1 Priorities in the management of the portfolio of entities supervised by the Minister of Treasury up to 2015 Minister of Treasury Warsaw, 2014
2 Table of Contents Introduction... 3 I. Corporate supervision Objectives of Corporate Supervision Professionalisation of supervision Supervision Professionalisation Programme The dividend policy Entities of strategic importance for the state economy and entities of significant importance, supervised by the Minister of Treasury Building the value of State Treasury entities Investment policy of State Treasury Investment cooperation between State Treasury companies Innovative policy of State Treasury companies and cooperation with the scientific and research environment II. Ownership transformations Privatisation Consolidation and merger processes Sale of employee share blocks Communalisation Transformation of entities with limited disposable potential Processes of restructuring as well as liquidation and bankruptcy... 17
3 Introduction The economic transformation in Poland has been continuing for over two decades. One of the pillars of transformation from the centrally planned economy system to the free market economy was the privatisation process. Adopting 8453 state-owned enterprises operating in 1990 as a starting point, 24 years later, as a result of ownership transformations, active entities representing less than 3% of this figure are supervised by the Minister of Treasury (242 entities according to the status as at 30 June 2014). Others include entities under liquidation, bankruptcy or those representing blocks of shares/stocks allocated for employees of the privatised companies. As a result of implementation of the ownership transformation processes significant limitation of the number of entities supervised by the State Treasury took place. At the same time, owing to the ownership decisions and providing the effective supervision, the value of assets held in the State Treasury resources over the last six years increased, even under the conditions of the global economic downturn. For example, the historic value of the current blocks of shares of companies with the Treasury shareholding listed on the Warsaw Stock Exchange, joint stock company (Waszawska Giełda Papierów Wartościowych w Warszawie S.A., hereinafter referred to as the GPW) has increased by over 55% since According to the status as at 30 June 2014, the shares of the State Treasury listed on the Warsaw stock exchange are worth over PLN 100 billion. The capital market is and will continue to be essential for the Polish economy. Many factors have contributed to the unquestionable success of the Warsaw stock exchange, among others, execution of historic transactions of large State Treasury companies and the resulting growing interest of institutional, individual investors and international financial institutions. Support offered by the (Ministry of Treasury) to the domestic capital market had a positive impact on the stock exchange turnover (since 2008 the capitalisation of national companies has more than doubled), catalysing the search for capital on the Warsaw primary market (over 170 companies have debuted on the GPW over the recent seven years). It is also noticeable that the ownership decisions of the Minister of Treasury affect the engagement of the so-called employee shareholding in the process of ownership changes in Poland. In , 1402 transactions of transferring enterprises for use against payment were conducted. This tool enables employees to lease assets of the privatised state enterprise by establishing a company. Engagement of employees in the ownership transformation process also takes place through making the stocks of privatised companies available free of charge. Since the regulations enabling this process entered into force, i.e. 8 January 1997, until 30 June 2014, almost two million employees have taken over 1.9 billion shares with the par value of PLN 6.4 billion free of charge 1. Earlier, from 1 August 1990 to 31 August 1997 the Act on privatisation of state enterprises enabled employees of privatised entities to purchase up to 20% of shares held by the State Treasury, at a price reduced by a half in relation to the the price defined for natural persons, Polish citizens, owned on the first day of sale. Accordingly, employees of 125 companies were able to participate in ownership transformation processes. 1 Preliminary data.
