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Introduction |
During an investment banking conference, centered on Balkans privatization issues, discussion focused on strategic privatization of the electricity sector in the economies in transition and identified the lessons learned and best practices for the benefit of future privatization efforts. Countries in attendance represented three groups:
(1) those with some privatization completed,
(2) those in the process of implementing privatization; and
(3) those with privatization policies and plans in place or development.
The participants generally agreed that the primary goal of electric sector strategic privatization is to restore and improve the system to provide reliable least-cost and environmentally sound electricity. Further, the participants agreed that this is best accomplished though the establishment of a clear and transparent process for privatization that leads to the purchase of state-owned assets by qualified strategic investors who possess the financial, commercial, material, technical expertise and, international experience to own and operate electric utilities in a transparent market oriented manner.
A key finding of the conference was that to successfully attract qualified strategic investors, the government must establish from the outset he proper sector conditions and (2) sound privatization policy and process. First the proper electricity sector reforms are needed such as (a) monopoly unbundling and establishment of a well defined electricity market, (b) establishment of a legal framework, and (c) development of a competent autonomous regulatory body with substantial authority. Second a sound privatization policy should provide strategic investors with financial and managerial control of the assets (at least 51% ownership) and a sound, transparent and timely process.
Taking these steps will assist the country in meeting several other objectives commonly associated with privatization, including:
1) Improving access to private capital resources for the rehabilitation, replacement and eventual expansion of the electric power infrastructure;
2) Improving access to new technology and management practices designed to improve the performance of the sector;
3) Reducing corruption through the introduction of commercial practices which will lead to strengthened collections, transparent and accountable delivery of electricity and reduced political interference in commercial operations; and
4) Improving customer service and customer choice through continued reform of the power sector as a result of innovation and reform introduced by the new owners.
The following provide a wide range of policy, institutional, organizational and procedural practices best suited to meet the privatization goal and objectives discussed above. Among the topics addressed at the conference were:
1) Setting appropriate privatization objectives;
2) The relationship between the creation of stable and transparent legal/regulatory institutions and the ability to attract private strategic investors;
3) The timing of privatization and its relationship to the introduction of competition in the sector;
4) The preferred sequencing of the sale of generation, transmission and distribution assets;
5) The role of various government entities in the privatization process;
6) The selection and role of the investment banker as advisor to the government in the privatization process; and
7) The process and schedule for the actual implementation of the privatization procedure including the importance of prequalification of potential strategic investors, selection of the winning proposal, negotiation and the provisions of the sales contract.
The conclusions from these discussions are set forth below in two parts:
(I) Key Elements of Power Sector Strategic Privatization, and
(II) The Privatization Process.
As these two titles reflect, experience shows that certain common, if not universal, principles apply in achieving a successful privatization. While the details of how and why a privatization goes forward can vary depending upon country circumstances, many traits are shared in successful sales of energy assets, and lessons have been learned that can be applied to increase the probability of success.
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Table
of contents |
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I. Power Sector Privatization |
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II. Privatization Process |
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Conclusion |
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