1 the french government shareholding agency (ape) 2007 highlights bruno bezard – managing director...
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The French Government The French Government Shareholding Agency (APE)Shareholding Agency (APE)
2007 Highlights2007 Highlights
Bruno BEZARD – Managing directorBruno BEZARD – Managing director
Stockholm
Thursday, March 29, 2007
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SynopsisSynopsis
APE : A professional shareholder
APE : A broad portfolio with strong opportunities
Focus on :EDF
Aéroports de Paris (ADP)
France Télécom - Orange
La Poste
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Since its creation in 2003, APE is exclusively dedicated to supervise the companies belonging to the public sector
Our sole mission : acting as an active shareholder and a vigilant member of board of directors. Clarifying responsibilities within French State (shareholder – regulator – customer …)
Our task force acts under the authority of the Minister for Economy and Finance, with a team with a wide range of competencies (public and private professionals - lawyers, bankers, accountants-)
Our duties : « Bringing up companies to market standard » : Developing corporate
governance, financial culture, and international positioning.
Acting as a rational investor, in a strongly European Commission regulated environment.
Creating long term value, maximize the value of portfolio assets. Working with the companies to faster shareholder value.
1 - APE : a professional shareholder1 - APE : a professional shareholder
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On all IPOs and privatizations, the green light of the French Government given, APE is the State’s dedicated task force along all the process
Since 1993 : stable and transparent process for IPO and privatizations (legal framework)
In the process, a K role is played by the Commission des participations et des transferts (CPT): This independent body ensures the transfer of state-owned assets to private sector is achieved at the fair value through a systematic auction process protecting the Government financial interests.
APE analyzes on behalf of French Government opportunities of IPO or privatization
Privatization is not only a cash generating process but also a real opportunity allowing companies to continue their own development
APE is the process driver
1 - APE : a professional shareholder1 - APE : a professional shareholder
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APE analyses a large scope of projects : Includes both internal projects and external growth
Covers financial and strategic aspects including a reorganization of a business unit (ex : SNCF’s freight activity)
Works in close cooperation with the management of the company through bilateral meetings with the top management and a presence in Board of director’s committees
Several recent examples :
France Telecom with Amena (mobile operator in Spain), project « Fiber to the home » in process
LFB (Blood & Biotech) in the USA (with GTC bio therapeutics)
EDF with EPR (European Pressurized Water Reactor) and wind energy
1 - APE : a professional shareholder1 - APE : a professional shareholder
62 - A portfolio with strong opportunities 2 - A portfolio with strong opportunities
Market value of 11 listed shares (combined assets)
Over € 155 bn (’22 march)
State State share
ownership Value (in € bn)
Aéroports de Paris (ADP) 68,39% 4.5
Air France KLM 18,57% 1.7
CNP Assurances 1,17% 0,1
EADS 15,04% 2.7
EDF 87,32% 93.6
France Télécom - Orange 32,45% 16.7
Gaz de France 79,78% 26.7
Renault 15,01% 3.7
Safran 30,85% 2.2
Thalès 27,30% 2.2
Thomson 1,90% 0.01
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2 - A portfolio with strong opportunities 2 - A portfolio with strong opportunities
InfrastructuresRFF
ATMBPorts autonomes
ServicesLa Poste Medias
France Television Arte
Radio France
Imprimerie NationaleFrançaise des jeux
…
TransportsSNCFRATP
EnergyAreva
DefenseDCNDCI
GIAT
Non listed companies
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2 - A portfolio with strong opportunities2 - A portfolio with strong opportunities
Net income + 12.4bn (vs + 6.4bn 2004 )
Total turnover 149 bn ( vs141 bn 2004 )
2005 : 50 major entities (IFRS data, in billions €)2005 : 50 major entities (IFRS data, in billions €)
Total balance sheet size 517 bn
Equity 52.4 bn (35.2 bn 2004)
Net debt / EBITDA 3.2 x (vs 3.9x 2004 )
Operating margin 12.3% (vs 11.9 % 2004)
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SNI 0.5 bn€
Snecma 1.3bn€ (IPO+ 2nd Offer)
Dassault systèmes 0.6 bn€
Renault 1.3bn€
2 - 2 - A proven track recordA proven track record
Thomson 1bn€
Block trade Capital increase
Block trade
France Telecom 5.1bn€
Air France + KLM 0.7bn€
Capital Increase
2003
France Telecom 15bn€ TOP Plan
Alstom
2004
Merger
AlstomAir France-KLM
France Telecom (Wanadoo)
2005
Bull 0.01 bn€
France Telecom 3.4bn€
Gaz de France 2.6 bn€ (IPO) + 1.9bn€
Sanef 0.9bn€
EDF 6.4bn€
France Telecom (Amena) 3Bn€
Snecma /Sagem (Safran)
Block trade Capital Increase Merger
APRR 1.3bn€
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Other sectors
Creation of La Banque Postale in January 06(after approval by the European Commission)
La Poste (Financial services):
Minority stake sold in June 2006Alstom
Strengthening of Alcatel interests in Thales’sshare capital
Alcatel - Thalès
Acquisition by Thales of a minority stake in DCN(shipyards activities)
DCN - Thalès
Defense
2 - 2 - 2006 and forthcoming developments2006 and forthcoming developments
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Energy
Transports
Merger with Suez Gaz de France
IPO in june (2006)Paris Airports (ADP)
transferred to private investors en 2006SNCM (Shipping)
Sold at the beginning of 20063 Freeway companies
2 - 2 - 2006 and forthcoming developments2006 and forthcoming developments
Transformation into joint-stock companies (on track)
Lyon, Toulouse & Bordeaux Airports
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2 – 2 – Cash generated by operations : total 63 Bn € between Cash generated by operations : total 63 Bn € between 2003 & 2006 (proceeds = 34 Bn, capital increase = 28 Bn)2003 & 2006 (proceeds = 34 Bn, capital increase = 28 Bn)