4 One of the key challenges of the ownership policy of the Minister of Treasury, influencing the development of the Polish economy is the support of investment projects in the companies supervised. Since 2007, the total capital expenditure of the biggest State Treasury companies from the gas, petroleum and power engineering sector amounted to almost PLN 34 billion. The value of acquisition during the same time reached PLN 43.5 billion. Over the nearest six years, companies of the fuel and energy sector plan to invest over PLN 60 billion. Owing to such activities Poland will strengthen its energy security and the national economy will gain a huge boost for development. Until 2020 companies will allocate the minimum of PLN 30 billion for the construction of new power units. Significant expenditure will be also incurred on the modernisation of transmission and distribution grids. Companies will allocate about PLN 18 billion for the gas infrastructure. Activities of the Minister of Treasury also have impact on the labour market. For example, within the implementation of the project on construction of new coal-fired units in Opole, 200 domestic contractors and 350 suppliers will be engaged. At a peak moment of the investment implementation about 4 thousand people will work on the site. On the other hand, the consolidation of the defence sector within Polska Grupa Zbrojeniowa S.A. (Polish Arms Group, joint stock company) shall make it possible to maintain and create new jobs directly for 14 thousand, and indirectly, even for thousand people. Employment in all capital groups and companies supervised by the Minister of Treasury amounts to over 300 thousand people. The current economic environment, the macroeconomic conditions and the experience associated with the crisis indicate that the economies holding a strong industrial sector managed better under the conditions of recession in the world markets. Therefore, the optimum solution is to build the value of entities which represent the multi-faceted (including economic) security of the state, with simultaneous reduction of its involvement in areas, where the corporate supervision provided by state administration authorities is not necessary. During the effective period of the "Privatisation Plan for the years " the Ministry of Treasury implemented 534 privatisation projects for 298 companies, resulting in 195 agreements envisaging the ownership transformation. The revenues from privatisation reached PLN 13.6 billion. The highest revenue was generated from privatisation through the stock exchange PLN 11.1 billion, which made 82% of the revenues gained over the recent two years. The revenue from industry privatisation (outside stock exchange) in the years 2012 and 2013 reached PLN 2.5 billion. In this period, 498 industry projects for 263 companies were implemented (almost 90% of all companies covered by the ownership transformation). Within the projects 159 privatisation agreements were concluded. Implementation of the ownership transformation processes, resulting in successive reduction of entities supervised by the State Treasury, requires defining of a new context for those processes and the role of the Minister of Treasury, arising from his proprietary rights. Considering the foregoing and taking into account the termination of the applicability of the "Privatisation Plan for the years ", this document has been prepared, comprising the description of priorities and targeted measures of the Minister of Treasury until the end of 2015, in the area of management of entities (companies and state-owned enterprises), it supervises. The main assumptions of the "Priorities..." include the optimisation of the State Treasury resources and the broadly understood building of their value. The Minister of Treasury will consistently implement the ownership
5 transformation processes, whereas, due to the decreasing resources of companies supervised by the State Treasury, the privatisation shall be treated as one of equivalent tools next to other types of ownership changes. On the other hand, the activities building the value of State Treasury assets will be supported, among others, by investment programmes, such as, for example, the "Polish Investments" Programme, the investment cooperation between the State Treasury companies, cooperation with the scientific-research community and a number of initiatives improving the supervision and management of State Treasury companies. The management process of entities supervised by the Minister of Treasury is based on: I. in the scope of generally applicable statutes: 1. Act of 8 August 1996 on the rules of exercising the powers attributable to the State Treasury, 2. Act of 30 August 1996 on commercialisation and privatisation, 3. Act of 15 September 2000, Code of Commercial Companies, 4. Act of 29 July 2005 on trading of financial instruments, 5. Act of 29 July 2005 on public offering and conditions governing the introduction of financial instruments to the organised trading, and on public companies, 6. Act of 18 March 2010 on specific powers of the minister competent for the issues of State Treasury and their exercising in some capital companies or capital groups conducting operations in the sectors of electric energy, petroleum and gas fuels, 7. implementing regulations to the aforementioned Acts of Law. II. in the scope of programme documents: 1. "Privatisation directions of the State Treasury assets", 2. programmes and strategies for individual sectors: Energy policy of Poland until 2030, Programme for electric power sector, Strategy of coal mining operations in Poland in the years , Policy of the Government of the Republic of Poland for the petroleum industry in Poland, Strategy for the development of marine harbours up to 2015, Strategy "Efficient State 2020".
6 I. Corporate supervision In accordance with art. 25 of the Act on state administration branches, the minister competent for the issues of State Treasury represents the State Treasury in the scope of management of the State Treasury assets, including the exercising of the proprietary and personal rights attributable to the State Treasury. Through his representatives, he supervises the State Treasury assets, from which the basic tasks associated with the execution of the corporate supervision arise, such as: regulating its legal framework, selection of appropriate staff, monitoring of the economic and financial situation of the State Treasury companies, as well as the periodical evaluation of performance of the statutory bodies in the entities supervised. Corporate supervision executed by the Minister is the aggregation of measures related to corporate supervision, including, in the scope of monitoring of issues arising from the legal regulations as well as monitoring of the economic and financial situation of entities supervised, and the analysis of effectiveness of their performance, providing basis for recommending the appropriate measures. 1. Objectives of Corporate Supervision Management of the state assets imposes dual responsibility on the Minister of Treasury: 1. as a market participant, he cares for building and execution of the value of his assets, stimulating positive changes creating value for shareholders (partners), simultaneously contributing to the development of the economic potential of the state. 