Swedish Government Presentation
Swedish Government Presentation
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Objective and Vision
Parliament objective
Professional management of state portfolio
Government’s vision
Valuable corporations create valuable jobs
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Implementation
Introducing private sector discipline— Shareholder value
Active ownership— Exit not an option
Commercial ownership tools— Transparency is the key to unlock “the black box”
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Changing the Government’s Role as Owner
Earlier Ownership responsibility
spread between several ministries
Closely related to political issues
Conflict of interest at all levels
Ownership concentrated to Ministry
Independent units with only one focus
Separation of sector political aspects and ownership
Competence, focus and resources
Now
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Value of Portfolio
Note:1 As of 30 June 2000
Estimated market value of managed portfolio (e billion)(1)
60
20
8
3.51.8 1.7 1.7 1.2 0.8 0.5
0
10
20
30
40
50
60
Gover
nmen
t
Inve
stor
Indu
strivä
rden
Kinnev
ikIn
vik
Lund
berg
s
Lato
ur
Ratos
Custo
s
Öresu
nd
0080791l.xls*Value of portfolio?Chart 1
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The Swedish Government’s Portfolio
Total value: e 60 billion
Note:1 As of 4 September 2000
Telia AB31%
Others23%
Vattenfall AB14%
V&S Vin & Sprit AB4% Nordic Baltic
Holding AB7%
Svenska Spel AB10%
Posten AB3%
Akademiska Hus AB3%
LKAB2%
Vasakronan AB2%
AssiDomän AB1%
0080791l.xls*Swedish state's portfolio (2)?Chart 2
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The Larger Companies—Total Sales
Total sales e37 billion0080791l.xls*The larger
companies estima (2)?Chart 1
0
1
2
3
4
5
6
7
Telia
AB
SAS
Vatte
nfall
AB
Poste
n AB
Apote
ket A
B
AssiD
omän
AB
Nordic
Balt
ic Hold
ing A
B
Syste
mbo
laget
AB SJ
Svens
ka S
pel A
B
Samha
ll AB
LKAB
V&S Vin
& Spr
it AB
Akade
misk
a Hus
AB
Civita
s AB
Svens
ka K
raftn
ät
0080791l.xls*The larger companies estima (2)?
Chart 1
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0
5
10
15
20
25
30
35
40
45
50
Volvo
Poste
n
Ericss
onTe
lia
Samha
llABB SJ
Sandv
ik
SEB Try
gg-H
ansa
Scani
a
Elect
rolu
x
Celsius
Skand
ia
Apote
ket
SASSHB
Vatte
nfal
lSCA
Astra
Nordic
Baltic
Hol
ding
AssiD
omän
Secur
itas
Number of Employees in Sweden, 1999
Source: Sweden’s largest companies
Wholly or partly Government owned
0080791l.xls*Number of employees in Sweden?
Chart 1
0080791l.xls*Number of employees in Sweden?
Chart 1
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Ministries Responsible for the Government Portfolio
Government owned companies by responsible Ministry (by number of employees)
0080791l.xls*government owned companies?Chart 20080791l.xls*government owned companies?Chart 3 Ministry of
Culture0.8%
Ministryof the
Environment0.1% Ministry for
Foreign Affairs0.1%
Ministry of Healthand Social Affairs
6.0%
Ministry ofFinance
9.0%
Ministry of Industry,
Employment andCommunications
84.0%
0080791l.xls*government owned companies?Chart 3
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Transformation
Transparency
Capital structure
Board nomination
e-enabling the Portfolio companies
Creating value
Survival
Phase 1Financial transformation
Phase 2e-Transformation
Year 1998–2000
Quarterly report the ultimate transparency
Year 2000–2002
No internet strategy
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Phase I: Financial Transformation
Enhance Operating Performance
Optimise Capital Structure
Focus and Earn Growth
Maximise Shareholder
Value
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Portfolio Management—Main Tools
Transparency— Consistent— Swift— Transparent
Capital structure— Optimise capital structure— Dividend policy— Profit sharing based on value based management system for all
Board nominations— Transparent and active— Based on company’s strategic situation
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Transparency
Consolidated balance sheet and income statement
Quarterly reporting
Value based management system foundation for profit sharing
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Capital Structure
Common understanding of cost of equity
Investments exceeding WACC
Focus on core business
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Board Nomination
Six to eight persons
Remuneration— Competitive
Cutting-edge corporate government guidelines — Clear responsibility and accountability— Committees— Evolution and feedback
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Active Ownership—Examples of Recent Events
Equity offerings
Sale of 30% of Telia in e9.1 billion IPO
Sale of remaining stake in Pharmacia & Upjohn for e1.8 billion
Trade sales
Sale of 25% stake in Celsius to Saab AB / Bae
Sale of SAQ Kontroll to Det Norske Veritas
Sale of 50% stake in VPC to a group of Swedish banks
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Active Ownership—Examples of Recent Events(continued)
Portfolio company restructurings
Sveaskog—the Government gained control over 1/3 of the forestry assets of AssiDomän
SJ—focus on passenger traffic, divestment of hotels, ferries, restaurants etc.
