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Dutch SOEs Policy and portfolio

Dutch SOEs Policy and portfolio. ICPE Meeting -State Ownership Authorities. Table of contents. Dutch SOE Policy retrospective 2. Current SOE Policy 3. Four “Pillars” of SOE Policy 4. Portfolio 5. SOE department. 1. Dutch SOE Policy retrospective: “State-Ownership”.

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Dutch SOEs Policy and portfolio

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  1. Dutch SOEsPolicy and portfolio ICPE Meeting -State Ownership Authorities

  2. Table of contents Dutch SOE Policy retrospective 2. Current SOE Policy 3. Four “Pillars” of SOE Policy 4. Portfolio 5. SOE department Dutch SOE's

  3. 1. Dutch SOE Policy retrospective: “State-Ownership” Prior to the early 80s, public services weremainlyofferedby governments Due to anenormous budget deficit, the centralgovernmentfaced seriousrestructuringchallenges In addition, since the late seventies the market-oriented school gainedinfluence: thisspurredan era of liberalisation and privatisation (Thatcher, Reagan) The Dutch Minister of Finance at that time screened the public sector for services suitableforprivatisation Approximately 40 governmentorganisationswereidentified as privatisationobjects Dutch SOE's

  4. “Privatisation, unless” During the 90s, the emphasis was predominantlyonprivatisation, alsobeyond the aforementionedapproximately 40 public services Thisemphasis was translated in the policy“privatisation, unless”; Underlying was the belief that public services couldbemanaged more efficiently bymarketparties, constrainedbylaw and regulation Targetedgovernmentorganisationswereconvertedintobusinesses, restructered and subsequentlyprivatisedaftersomeyears As a result, over 50 companieswereprivatisedthroughout the period 1980 – 2005; yielding a totalrevenue of approximately € 14 bln. Dutch SOE's

  5. A glance of privatised companies Dutch SOE's

  6. 2. Current SOE Policy (I)“Public unless” In 2007 the policy of “privatise, unless” changed to “public, unless” due to: 1. Increasing concerns in society aboutmarket-solutions 2. The portfolio consisted of more complex SOE’s; low hanging fruit was reaped Consequently, the government’semphasis was nolongeronprivatising, butonestablishing long term relationshipswithSOE’s Dutch SOE's

  7. (II) Public unless; “active shareholdership” The Ministry of Finance has increasingly become a active shareholder thereby predominantly focusing it´s SOE ownership on 4 core “pillars”: Corporate strategy; Investment policy; Capital structure; Executive’s remuneration policy; The Minister identified the public interests associated with every single SOE The aforementioned pillars should be aligned with the identified public interests Dutch SOE's

  8. (III) Latest developments, “partial privatization” Initiallyprivatisationused to bemotivatedbylarge budget deficits & the market-oriented school of thought However, due to the largeexpectedinvestmentneeds in the energy sector, privatization is beingreconsideredcurrently (GasUnie & TenneT; energytransportation) In addition the government is reassessing the necessity of state shareholdership in serveral participations (e.g. Holland Casino & de Staatsloterij; gambling) Dutch SOE's

  9. 3. Four Pillars of SOE Policy (I) Pillar Strategy Strategy of the SOE is the cornerstone of the SOE policy It needs to be consistent with the public interest of the SOE Does the strategy need to be limited to the public interest? No, because: Advantages of synergy; KNM (Metal processing) BNG (Financial Service) Maintaining strategic position; Schiphol (Infrastructure) TenneT (Energy) Enterprises in transition; KPN (Telecom) TNT (Post and Express) Dutch SOE's

  10. (II) Pillar Investment Policy The articles of association determine which investments need shareholder approval To asses the investments the Ministry developed a standard framework Most important criteria: Strategic rationale in line with public interest Process Business case/valuation Impact on capital structure and dividend Governance, implementation and exit possibilities Dutch SOE's

  11. (III) Pillar Capital Structure Equity is retained for future investments and as a buffer for volatility in profits. The buffer should however not be larger than necessary; if there is excess equity in a participation, this should be distributed to the shareholders There is a limit to the maximum potential distribution; a minimum credit rating target set by the Ministry should be maintained (financial institutions AAA, non-financials A) Dutch SOE's

  12. (IV) Pillar executive’s remuneration policy Supervisory board proposes a remuneration policy, the shareholder has a right of approval of remuneration policy Goal is to have a remuneration policy that is (more) suitable to the public context in which SOE operate (reduction of maximum pay) A framework was developed to asses proposals Parliament has approved the framework, but remains critical if enough reduction has been achieved Dutch SOE's

  13. 4. Portfolio • Currently 37 SOEs in portfolio Dutch SOE's

  14. Sectoral composition of portfolio Dutch SOE's

  15. Assets portfolio (2009) Dutch SOE's

  16. 5. SOE departement Total employees: 14 Teams per SOE Specific “knowledge teams”, examples: Remuneration CSR (latest pillar) Valuation Dutch SOE's

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