Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Hungarian State Holding Company:Governance of state ownership Presentation to the High Level Meeting of the State Ownership Authorities Csaba Polacsek Dr. Deputy CEO, Head of Corporate Portfolio Hungarian State Holding Company (HSHC) 5 September 2011 Executive summary • • • • • • • • • State ownership plays an important role in the Hungarian economy. The state-owned companies have a significant effect on GDP. State ownership is a significant tool to execute government public policies. In smaller states ownership position is of utmost importance compared to large states to control market mechanisms and pricing failures. Privatisation phase is over after the socialist regime. Bad governance practices (ie: corruption) of state owned assets were in the limelight: focusing on good governance. Applying private equity best practices is a must when it comes to stateowned asset management. Asset management – and within this the regulation of state assets and supervision of their ownership – falls within the Ministry of National Development’s remit. Expanding business-oriented thinking HSHC should improve the reputation of state-ownership. STATE CAN BE A RESPONSIBLE OWNER! Ownership entities of state owned enterprises Exercising state ownership rights - 3 different ownership entities remained Hungarian State Holding Company • Majority owned Companies in different sectors e.g. energy, postal, lottery, transportation etc. • Several minority shareholdings, including listed companies National Development Bank • Mainly financial or financial related companies • Other specific sectoral areas – e.g. forestry and infrastructure Entities declared by other law • Specific and large companies • their ownership entities are mainly ministries 4 National asset management framework:establishing HSHC Hungarian State Holding Company: moving towards the centralized model. Hungarian Privatization and State Holding • Former holding and privatization company • Company limited by shares Treasury Property Directorate • It managed state owned real estates • Budget institution National Land Fund Management • It managed state owned lands. Centralized ownership model Hungarian State Holding Company (HSHC) • Company limited by shares under Hungarian Company act • non-distributable shares 5 Facts and figures of state ownership • The functioning companies have NUMBE R HSHC SOE PORTFOLIO C O M MANAGED DIRECTLY BY HSHC P A FUNCTIONING COMPANIES N -majority owned I -minority owned E UNDER VOLUNTARY S 415 billion in proportion to HSHC ownership. 358 214 • Total book equity value of majority owned HSHC SOE portfolio is € 5.6 bn 124 • Not homogenous portfolio 90 • HSHC has the right to deal with 60 DISSOLUTION UNDER LIQUIDATIION 84 MANAGED BY OTHER ENTITES (asset management contrats) 57 REAL ESTATES a total balance sheet of €10.4 • inherited companies • HSHC liquidates companies that have no future perspective 14% of the state real estates is directly managed by HSHC (Total real estate value is € 31 billion). SOE assets at HSHC Major enterprises at HSHC Electricity Utilities Environmental Top Culture Transportation Agribusiness Manufacturing Sport Hungarian state owned asset management: international comparison • • • • SOE sector is a significant employer. Accepted and applied international asset management best practices. Continuous development of national asset management practices. Centralised asset policy at ministry level with more ownership exercising institutions. SOE employees as % of total employment in 2010 Total assets of m ajority ow ned SOEs in sectoral breakdow n - 2011 Other activities Source: OECD Primary sectors Manufacturing Real estate Other utilities Finance Telecoms Transportation Electricity and gas 8 Adequacy of state ownership policy • Deciding what level of state ownership is adequate should be part of the national strategic thinking. • Regarding contolling market failures in smaller states, the ownership position is more important than regulatory position. • Via ownership position the policy makers will have better access to market information and ‘drivers’ of pricing. • The so called ‘spontaneous privatisation’ (without any strategic consideration) is one of the biggest problem in Hungary. • Foreign background multinational companies chanelled out their profit from Hungary (low profit reinvestment level) • Keeping the natural monopolies (water supply, electricity, gas supply) with state-controlled ownership would have been important. • Delivering quality public services is easier when the state has a strong ownership position. Commercial and non-commercial objectives • Commercial and non-commercial activities are divided and accounted separately • Non-commercial public benefit activites must be in line with the company’s articles of association • Subsidies comply with state-aid regulation • Nonprofit business associations may engage in business operations only in the form of ancillary activities • The State Aid Monitoring Office has the task to ensure that state aid in Hungary is granted in accordance with EU regulation • Strict policies to avoid overcompensation of