AssiDomän—restructuring and focus on industrial portfolio
Portfolio company acquisitions / divestitures
Telia acquisition of Netcom asa
Vattenfall acquisitions in Germany, Poland, Finland
Nordic Baltic Holding acquisition of Unibank and bid for CBK
Sweden Post sale of Postgirot to a group of Swedish banks
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Phase II: e-Transformation
Enhance Operating Performance
Optimise Capital Structure
Focus and Earn Growth
Maximise Shareholder
Value
Define and Implement Technology Strategies
Understand how technology changes business model
Develop new technology strategies
In the new economy, corporations will need to marry business and financial strategy with technology strategy
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Potential Impact Varies by Industry
Average
eBay
SchwabTransform
the industry
Cost reduction opportunity
Information intensity
Low spending
One buyer,one seller
Industry fragmentation
Many buyers,many sellers
Average
Boeing
High spending
40%
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Most Companies ...
Average
Information intensity
Low spending
One buyer,one seller
Industry fragmentation
Many buyers,many sellers
Average
High spending
LKABLuftfartsverketSamhallSveaskogSv. Skogsplantor
LerniaPostenSASSJTelia
SOS AlarmSv. BilprovningSv. Kraftnät RymdaktiebolagetVattenfall
… are facing a significant discontinuity
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The Greatest Benefits ...
Internal processes
Supplier /procurement management
Customer /distribution
management
Internal policies Company information Product information
On-line admin / HRProcesses / Transactions
Pricing and inventory visible to suppliers
Electronic ordering and payment possible
are also the most difficult to achieve
Intranet for primary processes
Electronic buying /auctions
Value added services online
Seamless data flow /knowledge sharing
Electronic-onlysupply chain
Unique onlineoffering
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Savings Achieved
0080791l.xls*savings?Chart 1 34
20
16
11 10
5
0
5
10
15
20
25
30
35
40
Electroniccomponents
Forestproducts
Computing Steel MRO Healthcare
(%)
0080791l.xls*savings?Chart 1
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Determination of Threat / Opportunity
Indu
stry
frag
men
tatio
n
Information intensity
Mining
Automotive
Oil and Gas
Construction
Chemicals
CapitalGoods
Metal Fabrication
Electronic
Transportation
Telecom
Utilities
Financial Services
Banks
SecuritiesInsurance
Aerospace
PublishingComputers
HealthConsumerProducts
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Dell Outperforms the Competition
0080791l.xls*Dell outperforms?Chart 7
100
814
88
31
60
0
20
40
60
80
100
Costposition
ROI % Inventoryturns
Percentage of total Times per year
0080791l.xls*Dell outperforms?Chart 4
DELL CPQ Nasdaq
1990 1994 19980
25
50
75
100
125
Sto
ck p
rice
index (
1-J
an-1
99
0)
= 1
00
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The Panel Sees Far Less Impact Today ...… than others
What is the impact of e-commerce on your business today?