Sales : 34.3 Bn € proceeds for State by IPO, block trade, industrial
partnership …Capital increase : 28.5 Bn €
2003 2.9 (Renault 1.3, Thomson 1 …) 15 (France Tél)
2004 7.6 (FT 5.1, Air France-KLM 0,7…) 1.3 (APRR)
2005 6 (FT 3.4, Gaz 2.6) 12.2 (EDF 6.4, FT 3, Gaz 1.9 …)
2006 17.8 (Toll roads 15, Alstom 2 …) -
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We have very carefully prepared EDF for its IPO, which took place in November 2005
We passed a law to change the legal structure of EDF to authorize the French State to sell part of it
We changed the financing of its specific mechanism pension scheme and clarified its long term nuclear liabilities (which are very specific to companies in the nuclear business and represent an important part of its balance sheet : as of today, € 28 bn of €180 bn)
We closed an ambitious acquisition in Italy (Edison) with a local partnership and an acceptable level of risk
We finally defined a precise equity story and explained the relevance of the IPO project to the Parliament, mayors, employees, citizens and financial markets
Since 2002, we’ve squared up relationship between EDF and its main shareholder as well as internal corporate governance, both now based on best practices of the marketplace
3 - Focus on EDF3 - Focus on EDF
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Strategy, investment and dividend policy All this enabled EDF to successfully complete its IPO while
presenting a high-profile equity story : Strengthen EDF leading integrated position in electricity and gas in
Europe, in a fully competitive market in production and supply as of July, 1st,
Take a significant part in the current nuclear revival worldwide. A €40bn investment plan between 2006 and 2010 aimed at achieving the
group’s industrial target, alongside a refocusing of operations through a divestment of non-core assets
The Agency and the company have jointly defined a selective investment policy. As EDF’s CEO often brings to mind, the group’s investment policy obeys 3 main rules : return, full matching with EDF industrial strategy, no hostile deals
Furthermore, the Agency has set operational and financial targets and a dividend guidance for the period 2005 through 2008 :
Average organic EBITDA growth between 3% and 6% per year over the period, two-digit organic growth of net earnings (excluding non recurring items), and a dividend payout set at 50% of recurring net income
3 - Focus on EDF3 - Focus on EDF
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EDF recent story provides an excellent illustration of the Agency’s role, acting as a controlling shareholder of a leading European energy utility
Since its IPO in November 2005, EDF stock has exhibited a 78% increase in 15 months, reaching a market capitalization over €100 bn 2006 sales reached € 58.9 bn or a 11% organic growth. 2006 dividend paid in 2007 increased 47% compared to last year, reaching € 2.1bn or 1,16€/share
To sum-up, the Agency pays a lot of attention to the achievement of the operational and financial targets of EDF and to the consistency of its strategy, including through an in-depth review of all the significant investments. As a long-term shareholder, we have the objective to create sustainable value, taking into account the interest of all shareholders, with a balanced risk analysis
3 - Focus on EDF3 - Focus on EDF
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Company
ADP is a leading airport in Europe both in terms of passenger numbers and freight It benefits from three highly complementary airports at its
disposal, Roissy-CDG (medium/long-haul), Orly (short-haul) and Le Bourget (business aviation). With 82.5 million passengers in 2006 (up 4.8% from 2005)
ADP is Europe’s second largest airport group, and is the first airport in Europe for air cargo / mail
In 2006, it achieved 2.07 bn € consolidated revenues (up 8.1% from 2005), with Airport services accounting for 83%
3 - Focus on Aéroports de Paris - ADP3 - Focus on Aéroports de Paris - ADP
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IPO
The June 06 IPO aimed at providing the company with the means to implement an ambitious investment program (€ 2.5 bn for 2006-2010) so that it could take a significant share of the expected traffic growth. In this respect, the capital structure of the company was designed for a good rating (AA- rating; S&P), through a € 600 m capital increase
In line with the 2005 law which has transformed ADP into a company, the French government has retained a majority stake (now 68%)
Pricing was achieved at the middle of the range with strong institutional and retail demands, despite difficult market conditions
3 - Focus on Aéroports de Paris - ADP3 - Focus on Aéroports de Paris - ADP
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Shareholder value
ADP offers both defensiveness and strong upside in order to maximise shareholder value: Since the IPO, ADP shares have climbed 58%, outperforming the DJ Stoxx by 26ppts
the company offers an excellent visibility thanks to a favourable and incentive regulatory framework, locked-in tariff increases for the period 2006-2010 and no limit on runway capacity with investment programs in place to address terminal capacity issues
the Group has set targets for increasing EBITDA margin …with the aim of setting the dividend payout rate at 50%
ADP has a clear growth strategy that is already underway, with significant growth potential emanating from real-estate and commercial activities that still have to be fully leveraged
3 - Focus on Aéroports de Paris - ADP3 - Focus on Aéroports de Paris - ADP
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France Télécom provides a great example of a successful transformation. Confronted in 2002 with very important financial issues, it has now become a privatized company with strong fundamentals
End of 2002: “Ambition 2005 plan” and €15 bn capital increase
Privatizing the company Over this period the government has also prepared a law (voted at the end of December 2003) in order to allow France Télécom to be privatized
This occurred in September 2004 after a placement under an “Accelerated Book Building” procedure through which 10.85% of France Télécom equity was sold and generated proceeds of € 5.1bn.
