The State acting as an Owner :
The French Reforms
Jean-Louis GIRODOLLE
Vice-Director
French Government Shareholding Agency
JLG - May 2005
Synopsis
Introduction
JLG - May 2005
1
A dedicated entity : The French Government
Shareholding Agency (« Agence des
Participations de l’Etat »)
2
A clear owernship policy, aimed at modernizing
and transforming SOEs
2
2
Synopsis
Introduction
JLG - May 2005
1
A dedicated entity : The French Government
Shareholding Agency (« Agence des
Participations de l’Etat »)
2
A clear owernship policy, aimed at modernizing
and transforming SOEs
3
3
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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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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Synopsis
Introduction
JLG - May 2005
1
A dedicated entity : The French Government
Shareholding Agency (« Agence des
Participations de l’Etat »)
2
A clear owernship policy, aimed at modernizing
and transforming SOEs
6
6
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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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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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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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)
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Synopsis
Introduction
JLG - May 2005
1
A dedicated entity : The French Government
Shareholding Agency (« Agence des
Participations de l’Etat »)
2
A clear owernship policy, aimed at modernizing
and transforming SOEs
11
11
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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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
JLG - May 2005
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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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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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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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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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The State acting as an Owner :
The French Reforms
Jean-Louis GIRODOLLE
Vice-Director
French Government Shareholding Agency
JLG - May 2005