2. as a warrant of economic security, he ensures high standards in supervision and management of companies as well as takes into account the support to implementation of the state policies and recommendations arising, for instance, from the applicable governmental documents. The Minister of Treasury, being a market participant, acts on the basis of the same rules which apply to private entities. However, the Minister's goals must consider the interests of the State Treasury as well as the fact that while taking the ownership decisions, he, in fact, cares for the economic security of the state, among others, in the area of energy security or transmission security. All these elements constitute good ownership policy. Thus, the main purpose of improvement of corporate supervision and management is to build value of entities with State Treasury shareholding for their shareholders. The main objectives of corporate supervision include: improving performance, management effectiveness and value of companies with State Treasury shareholding as well as optimisation of the portfolio of the assets supervised, preparing entities to the process of transformation and privatisation, eliminating the privatisation barriers - defining the indicative catalogue of measures required to achieve the target model of state involvement in the economy, ensuring the transparency of the activity of governing bodies in the companies with State Treasury shareholding. The aforementioned objectives shall be achieved through: application of standards for corporate supervision of the Minister of Treasury, representing the expectations of the owner in the scope of implementation of the specific objectives,
7 appointing adequately prepared supervisory board members, taking into account the balanced participation of women and men, in order to assure proper functioning of corporate supervision, improving the procedures and/or good practices, related to the management staff of companies with State Treasury shareholding, developing and implementing new standards and mechanisms for monitoring and assessment of economic and financial activities of companies with State Treasury shareholding enabling immediate response to the developments, initiating the cooperation between entities with State Treasury shareholding, in order to use the potential of their assets and obtain the synergy effect, the dividend policy. 2. Professionalisation of supervision In the scope of corporate governance and organisation the "Principles of Corporate Supervision over Companies with State Treasury Shareholding" apply at the Ministry of Treasury, pursuant to which the Minister, as a state body bearing statutory responsibility for the protection of the State Treasury interests in the area of exercising rights arising from socks/shares in companies with the State Treasury shareholding, executes corporate supervision over such companies. The aforementioned document thoroughly governs the rules, procedures and tools of exercising the supervision as well as supplements the provisions of the commonly applicable law. Professionalisation of the supervision, or raising its standards, are the areas which must create a well-functioning whole - the fixed elements must be supplemented with the relative elements. Therefore, in the years , besides legal regulations, a number of initiatives will be implemented, in relation to communication, raising the qualifications or support of the State Treasury representatives in the supervisory boards. In the Ministry of Treasury a separate organisational unit was created whose tasks include the strengthening of the position of supervisory boards through providing them with a possibility of support and broader cooperation. In the scope of cooperation within entities with State Treasury shareholding, creation of a platform of meetings for representatives of such entities is planned, in order to: exchange business experience (e.g. in the scope of investment financing, asset restructuring), search for coinciding scopes of activities and implementation of common projects in such areas, resulting in increasing of the effectiveness in management of assets held by the companies. Ministry of Treasury consistently raises standards of corporate supervision through a number of initiatives, both in terms of legislation and governance. Their effects indicate that the consolidation of the solutions developed - taking into account the specific character of individual sectors - in relation to all entities covered by the broadly understood state supervision, would have only positive consequences. Transparent supervision, based on rational principles, influences the effective functioning of entities with State Treasury shareholding and social trust towards state institutions.
8 It should be stressed that both the "OECD Principles of Corporate Governance in a state-owned enterprise" and the "Efficient State 2020" Strategy adopted by the Council of Ministers on 12 February 2013, stipulate the necessity to focus and consolidate the ownership activities. The OECD Guidelines indicate that "exercising of ownership rights should be clearly defined in the state administration structures. Attainment of this goal may be facilitated by the establishment of a coordinating entity or, what is more adequate, centralising of the ownership function". On the other hand, the provisions of the Strategy underline the legitimacy of introducing the standardised and effective mechanisms for execution of corporate powers by State Treasury in the scope of corporate supervision in companies and during privatisation of companies with State Treasury shareholding, inter alia, through consolidation of the regulations concerning corporate supervision and ownership transformations of entities with State Treasury shareholding within one Act of Law. The aforementioned assumption is justified both in terms of a system (in accordance with the Constitution the organisation of State Treasury and the procedures for management of state assets should be defined in the statutes c.f. art. 218), as well as considering the need of effective and consistent management of state assets 120 commercial law companies stay beyond the supervision of the Minister of Treasury, where the powers allocated to State Treasury are exercised by 11 various entities and bodies (status as at 31 March 2014). 2.1 Supervision Professionalisation Programme An essential tool to achieve the aforementioned effects is, among others, implementation of corporate governance principles, taking into account the applicable EU directives, OECD guidelines and the World Bank. In order to implement the aforementioned objectives, the Supervision Professionalisation Programme (PPN) was developed in the, meeting the expectations formulated in the OECD Guidelines The State should act as an conscious (holding sufficient information) and active owner, ensuring the execution of the supervisory functions over the public enterprise in the transparent manner, i.e. assuming the responsibility for the measures undertaken, as well as adopting the required professionalism and effectiveness. The Supervision Professionalisation Programme consistently and precisely defines the expectations of the Minister of Treasury and the standards which should be followed by members of supervisory boards representing State Treasury. The Programme assumes the improvement of the regular bilateral flow of information on risks and significant events influencing the activities of companies between Ministry of Treasury and the supervisory boards. The Programme will be successively developed. Up to date, as an introduction to the Programme, two documents have been prepared: Good Practices in the scope of ensuring balanced participation of women and men in governing bodies of companies aimed at equal exploitation of the potential of the whole population to the benefit of entrepreneurs, in particular, companies with State Treasury shareholding, Good Practices in the scope of shaping the level and components of remuneration in case of concluding managerial contracts with management board members of selected companies with State Treasury shareholding. This document provides details of issues covered, but not developed precisely in the provisions of the so-called Act on Public Sector Salary Cap.
