JLG - May 2005 The State acting as an Owner : The French Reforms Jean-Louis GIRODOLLE Vice-Director French Government Shareholding Agency

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

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

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

7 JLG - May 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 JLG - May 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 JLG - May 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 JLG - May 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 ( and soon on a dedicated website ( Consolidated financial statements established for the first time in 2004 (for fiscal year 2003)

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

12 JLG - May 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 JLG - May 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 JLG - May 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 JLG - May 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 JLG - May 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 JLG - May Conclusion : Agenda Utilities : EDF (electricity), GDF (gas) Paris airports : Aéroports de Paris (ADP) Future Postal Bank Railways : SNCF (freight activity restructuring, non core assets disposals) …….

JLG - May 2005 The State acting as an Owner : The French Reforms Jean-Louis GIRODOLLE Vice-Director French Government Shareholding Agency