Transcript Paris EUROPLACE 2007

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The French Government
Shareholding Agency (APE)
2007 Highlights
Bruno BEZARD – Managing director
Stockholm
Thursday, March 29, 2007
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Synopsis
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APE : A professional shareholder
APE : A broad portfolio with strong
opportunities
Focus on :
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EDF

Aéroports de Paris (ADP)

France Télécom - Orange

La Poste
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1 - APE : a professional shareholder
Since its creation in 2003, APE is exclusively dedicated to supervise
the companies belonging to the public sector
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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 :
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« 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.
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1 - APE : a professional shareholder
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
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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
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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
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1 - APE : a professional shareholder
APE analyses a large scope of projects :
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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 :
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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
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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
Transports
SNCF
RATP
Services
La Poste
Medias
France Television
Arte
Radio France
Non listed
companies
Infrastructures
RFF
ATMB
Ports autonomes
Imprimerie Nationale
Française des jeux
…
Energy
Areva
Defense
DCN
DCI
GIAT
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2 - A portfolio with strong opportunities
2005 : 50 major entities (IFRS data, in billions €)
Total balance sheet size
Equity
Net debt / EBITDA
Total turnover
Net income
Operating margin
517 bn
52.4 bn (35.2 bn 2004)
3.2 x (vs 3.9x 2004 )
149 bn ( vs141 bn 2004 )
+ 12.4bn (vs + 6.4bn 2004 )
12.3%
(vs 11.9 %
2004)
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2 - A proven track record
2003
Block trade
Renault 1.3bn€
Capital increase
France Telecom 15bn€ TOP Plan
Thomson 1bn€
Dassault systèmes 0.6 bn€
Alstom
2004
Block trade
SNI 0.5 bn€
Snecma 1.3bn€ (IPO+ 2nd Offer)
France Telecom 5.1bn€
Capital Increase
Merger
France Telecom (Wanadoo)
Alstom
APRR 1.3bn€
Air France-KLM
Air France + KLM 0.7bn€
2005
Block trade
Capital Increase
Bull 0.01 bn€
EDF 6.4bn€
France Telecom 3.4bn€
Sanef 0.9bn€
France Telecom (Amena) 3Bn€
Gaz de France 2.6 bn€ (IPO) + 1.9bn€
Merger
Snecma /Sagem (Safran)
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2 - 2006 and forthcoming developments
Defense
DCN - Thalès
Acquisition by Thales of a minority stake in DCN
(shipyards activities)
Alcatel - Thalès
Strengthening of Alcatel interests in Thales’s
share capital
Other sectors
La Poste (Financial services):
Creation of La Banque Postale in January 06
(after approval by the European Commission)
Alstom
Minority stake sold in June 2006
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2 - 2006 and forthcoming developments
Energy
Gaz de France
Merger with Suez
Transports
3 Freeway companies
SNCM (Shipping)
Paris Airports (ADP)
Lyon, Toulouse
& Bordeaux Airports
Sold at the beginning of 2006
transferred to private investors en 2006
IPO in june (2006)
Transformation into joint-stock companies
(on track)
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2 – Cash generated by operations : total 63 Bn € between
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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3 - Focus on EDF
We have very carefully prepared EDF for its IPO, which took place
in November 2005
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We passed a law to change the legal structure of EDF to authorize
the French State to sell part of it
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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)
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We closed an ambitious acquisition in Italy (Edison) with a local
partnership and an acceptable level of risk
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We finally defined a precise equity story and explained the relevance
of the IPO project to the Parliament, mayors, employees, citizens
and financial markets
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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
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3 - Focus on EDF
Strategy, investment and dividend policy
 All this enabled EDF to successfully complete its IPO while
presenting a high-profile equity story :
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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
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Furthermore, the Agency has set operational and financial targets
and a dividend guidance for the period 2005 through 2008 :
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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
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3 - 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
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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
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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
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3 - Focus on Aéroports de Paris - ADP
Company
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ADP is a leading airport in Europe
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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)
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ADP is Europe’s second largest airport group, and is the first
airport in Europe for air cargo / mail
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In 2006, it achieved 2.07 bn € consolidated revenues (up 8.1%
from 2005), with Airport services accounting for 83%
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3 - Focus on Aéroports de Paris - ADP
IPO
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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
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In line with the 2005 law which has transformed ADP into a company,
the French government has retained a majority stake (now 68%)
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Pricing was achieved at the middle of the range with strong
institutional and retail demands, despite difficult market conditions
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3 - Focus on Aéroports de Paris - ADP
Shareholder value
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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
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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
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the Group has set targets for increasing EBITDA margin …with the
aim of setting the dividend payout rate at 50%
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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
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3 - Focus on France Télécom - Orange
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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
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End of 2002: “Ambition 2005 plan” and €15 bn capital increase
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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
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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.
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3 - Focus on France Télécom - Orange
Current strategy: NExT 2006-2008 plan
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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
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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)
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3 - Focus on France Télécom - Orange
Current strategy: NExT 2006-2008 plan
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As far as M&A is concerned, France Télécom chose a very careful
approach:
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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 … La Poste : The French Post Office
Financial services division
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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.
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2005, November 30 : Creation of La Banque Postale : Approval by
Commission Bancaire, the main regulatory authority in the banking sector.
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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.
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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.
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3 - Focus on … La Poste : The French Post Office
Other activities
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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”.
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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.
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Parcels and express : La Poste is the third largest European operator in the
sector, continuously strengthening its pan European network.
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The French Government
Shareholding Agency (APE)
2007 Highlights
Bruno BEZARD – Managing director
Stockholm
Thursday, March 29, 2007