apr-11.pdf (2.07 MB) - Crown Ownership Monitoring Unit

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Special Topic: IndependentCommercial Valuation ReportsUnder the State-Owned Enterprises Act 1986 the principal objectiveof an SOE is to operate as a successful business. In the absenceof shares in SOEs being exposed to a market assessment oftheir value, robust Board estimates 7 of commercial value take onheightened importance both as an input into TSR, and as a metricin its own right, in assessing the extent to which SOEs are deliveringupon that principal objective.To provide an independent view of the value of the SOEs that can be compared with thecompany’s own estimates, COMU has commissioned independent commercial valuationreports for each SOE. 8 Copies of the reports are available on the COMU website.This special topic summarises the results of Board estimates of commercial value, andcompares them to the independent valuations. The results provide confidence that mostBoards are using robust approaches to their commercial valuations.Board estimates of 2010/11 commercial value are unchanged inaggregate from 2009/10 for SOEs in the commercial priority portfolio withindependent valuations at a similar levelIndependentvaluationresults aregenerallyconsistentwith Boardestimates ofcommercialvalueTable 7 provides a summary of the independent commercial values and a comparisonwith SOE Boards’ own estimates of commercial value, published in their 2010 and 2011Statements of Corporate Intent (SCI).The total reported SCI Board estimate of commercial value of the SOE portfolio isunchanged from last year, being $19.6 billion (excluding KiwiRail Group, which haschanged its valuation methodology for its SCI 9 ). In aggregate, the SOE Boards’estimate of commercial value of $19.6 billion is $1.1 billion higher than that assessedby the independent commercial valuations, where the SOE’s contributed the majority ofthe difference. Given the potential for significant differences in valuation assumptions,and differences in the level of information available to each valuer (private versus onlypublicly available information), we do not consider this difference to be significant.It is also reassuring to note that the aggregate commercial value of the SOE portfolioas assessed by the independent valuers and SOE Boards is $4.5 billion to $5.6 billionhigher (excluding KiwiRail Group) than the book value of equity.7 The Boards of SOEs are required to estimate the commercial value of the <strong>Crown</strong>’s investment and disclosetheir estimates annually in their SCI.8 In 2009/10, COMU commissioned reports for the generator retailers Transpower, Solid Energy and NZ Post.In 2010/11, independent commercial valuation reports were commissioned for all SOEs.9 KiwiRail Group reported in its SCI the value of the <strong>Crown</strong>’s investment as at 30 June 2010 as $12.4 billion,being the book value of shareholders’ equity. That value reflected the application of existing accountingmethodologies to determine asset values. In the 2011 SCI, the KiwiRail Group board estimate of commercialvalue of KiwiRail Group is negative $484 million using a discounted cash flow (DCF) valuation methodology.page | 26
Book value and commercial valueOne measure of the value of a company is its book value of equity. The book valueof equity can deviate significantly from market value if the earning power of assetshas increased or declined since they were acquired. Book values are also affected byaccounting policy decisions, and may not carry much meaning for service firms withlow asset bases.By comparison, commercial valuation is a forward-looking measure, generally basedon the net present value of future cash flows, thereby setting a standard for futureperformance that needs to be achieved to maintain or increase company value.page | 27
Page 1 and 2: 2011AnnualPortfolioReport
Page 3 and 4: 2011AnnualPortfolioReport
Page 5 and 6: 51 Crown Financial Institutions52 A
Page 7 and 8: topic on CFI risk tolerance (page 4
Page 9 and 10: Commercial Priority Portfolio Perfo
Page 11 and 12: page | 9
Page 13 and 14: Crown Financial InstitutionPerforma
Page 15 and 16: EQC has been excluded from the anal
Page 17 and 18: Longer-term performance has been be
Page 19 and 20: Figure 6 - Annualised return and ri
Page 21 and 22: page | 19
Page 23 and 24: Company financial performanceRevenu
Page 25 and 26: Figure 9 - Dividends for the last f
Page 27: Figure 12 - TSR - return compositio
Page 31 and 32: There have been offsetting movement
Page 33 and 34: Special Topic: Commercial PriorityP
Page 35 and 36: F igure 14 - Net operating profit d
Page 37 and 38: jurisdictions is fraught. There are
Page 39 and 40: Key assumptions and features of the
Page 41 and 42: ROIC 2002 2003 2004 2005 2006 2007
Page 43 and 44: By 2011 the landscape for SOE discl
Page 45 and 46: There have been considerable improv
Page 47 and 48: ...and invest in different levels o
Page 49 and 50: It is not clear whether the level o
Page 51: Board demographicsThe breakdown of
Page 54 and 55: Accident Compensation CorporationCH
Page 56 and 57: Earthquake CommissionCHAIR » Micha
Page 58 and 59: Government Superannuation FundCHAIR
Page 60 and 61: National Provident FundCHAIR » Cat
Page 62 and 63: New Zealand Superannuation FundCHAI
Page 65 and 66: CommercialPriority Companies
Page 67 and 68: Major investmentsThe total investme
Page 70 and 71: Animal Control Products LimitedCHAI
Page 72 and 73: AsureQuality LimitedCHAIR » Janine
Page 74 and 75: Crown Fibre Holdings LimitedCHAIR
Page 76 and 77: Genesis Power LimitedCHAIR » Rt Ho
Page 78 and 79:
Kordia Group LimitedCHAIR » David
Page 80 and 81:
Landcorp Farming LimitedCHAIR » Ho
Page 82 and 83:
Learning Media LimitedCHAIR » Sand
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Meridian Energy LimitedCHAIR » Chr
Page 86 and 87:
Meteorological Service of New Zeala
Page 88 and 89:
Mighty River Power LimitedCHAIR »
Page 90 and 91:
New Zealand Post LimitedCHAIR » Ho
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New Zealand Railways Corporation (t
Page 94 and 95:
Public TrustCHAIR » Trevor JanesBO
Page 96 and 97:
Quotable Value LimitedCHAIR » Phil
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Solid Energy New Zealand LimitedCHA
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Television New Zealand LimitedCHAIR
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Transpower New Zealand LimitedCHAIR
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Multiple ObjectiveCompanies
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Crown Research Institute TaskforceD
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OperationsNZVIF has been operating
Page 111 and 112:
Entity AbbreviationsACC - Accident
Page 113 and 114:
Measure Description CalculationShar
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Financial Position Financial Perfor
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The financial data in the 2011 APR
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apr-11.pdf (2.07 MB) - Crown Ownership Monitoring Unit

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