noncommercial activities Asset management strategy Back to basics: defining the asset management strategy • Instead of administrative management the focus is to create the framework for business-oriented asset management. • Goals to fulfil during asset management: effectiveness, having economic value added decisions, being cost sensitive • Main focus is to reinforce accountability and corporate governance • Strategic thinking at operational level is a neccesity • Before having a comprehensive strategy there were alarming tasks to do: » Due diligence of companies » Replacing managements at SOEs where neccesary » Understanding contractual frameworks of SOEs (especially long-term commitments) Strategy and operation Layers of SOE strategic thinking Strategy Comprehensive asset strategy Asset strategy for SOEs Individual company strategies Operation Principles of decisionmaking Portfolio-level recommendations Executing the individual strategy Critical strategic points Strategic points INDIVIDUAL COMPANY STRATEGIES BUSINESSORIENTED APPROACH RISK MANAGEMENT CORPORATE GOVERNANCE Target •Strategy is a basic document •Strategy is based on the business model of the company • Mining out possibilities • How to find solutions • Risk map • Risk management system • Broad corporate governance recommendations • Roles and responsibilities of management First steps before building up the strategy Liquidating companies Due diligence Corporate governance Disfunctional companies with no future perspective Accounting former managements Contracting out from unfavorable decisions and commitments Discontinuing 31 BoD at companies Saving EUR 500 000 from less bodies at company level Cleaning up the portfolio Terminating companies Between September 1990 and April 2010 Between May 2010 and May 2011 Liquidation 63 21 Voluntary dissolution 46 13 Selling minority stocks 11 Selling minority stocks is in the pipeline: 50 minority stock to be sold until the end of 2011 Be the first to know: recalibrating corporate controlling Stronger controlling system Private equity management type controlling CEO of HSHC HSHC Controlling Department Supervisory Board (peremptory) Internal audit Head of corporate portfolio HSHC portfolio manager Management HSHC Supervisory Department Auditor Governance and company monitoring Recognising anomalies Transparent company operation for the owners Understanding operation Early-warning system Corporate Monitoring System Recognising operation that is not in line with goals Accountability if plans cannot be executed properly Feedback Plans and execution Central support for operation Joint procurements Portfolio-level regulations (investment regulation, renumeration policy, harmonizing accounting policies) Knowledge-base - Business plan guideline - Regular workshops and peer reviews Corporate governance best practices Shared-service centers Goals: 1. 2. 3. 4. 5. Streamlining businesses Reducing overlapping activites and redundancies Centered support services Focusing on core competencies Information an control over minor companies Results: - reduced OPEX - reliable support services - stronger controlling - portfolio level net cost reduction Organizational chart of HSHC Minister of National Development Supervisory Board Board of Directors Chief Executive Officer General Deputy CEO of Real Estate Portfolio Deputy CEO of Corporate Portfolio Chief Legal Counsel CFO HR and Security Decision-making structures of SOEs Companies with BoD Companies without BoD HSHC HSHC Supervisory Board Board of Directors Supervisory Board Chief Executive Officer Chief Executive Officer HSHC Peremtory Supervisory Board Chief Executive Officer Further steps to improve governance Developing sustainable and measurable business models Structures built on portfolio synergies Portfolio clean-up Corporate governance check-list for SOEs Annex 1: Example of real estate management • The Palace is one of the most important, largest monuments of Hungarian Palace architecture. Its builder, Count Antal Grassalkovich I (1694-1771) was a typical figure of the regrouping Hungarian aristocracy of the 18th century. He was a Royal Septemvir, president of the Hungarian Chamber, and confidant of Empress Maria Theresa (1740-1780). The construction began around 1733, under the direction of András Mayerhoffer (1690-1771) a Salzburg builder. • In 2009 an enormous renovation project was launched in order to restore the major part of the building that will serve as the most important summit building during the Hungarian EU Presidency in 2011. 23 Annex 2: Example from the company portfolio • • • #1 electricity power generator in Hungary #1 wholesale electricity trader in Hungary 99,9% owner of the Hungarian power grid company Total generation capacity: 2777 MW Miskolc 63MW Vértes 240MW Lőrinci 170MW Sajószöged 120MW Hungarowind Észak-Buda50MW Márkushegy 0.75mt 23MW Litér 120MW Coal plant Paks 1,970MW 2009 2010 8 534 8 090 € 2 144 € 2 083 EBITDA € 431 € 418 Profit before tax € 315 € 306 Net profit € 225 € 218 Number of employees Revenues Nuclear power plant Heating plant Total assets € 3 008 € 2 923 Gas turbine plant Equity € 1 809 € 1 757 Wind power Coal mine 24