3 - Focus on France Télécom - Orange3 - Focus on France Télécom - Orange
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Current strategy: NExT 2006-2008 plan Under close supervision of its major shareholder, FT is now
implementing a pro active strategy (New Experience in Telecom or NExT plan) and is succeeding in facing all the great challenges the company is confronted with, in particular maturing markets in Europe, technological changes and difficult regulatory environment
FT is focusing on promoting convergence and innovative products (LiveBox, VoIP, Unik, 3G services, content and services development) as a competitive advantage in order to face a tough competition especially in the European mature markets (France, UK, Spain) and stop declining growth
FT is also developing its subsidiaries in emerging markets (Rumania, Egypt, etc.) which are great sources of growth and profitability
Simultaneously FT is rapidly adapting its cost structure to stabilize EBITDA margin: internal headcount resizing (17.000 permanent headcount net reduction on 2006-2008 out of which 16.000 in France), IT&N opex savings (up to 2 point of EBITDA rate in 2008 versus 2005)
3 - Focus on France Télécom - Orange3 - Focus on France Télécom - Orange
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Current strategy: NExT 2006-2008 plan
As far as M&A is concerned, France Télécom chose a very careful approach:
the group doesn’t intend to implement any significant M&A operation in the middle term and keeps focusing on debt reduction (objective of a net debt to EBITDA ratio under 2x at the end of 2008)
The group has recently announced the generation of a €6.8bn organic cash flow for 2007, and that it would quasi stabilize its EBITDA margin rate
In other words France Télécom has now fully recovered and shows strong fundamentals. The group keeps focusing on its business strategic development and internal transformation as well as debt reduction
3 - Focus on France Télécom - Orange3 - Focus on France Télécom - Orange
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2005, May 20 : European directives relating to postal market’s liberalization was transposed into French law (French Postal Sector Regulation Act). Enabled the creation of La Banque Postale.
2005, November 30 : Creation of La Banque Postale : Approval by Commission Bancaire, the main regulatory authority in the banking sector.
2005, December 21 : European Commission has approved, under the EU Treaty rules on State aid, the transfer of the banking and financial business of the French Post Office (La Poste) to its subsidiary, La Banque Postale. Following a deep analysis, the Commission has found that the transaction as such will not confer an economic advantage and do not constitute a State aid on Banque Postale. The French authorities have entered into commitments ensuring this outcome.
2006, January 1 : Creation of La Banque Postale : La Poste’s financial services are able to offer to their customers a new range of products.
3 - Focus on … La Poste : 3 - Focus on … La Poste : The French Post OfficeThe French Post Office
Financial services divisionFinancial services division
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Mail : in order to improve performance and preserve its competitive edge, La Poste’s mail division has launched a huge modernization program of its industrial equipments : the “Mail Quality Project”.
Retail outlet : launched in 2005, the strategic project “Customer Relations Project” (770 M€), aims at creating a modern post office network ; La Poste Retail Outlet, the nationwide sales network of La Poste, is now a separate division.
Parcels and express : La Poste is the third largest European operator in the sector, continuously strengthening its pan European network.
Other activitiesOther activities
3 - Focus on … La Poste : 3 - Focus on … La Poste : The French Post OfficeThe French Post Office
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The French Government The French Government Shareholding Agency (APE)Shareholding Agency (APE)
2007 Highlights2007 Highlights
Bruno BEZARD – Managing directorBruno BEZARD – Managing director
Stockholm
Thursday, March 29, 2007