Planned recapitalisation, ‘updated’ intervention strategy: Post-crisis risks for state shareholders, which have mobilised significant resources to support their group capital, the Court of Auditors warned in a report published on Sunday.
In this report, the Court of Auditors is interested in the management of the pandemic by the state as a shareholder of the company, either through the management of large companies (EDF, Air France-KLM, Orange, etc.), or through the Caisse des dépôts (CDC) and Bpifrance.
The sages welcomed the nation’s “effective” mobilization in 2020 to support groups that hold part of the capital, considering the “powerful means” deployed “played a key role in a number of large-scale operations” such as support for Air France-KLM, Renault or EDF.
Collectively, these interventions are “highly costly” for the state, the court stressed, estimating a budget impact of around €15.5 billion for 2020: $2.4 billion in uncollected dividends, $9 billion in possible reduced income from disposals, including ADP , and $4 billion from capital interventions (excluding the $4 billion increase in the SNCF that the court deemed unrelated to the crisis).
In addition to this, asset losses are estimated at around 11 billion euros, of which APE-managed portfolios alone lost 9.7 billion euros, related to the decline in the value of state-owned assets in the crisis-hit transport and energy sectors.
“In addition to the costs observed in 2020, the health crisis, which is not yet over at the time of writing this report, has had an impact on the prospects of the companies involved and has created a risk of future costs for public shareholders,” but the court was concerned.
– “structural” issues with some flagships –
Compared to Bpifrance or the Caisse des dépôts (CDC), the court has paid particular attention to APEs that manage public equity in large companies: “The delayed impact of the crisis on equity managed by APEs may be meaningful,” she warned.
She specifically mentioned the “recapitalization needs” following the 2020 crisis, for certain industrial flagships with “structural issues with profitability and cash flow”.
She cited the example of Air France-KLM, which had already had to convert state-granted advances to indefinite loans last year and launched its first capital increase, essentially subscribed by the state.
In her response to the court report, Anne-Marie Couderc, chair of the airline group’s board, also referred to a “capital increase in the first half of 2022, which will likely “start repayment of aid the group has benefited from”.
The court cited a December 2020 APE study that assessed the need for public funding to enhance equity in distressed companies under more or less optimistic scenarios (excluding interventions in EDF and SNCF) 20 billion euros.
Already pivotal in the 2017 report on the state’s policy as a shareholder, the court this time explicitly called on the latter to “update” the strategy set out in 2017, which stipulated that APEs selling shares must fund their holdings.
Because the crisis reduces the likelihood of immediate disposal and dividend collection, and the need for intervention “could be very high, the traditional income outlook for state shareholders is uncertain, whether it is to support the transformation of listed companies or to further participate in protecting strategic companies,” she noted.
The court also wants to clarify the respective roles of APE, CDC and Bpifrance in order to develop better policies for state shareholders.
A road the government doesn’t seem to want to take. In his response to the court, Prime Minister Jean Castex argued that such reflection was “premature” and that the 2017 doctrine “showed completely satisfactory results” before the crisis.