9 2.2 The dividend policy Taking into account the long-term goals of the companies themselves and the needs of the state budget, development of clear solutions in the scope of the dividend policy is particularly important. This policy is flexible towards companies with State Treasury shareholding and demonstrates individual approach to each company, considering the market situation, position in the sector, investment needs, sources of operating profit or the stable balance sheet structure. It also fosters the stabilisation of a company shareholding. The policy is conducted so that safe development and long-term building of value is ensured to entities supervised by the Minister of Treasury, and simultaneously, while exercising the right of the owner to the profit, budgetary needs of the state are co-financed. The rules described above will be prepared in the form of a document defining the principles of the dividend policy, which will be prepared, among others, on the basis of the analysis of regulations already functioning in companies, the practice used by the Ministry so far and other documents related to the issues in question. 3. Entities of strategic importance for the state economy and entities of significant importance, supervised by the Minister of Treasury The main task of the Government is to conduct policy in all spheres of the economic and social life of the country. The possible impacts concentrate in two areas: governance impact (the empire sphere), ownership impact (the dominium sphere). In the framework of the ownership impact, the state (Government) assesses which of the asset components of State Treasury are required for conducting of the effective policy, among others, in the scope of: supporting the economic development, innovativeness and ensuring state security, with particular attention to energy security. It should be stressed that such an assessment should be performed for a possibly long time perspective, nevertheless, considering the need for flexible and effective response to the economic and social needs. The Minister of Treasury and other ministers supervise entities which require active management of the development and investment potential in order to: build value for shareholders, stimulate the process of creating the strong country economy, based principally on the domestic industry, co-create the economic security of the state. Therefore, in accordance with the "Efficient State 2020" Strategy it would be appropriate to separate, among others, from the aforementioned group, entities of strategic importance for the state economy, and to introduce specific regulations allowing for application of full market mechanisms for the effective management of such entities. The list of entities of strategic importance for the state economy is contained in Appendix no. 1. The entities of strategic importance for the state economy include such entities which may play the role of economic leaders in the process of Polish economy re-industrialisation. The re-
10 industrialisation process, detected by the European Parliament 2 is the direction which may lead to the emergence of new markets, among others, for new and innovative products and services, to the appearance of new business models, creative entrepreneurs and enterprises as well as to the creation of new jobs. Industry is the sector which usually contributes to the creation of added value in the economy, since each job in industry creates two additional jobs in the service sector. The Minister of Treasury also supervises entities of significant importance whose functioning and possibilities for ownership transformations are specified in individual strategies, legal regulations or targeted decisions, including those related to critical infrastructure (Appendix no. 2). 4. Building the value of State Treasury entities The expected effects of implementation of the state long-term goals in the economic sphere include: economic growth, ensuring security and support of the Polish know-how and brand. Accordingly, the Minister of Treasury has recognised the implementation of the smart development principle as one of the main areas of activities, fostering building of the knowledge-based economy and reindustrialisation of the Polish economy based on the strong position of key State Treasury entities. Their role and legal form will consider the needs in the scope of support of the state policies and its most important tasks. Effective use of assets of entities supervised by the Minister of Treasury and creating of new jobs will be also treated as a priority. In accordance with the corporate governance, the Minister of Treasury will continue activities leading to increasing the stability of the Polish economy, through the enhancement of the attractiveness of the capital centre, which is the GPW for the region, as well as creating the conditions for international development and expansion to the entities where the State Treasury is the shareholder. In the years activities aimed at increasing the value of the companies with State Treasury shareholding will mainly take place through: consistent building and application of corporate governance understood as rules and norms adopted for the management of the specific organisation under the corporate supervision, analysis and optimisation of organisational structures of companies and capital groups, taking decisions enabling the companies to acquire capital for the development and growth of competitiveness, including the support to the investment policies as well as initiating and promoting the cooperation between companies and the scientific and research community, optimum use of assets through the implementation of joint ventures. 4.1 Investment policy of State Treasury Functioning of Poland in the global economy system requires creation of conditions to ensure the relevant position in international markets to key entities from the point of view of the state. Effective activity for the increase in the value of State Treasury assets contributes to the development of innovative and competitive economy. The philosophy of managing the State Treasury shares has changed. The current approach mainly focuses on the management of the excess potential of state assets, and, among others, implementation of the "Polish Investments" Programme fosters building of their value. It is oriented 2 The Resolution of the European Parliament of 15 January 2014 on reindustrialising Europe to promote competitiveness and sustainability.