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Mol panel Bain Swedish Bain RoW EU e-commerce
survey
% o
f C
EO
me
ntio
ns
(N=15) (N=14) (N=280) (N=410)
None
Little impact
Major impact
Very high impact /
transform
0080791l.xls*The Panel?Chart 1
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Anxiety About Competitors ...… is much higher elsewhere
How much do your competitors spend on e-business?
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Mol panel The conference board panel
(N=15) (N=80)
do not know/none
less
same
more
do not know/none
less
same
more
0080791l.xls*Anxiety?Chart 1
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There is a Clearly Recognised Gap … … especially in procurement
0
10
20
30
40
50
60
70
80
90
100
Customers Suppliers Internal
% o
f re
spo
nse
s
Is e-enabled
Should be e-enabled
87%80%
94%0080791l.xls*Responses?
Chart 1
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Procurement is a Gap for all Companies
What percentage of companies are e-enabled?
0%
20%
40%
60%
80%
100%
Group low Group medium Group high
Customers Suppliers Internal
0% 0%
40% 40%
20%
60%
100%
40% 40%
20%
30%
50% 50%
80%
60%
0080791l.xls*Procurement?Chart 2
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Procurement Savings can be Substantial
Efficiency improvement Procurement cost savings
9
5
21
25
0
5
10
15
20
25
30
CaterpillarPilot
GE Lighting
Da
ys o
f pro
cess
tim
e
Before After
0080791l.xls*Procurement savings?Chart 1
30%
15% 14%
0
10
20
30
40
50
GE FreemarketsAverage Savings
UnitedTechnology
Per
cent
of
tota
l
0080791l.xls*Procurement savings?Chart 2
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Government-owned Companies
25% of domestic business community
Total sales e39 billion
Indirect material 60% of total costs
Cost reductions through e-procurement 5–10%
Total savings e1.5–2.5 billion
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Assets Liabilities
Authorities 78.9 45.2
Government debt 0 163.5
Central Bank 27.3 13.5
AP-fund 74.1 0.2
Elimination (17.3) 0
Government-
owned
companies 16.7 0
Net wealth (42.7)
Transparency Shows the Real ValueGovernment balance sheet 1999, e billion
Companies valued at book value Companies valued at market value
Sources: The Swedish National Financial Management Authority and Ministry of Industry
Assets Liabilities
Authorities 78.9 45.2
Government debt 0 163.5
Central Bank 27.3 13.5
AP-fund 74.1 0.2
Elimination (17.3) 0
Government-
owned
companies 59.7 0
Net wealth 0.2
With government owned companies valued at market price the government position is positive.
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Listed Companies—Relative PerformanceShare price performance 2000 to 30 August 2000
Notes: Government shareholding 1 NBH 18.1%2 SAS 21.4%3 AssiDomän 35.3%4 OM Gruppen AB 7.7% 5 Telia 70.6% since listing (13 June)
0080791l.xls*relative performance?Chart 10080791l.xls*relative performance?Chart 10080791l.xls*relative performance?Chart 10080791l.xls*relative performance?Chart 1
(0.4)
8
(20)
143
29
(3)
(30) (10) 10 30 50 70 90
SX Gen. index
Telia
OM Gruppen AB
AssiDomän
SAS
Nordic Baltic Holding
(%)
4
3
2
1
5
150
0080791l.xls*relative performance?Chart 1
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1.0 1.015.0 19.8 27.0
39.9 46.5
65.3
171.0
(31.9) (40)
(20)
0
20
40
60
80
100
120
140
160
180A
ssiD
om
än
¹
LK
AB
Vä
gve
rke
tP
rod
ukt
ion
&
Ko
nsu
lt
Va
tten
fall
Sve
nsk
a
Kra
ftnä
t SJ
Lu
ftfa
rtsv
erk
et
Po
ste
n
SA
S²
Telia
Value creation can also be measured using… … the EVA methodology
1998 EVA (economic value added) (e million)
Notes:1 35.3% of AssiDomän2 21.4% of SAS
Total EVA: e267.9m
0080791l.xls*Value creation using EVA?Chart 1
0080791l.xls*Value creation using EVA?Chart 1
0080791l.xls*Value creation using EVA?Chart 1