estima (2)?Chart 1 0080791l.xls*The larger companies estima (2)?Chart 1 0080791AL

  8. Number of Employees in Sweden, 1999 0080791l.xls*Number of employees in Sweden?Chart 1 0080791l.xls*Number of employees in Sweden?Chart 1 Wholly or partly Government owned Source: Sweden’s largest companies 0080791AL

  9. Ministries Responsible for the Government Portfolio Government owned companies by responsible Ministry (by number of employees) 0080791l.xls*government owned companies?Chart 2 0080791l.xls*government owned companies?Chart 3 0080791l.xls*government owned companies?Chart 3 0080791AL

  10. Transparency Capital structure Board nomination e-enabling the Portfolio companies Creating value Survival Lower case e for e-transformation Transformation Phase 2 e-Transformation Phase 1 Financial transformation • Year 1998–2000 • Quarterly report the ultimate transparency • Year 2000–2002 • No internet strategy 0080791AL

  11. Enhance Operating Performance Maximise Shareholder Value Optimise Capital Structure Focus and Earn Growth Phase I: Financial Transformation 0080791AL

  12. Portfolio Management—Main Tools • Transparency • Consistent • Swift • Transparent • Capital structure • Optimise capital structure • Dividend policy • Profit sharing based on value based management system for all • Board nominations • Transparent and active • Based on company’s strategic situation 0080791AL

  13. Transparency • Consolidated balance sheet and income statement • Quarterly reporting • Value based management system foundation for profit sharing 0080791AL

  14. Capital Structure • Common understanding of cost of equity • Investments exceeding WACC • Focus on core business 0080791AL

  15. Board Nomination • Six to eight persons • Remuneration • Competitive • Cutting-edge corporate government guidelines • Clear responsibility and accountability • Committees • Evolution and feedback 0080791AL

  16. Active Ownership—Examples of Recent Events Trade sales Equity offerings • Sale of 25% stake in Celsius to Saab AB / Bae • Sale of SAQ Kontroll to Det Norske Veritas • Sale of 50% stake in VPC to a group of Swedish banks • Sale of 30% of Telia in e9.1 billion IPO • Sale of remaining stake in Pharmacia & Upjohn for e1.8 billion 0080791AL

  17. Active Ownership—Examples of Recent Events (continued) Portfolio company acquisitions / divestitures Portfolio company restructurings • Telia acquisition of Netcom asa • Vattenfall acquisitions in Germany, Poland, Finland • Nordic Baltic Holding acquisition of Unibank and bid for CBK • Sweden Post sale of Postgirot to a group of Swedish banks • Sveaskog—the Government gained control over 1/3 of the forestry assets of AssiDomän • SJ—focus on passenger traffic, divestment of hotels, ferries, restaurants etc. • AssiDomän—restructuring and focus on industrial portfolio 0080791AL

  18. Phase II: e-Transformation In the new economy, corporations will need to marry business and financial strategy with technology strategy Understand how technology changes business model Develop new technology strategies Define and Implement Technology Strategies Enhance Operating Performance Maximise Shareholder Value Optimise Capital Structure Focus and Earn Growth 0080791AL

  19. Potential Impact Varies by Industry Average Many buyers,many sellers eBay Schwab Transform the industry Industry fragmentation Average Cost reduction opportunity One buyer,one seller Boeing 40% Low spending Information intensity High spending 0080791AL

  20. Most Companies ... … are facing a significant discontinuity Average Many buyers,many sellers LerniaPosten SAS SJ Telia SOS Alarm Sv. Bilprovning Sv. Kraftnät Rymdaktiebolaget Vattenfall Industry fragmentation Average LKAB Luftfartsverket Samhall Sveaskog Sv. Skogsplantor One buyer,one seller Low spending Information intensity High spending 0080791AL

  21. On-line admin / HR Processes / Transactions • Pricing and inventory visible to suppliers • Electronic ordering and payment possible • Intranet for primary processes • Electronic buying /auctions • Value added services online • Seamless data flow /knowledge sharing • Electronic-onlysupply chain • Unique onlineoffering The Greatest Benefits ... are also the most difficult to achieve Internal processes Supplier /procurement management Customer /distribution management • Internal policies • Company information • Product information 0080791AL

  22. Savings Achieved 0080791l.xls*savings?Chart 1 0080791l.xls*savings?Chart 1 0080791AL

  23. Securities Insurance Banks Aerospace Financial Services Publishing Utilities Computers Telecom Industry fragmentation ConsumerProducts Chemicals Health Transportation Electronic Construction CapitalGoods Automotive Metal Fabrication Mining Oil and Gas Information intensity Determination of Threat / Opportunity 0080791AL

  24. Yvonne Tucker: No data was given for these charts, had to guess values 125 100 100 88 100 80 60 75 60 Stock price index (1-Jan-1990) = 100 50 40 31 25 20 14 8 0 0 1990 1994 1998 Cost ROI % Inventory position turns DELL CPQ Nasdaq Percentage of total Times per year Dell Outperforms the Competition 0080791l.xls*Dell outperforms?Chart 4 0080791l.xls*Dell outperforms?Chart 7 0080791AL

  25. The Panel Sees Far Less Impact Today ... … than others 0080791l.xls*The Panel?Chart 1 What is the impact of e-commerce on your business today? 0080791AL

  26. Anxiety About Competitors ... … is much higher elsewhere 0080791l.xls*Anxiety?Chart 1 How much do your competitors spend on e-business? 0080791AL

  27. There is a Clearly Recognised Gap … … especially in procurement 0080791l.xls*Responses?Chart 1 0080791AL

  28. Procurement is a Gap for all Companies 0080791l.xls*Procurement?Chart 2 What percentage of companies are e-enabled? 0080791AL

  29. Procurement Savings can be Substantial Efficiency improvement Procurement cost savings 0080791l.xls*Procurement savings?Chart 1 0080791l.xls*Procurement savings?Chart 2 0080791AL

  30. Government-owned Companies • 25% of domestic business community • Total sales e39 billion • Indirect material 60% of total costs • Cost reductions through e-procurement 5–10% Total savings e1.5–2.5 billion 0080791AL

  31. Transparency Shows the Real Value Government balance sheet 1999, e billion Companies valued at book value Companies valued at market value Sources: The Swedish National Financial Management Authority and Ministry of Industry With government owned companies valued at market price the government position is positive. 0080791AL

  32. Banker requested no decimal points (except (0.4)) Listed Companies—Relative Performance Share price performance 2000 to 30 August 2000 0080791l.xls*relative performance?Chart 1 0080791l.xls*relative performance?Chart 1 0080791l.xls*relative performance?Chart 1 0080791l.xls*relative performance?Chart 1 0080791l.xls*relative performance?Chart 1 Notes: Government shareholding 1 NBH 18.1% 2 SAS 21.4% 3 AssiDomän 35.3% 4 OM Gruppen AB 7.7% 5 Telia 70.6% since listing (13 June) 0080791AL

  33. 0080791l.xls*Value creation using EVA?Chart 1 Value creation can also be measured using… … the EVA methodology 1998 EVA (economic value added) (e million) 0080791l.xls*Value creation using EVA?Chart 1 0080791l.xls*Value creation using EVA?Chart 1 Total EVA: e267.9m Notes: 1 35.3% of AssiDomän 2 21.4% of SAS 0080791AL

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