11 towards the long-term financing of development investments of significant importance for the strategic state interests. They mainly comprise infrastructural projects in the energy and gas sector, management of hydrocarbon deposits, transport, industrial, telecommunications and local government infrastructure. The "Polish Investments" Programme is based on two pillars financing investment projects - Bank Gospodarstwa Krajowego (BGK) and the company Polskie Inwestycje Rozwojowe S.A. [Polish Development Investments, joint stock company] (PIR). The financial resources enabling investing in special purpose vehicles and increasing the credit and guarantee action associated with the financing of the projects will originate from capital injection of PIR and BGK with the shares of the following companies: PGE Polska Grupa Energetyczna S.A., PKO BP S.A., PZU SA, where the State Treasury shall will retain corporate governance. The final size of the blocks of shares of the aforementioned companies, to be contributed to PIR, will depend on the financial needs associated with the involvement in implementation of the investment projects. The Council of Ministers approved the contribution of the blocks of shares, limiting only their maximum level, therefore, the Minister of Treasury has a possibility to sell their part and acquire revenues from privatisation for the State Treasury. The capital injection of BGK will enable to obtain the multiplication effect, due to which the bank capitals increased by the aforementioned resources will allow for 7-fold increase of the credit and guarantee action associated with the needs of long-term financing of this type of investments. The investment policy of the company Polskie Inwestycje Rozwojowe S.A. is based on four principles: striving for the economic development of the country, i.e. investing in projects which shall contribute to the Polish GDP growth, create new jobs and ensure the increase in effectiveness, investing on market basis, i.e. involvement in projects in which the expected return rate is adequate to the risk and market expectations, activation of private capital for infrastructural investments, dissemination of good business practices. The analysis of the market environment indicates the need for more effective use of funds from the Entrepreneur Restructuring Fund (FRP) and shifting the focus from support of the restructuring activities of enterprises (mainly companies with State Treasury shareholding or companies where State Treasury has a dominating position) to development-friendly investments, including projects of innovative nature, implemented also by medium and large private enterprises which may not use the standard offer of the financial market. The aim of the support is to increase the competitiveness of Polish entrepreneurs and enable them to implement the investments, also those of innovative nature. In the process of support offered to Polish entrepreneurs, Agencja Rozwoju Przemysłu S.A. [Industrial Development Agency, joint stock company] (ARP) plays an essential role. Within the funds originating from FRP, the Agency grants public aid and support which is not classified as public aid. ARP focuses on the support to the development and modernisation of Polish enterprises, enabling them to compete in global markets effectively. Development-friendly and innovative measures are mainly promoted. 4.2 Investment cooperation between State Treasury companies The effective use of property and, at the same time, the increase in the value of assets, is also based on the assumption of investment cooperation between State Treasury companies. The Minister of
12 Treasury supports activities of the entities supervised in the scope of joint actions aimed at creation and implementation of significant investment projects. An example may be the draft agreement negotiated and initialled between KGHM Polska Miedź S.A., PGE Polska Grupa Energetyczna S.A., Tauron Polska Energia S.A. and Enea S.A. concerning the purchase of shares in the special purpose vehicle for construction and operation of a nuclear power plant - PGE EJ1 sp. z o.o. Joint actions and ensuring the financing of the projects by their participants enables to obtain the synergy effect and considerably increases the success opportunities of the new initiative. In order to maximise the potential of assets held by State Treasury companies, in the years , Ministry of Treasury intends to monitor the coherence of goals and scopes of the strategic projects under implementation. 4.3 Innovative policy of State Treasury companies and cooperation with the scientific and research environment The strategic objective of the economic and social policy of the state also assumes the exploitation of the potential existing within companies with State Treasury shareholding, through increasing of their innovativeness understood as demand and ability of entrepreneurs to commercialise knowledge and results of studies derived from the world of science, as well as to conduct own studies improving and developing production, and to search for new solutions and concepts. Innovation in economy leads to creation of new products, enhancement of technology, increasing the effectiveness and, consequently, to increasing the economy competitiveness in relation to other countries. The strive for increasing the expenditure of Polish enterprises related to scientific and research activities is integrally associated with the implementation of goals defined by the priorities contained in the Europe 2020 Strategy and in the assumptions of the Operational Programme - Smart Growth They indicate the conditions of development fostering knowledge-based economy, more competitive, effectively using the resources and environmentally-friendly, as well as ensuring the optimum level of employment. Cooperation between science and business in order to use the scientific achievements in the economic practice is the opportunity for full and effective expenditure of resources from the European funds supporting smart growth and innovative potential, both in the form of new technology as well as new solutions in the scope of work organisation, management and services. The use of the scientific potential and the research base of universities, with simultaneous support offered to the scientific and educational activity promotes not only the scientific centres and State Treasury companies but also contributes to the increase of innovativeness of the whole society. An example of a research and development project implemented at an extensive scale is the Blue Gas Polish Shale Gas Programme, announced by the National Research and Development Centre and Agencja Rozwoju Przemysłu S.A. in The Programme focuses on the support of large, integrated research and development projects, comprising the development of solutions leading to commercialisation of the innovative technologies associated with the exploration and extraction of shale gas. All industrial partners engaged in the specific project, while financing only a part of resources needed to conduct the studies, will have full access to the research results and a possibility to use the technologies or methodologies developed in their own operational practice. The initiatives undertaken by the Minister of Treasury set directions of actions in the scope of building the value of of State Treasury assets. Therefore, meetings of representatives of science and various economic sectors are planned to be initiated in order to explore innovative technologies
13 offering high implementation potential and transfer them to business, which should positively influence the development of individual companies and the increase of their market position. The priority of Ministry of Treasury is to intensify the cooperation with Agencja Rozwoju Przemysłu S.A., in order to support small and medium-sized entrepreneurs within the development of innovative projects. The Minister of Treasury, recognising the potential of small and medium-sized enterprises and their importance for the State economy, shall consider a possibility to address the financing provided by ARP also to this kind of entities. At present, the Agency provides support which is not classified as public aid, only to large entrepreneurs.
14 II. Ownership transformations In the period of implementation of the "Privatisation Plan for the years " and the "Privatisation Plan for the years ", the number of companies supervised by the Minister of Treasury decreased by over two-fold. According to the status as at 30 June 2014 the State Treasury stopped acting as a shareholder in 874 companies, with the simultaneous increase in the number of companies with State Treasury shareholding by 240 entities (as a result of commercialisation and acquisition/takeover of shares from other entities). Privatisation Plan for the years Privatisation Plan for the years active compani es 0 Beginning Początek End Koniec obowiązywania of the Plan obowiązywania of the Plan effectiveness Planu effectiveness Planu Zwiększenie Increase in number liczby of companies spółek Liczba sp. w nadzorze Number of companies supervised by 0 Beginning Początek obowiązywania of the Plan effectiveness Planu End Koniec obowiązywania of the Plan effectiveness Planu Zwiększenie liczby spółek Increase in number of companies Liczba sp. w nadzorze Number of companies supervised by According to the status as at 30 June 2014, the Minister of Treasury supervises 599 companies. They include 40% of active entities (conducting business operations) and the remaining part represents companies under bankruptcy, liquidation which do not carry out business operations and companies where State Treasury only holds employee shareholding. The implementation of ownership transformations is aimed at consistent limitation of the state role in such areas where execution of corporate supervision by public administration authorities is not necessary, allowing for the streamlining and optimising of the resources held. The purpose of effective management of the State Treasury assets, including the ownership transformations, is also to administer the public property so that, on the one hand, it shall contribute to the growth in the value of assets held, on the other hand, enabling to use this value in optimum way, consequently influencing the budgetary balance of the state. The new challenges emerging in connection with the streamlining of the State Treasury resources impose the need to define the optimum ownership concept for entities remaining under the supervision of the Minister of Treasury for the nearest two years. The changing conditions
15 determining conducting of the ownership transformation processes, such as the economic and social situation of Poland, the strategic goals of the state, or the quantitative and qualitative change of companies still supervised by the Minister of Treasury, require a comprehensive approach to those processes. The experience gained within the implementation of the privatisation processes so far indicates that not only privatisation but also other forms of ownership changes may generate positive effects for companies and for the whole economy. For this reason, the broadly understood ownership transformations comprise not only the disposal of stocks or shares in companies, communalisation, redemption of shares or stocks, or contributions to increase the share capital, but also the consolidation, processes of merger or division of companies, and in some cases, liquidation. They also comprise any other measures related to the administration of assets of State Treasury companies, or their part, not directly associated with the business operations conducted and may be effectively used by other economic operators. The objective of ownership transformations, depending on their form, is to ensure capital or know-how inflow from the investor, delegate influence on economic operators significant for the local community to the local governments, support synergy processes in companies or optimise assets and their exploitation in the entities supervised by the Minister of Treasury. The list of entities which may be subject to ownership transformations is presented in Appendix no. 3 (according to the status as at 30 June 2014). 1. Privatisation Privatisation of State Treasury companies will continue to play an important role in the ownership transformation processes due to the opportunities offered to the companies by acquiring of an investor. Access to new financing sources and modern technologies as well as the change in the quality of management increases the opportunities of the privatised entities to raise their competitiveness, ensure the stability of operations and the development in a long-term perspective. However, it should be stressed that the selection of the optimum procedure and timeline of the ownership changes for individual companies will proceed in accordance with the flexibility rule, allowing for dynamic and, at the same time, adequate response to the changing financial situation of companies, their micro- and macroeconomic environment as well as the perspectives of further conducting and development of the operations. The ownership transformation processes of individual entities will also consider the social environment, among others, in terms of public interest or needs of local communities. Alternative solutions in the scope of ownership transformations will be also searched for, which shall enable the streamlining of the State Treasury resources. In case of privatisation of large State Treasury companies, the preferable method will be the sale of shares on a regulated market, including the use of opportunities offered by the stock exchange debut (IPO Initial Public Offering). In some entities the process of limiting the functioning of a company to its core business operations may contribute to the increase in revenues and reduction of costs. For almost a half of companies designed for ownership transformation in the period of the nearest two years, obstacles and barriers which may jeopardise changes in the ownership structure have been identified. The most common barriers include: unregulated legal status of real property held by companies, difficult economic and financial situation of entities, redundant assets,
16 unattractive sector in which a company operates, low profitability, re-privatisation claims, required approval of other shareholders for the disposal of stocks or shares of State Treasury, minority shareholding of State Treasury. The obstacles emerging during the ownership transformation processes require increased labour expenditure, generate additional costs and delay the completion of the process. The effectiveness of the ownership transformation implementation also depends on the interest of potential investors, in particular, on their potential to acquire financial resources, affecting the price conditions offered at the purchase of stocks or shares of State Treasury. Accordingly, in order to mitigate the impact of the barriers preventing the ownership transformation processes, intraministerial "problem teams" are established at the Ministry of Treasury, in relation to selected companies or groups of companies. Their role is to develop an effective ownership concept through combining expertise of specialists representing several disciplines. 2. Consolidation and merger processes Considerable opportunities for the companies transformed may be also created by processes based on consolidation and merger, or contribution of shares in order to build the value of capital groups, which is one of the methods to obtain the synergy effect, cost optimisation and, consequently, the growth in the value of an enterprise. Such processes may be implemented, among others, by the Minister of Treasury or Agencja Rozwoju Przemysłu S.A., within all State Treasury entities. An example of such an approach is the consolidation of companies of the defence sector within Polska Grupa Zbrojeniowa S.A. (Polish Arms Group, joint stock company). Owing to this process, a strong group with revenues reaching PLN 5 billion is created. Agencja Rozwoju Przemysłu S.A. should become a leading entity which, due to the knowledge and experience gained, shall lead the company restructuring processes. The engagement of the ARP under the commercial conditions, as an independent investor, should represent a factor offering opportunities of successful restructuring of companies. The participation of the Agency may be used during the implementation of governmental strategies, e.g. in the scope of energy development. 3. Sale of employee share blocks Due to the current stage of ownership transformations, 115 among companies supervised by the Minister of Treasury are the entities where all stocks or shares are to be taken over by authorised employees of the privatised companies (according to the status as at 30 June 2014). In accordance with the Act on commercialisation and privatisation these companies will remain under the supervision until the termination of the statutory time limit of free release of shares to employees, lasting 24 months, or the disposal of such shares which have not been accepted by authorised employees or their successors (Appendix no. 4). If State Treasury still acts as a shareholder with the "residual" interest in the share capital following the lapse of the aforementioned time limit, the processes of sale of this type of share blocks will be carried out.
17 4. Communalisation In case of companies executing tasks important from the perspective of a given region, the procedure of free transfer of shares to the local government units will be considered (communalisation). Owing to the amendment to the Act on commercialisation and privatisation, initiated by Ministry of Treasury, the catalogue of companies which may be covered by the communalisation processes, will be extended by entities which were established under the procedures other than commercialisation. 5. Transformation of entities with limited disposable potential The supervision of the Minister of Treasury comprises entities with limitations concerning the disposable stocks or shares, arising from the statutes, governmental strategies or statutory provisions associated with maintaining of the corporate governance by State Treasury. Such entities may be subject to ownership transformations, however, taking into consideration the applicable legal regulations / targeted decisions or potential changes concerning the form of functioning or the ownership structure. Such a rule shall also apply to the processes of consolidation, merger or division of entities with limited disposable potential. The transformations of entities listed at the GPW will be conducted in the scope enabling the Minister of Treasury to execute the ownership policy, with respect to the market rules. 6. Processes of restructuring as well as liquidation and bankruptcy State Treasury companies also comprise entities which require restructuring, understood as a process of systemic changes adjusted to the effective implementation of the enterprise goals and creating the conditions of the growth of its value. The Minister of Treasury will actively support the restructuring and remedying measures through setting the goals and taking ownership decisions in this area. Such changes may refer to the transformation of the organisational form, consolidation of entities, division of an enterprise, management decision-making systems, human resources or the disposal of assets redundant for the operations conducted, e.g. real property. The main goals of the implementation of the restructuring processes of State Treasury companies include: increasing the level of exploitation of assets, increase in profitability, improvement of competitiveness, ensuring the financial liquidity, improvement of the financial result. A significant number of State Treasury companies under liquidation, bankruptcy and those which do not conduct any business operations causes that within the planned ownership change processes, activities aimed at termination of their activity and satisfying the creditors, will play a considerable role. Ministry of Treasury intends to continue public aid aimed at saving and restructuring of enterprises facing a very difficult economic and financial situation. At present, within the "Policy of New
18 Opportunity", Ministry of Treasury participates in the development of the assistance programme to regulate comprehensively the rules on granting public aid to small and medium-sized enterprises. Following the notification by the European Commission the programme will enable to take decisions concerning offering aid from FRP for saving and restructuring of small and medium-sized enterprises at a national level, which shall significantly accelerate the disbursement of funds to the entrepreneurs. Authorities to participate in the development of the programme include Ministry of Economy, Ministry of Treasury, Office for Competition and Consumer Protection. The development of the optimum structure of State Treasury assets is associated with ownership changes and constitutes an integral element of the ownership policy of the state which will be executed by Ministry of Treasury based on operational documents. The rationally conducted ownership transformation processes will make an effective tool for the effective management of State Treasury assets in the period of the forthcoming two years.
19 List of entities with strategic importance for the state economy, supervised by the Minister of Treasury (according to the status as at 30 June 2014) Appendix no. 1 No. Name of entity Minister exercising rights arising from shares Justification 1 Agencja Rozwoju Przemysłu S.A. 2 Bank Gospodarstwa Krajowego The company is one of the main instruments of the state supporting measures aimed at adjustment of the Polish economy to the functioning under market economy conditions; entered to the list of companies of particular importance for the state economy (Regulation of the Council of Ministers of 22 October 2010). The Bank fulfils the role of the state policy instrument ans executes tasks commissioned by the Government pursuant to the Act on Bank Gospodarstwa Krajowego. Its system and transformation procedure is regulated by the provisions of the Act on banking law, whereas the provisions of the Act on commercialisation and privatisation shall not apply in this case. 3 Grupa Azoty S.A. 4 Grupa LOTOS S.A. 5 KGHM Polska Miedź S.A. As a result of consolidation of the chemical sector the Group was established which is one of the leaders of the European fertiliser market. The entity of strategic importance for the economy of the state, where the Minister of Treasury shall maintain the corporate governance. The Company covered by the "Policy of the Government of the Republic of Poland for the petroleum industry in Poland", pursuant to which State Treasury shall at least maintain its role as the majority shareholder of the Company. The Company holds strategic resources and implements key investments. 6 PGE Polska Grupa Energetyczna S.A. In accordance with the provisions of the document "Energy policy of Poland until 2030", State Treasury will maintain the majority shareholding in the company. Within the implementation of the "Polish Investments" Programme, contribution of 7.89% of shares or acquisition of revenues from privatisation is possible. 7 Polska Grupa Zbrojeniowa S.A. As a result of the on-going consolidation process, the company will ultimately become a dominating entity of a capital group where companies of the defence sector, with direct or indirect State Treasury shareholding, will be concentrated. 8 Polska Wytwórnia Papierów Wartościowych S.A. MSW (power of attorney) Company of particular importance for the state economy (Regulation of the Council of Ministers of 22 October 2010 concerning the defining of state enterprises and sole shareholding State Treasury companies of particular importance for the state economy) and of particular economic and defence importance (Regulation of the Council of Ministers of 4 October 2010). 9 Polski Koncern Naftowy ORLEN S.A. The provisions of the "Energy policy of Poland until 2030" stipulate maintaining of State Treasury shareholding at least at the level recorded so far.