Guest Contributor

On 17 November 2011, representatives of the French financial, industrial and private equity community were invited to a celebration to mark the 3rd anniversary of the creation of France’s Fonds Stratégique d’Investissement (FSI) at the Elysées presidential palace.

President Nicolas Sarkozy congratulated the sovereign wealth fund on its achievements since its creation in 2008: a total of Euro 5.9bn invested in French companies, small and large.

He also announced the establishing of 3 successor funds focused on 3 sectors: aeronautics (Aerofund 2), healthcare (InnoBio MedTech) and nuclear energy.

The event was relatively discrete, and observers noted that the President was obliged to make some new announcements on the subject of the financing of French small and medium sized companies (SMEs), an area he champions closely. The mandate of the FSI remains quite different from that of major SWFs – it is mainly inward-looking and designed as a pillar of France’s industrial policy. One of the chief objectives is to support the development of future champions of French industry, throughout the value chain, down to the smallest subcontractor. Its investments have been chiefly to insulate French SMEs from hostile takeovers, rescue distressed companies or meet financing needs that the rest of the financial markets cannot provide. Indeed France has several investment and credit entities with a multiplicity of programs to assist the development of SMEs. These institutions include CDC Entreprises (a subsidiary of French state institution Caisse des Dépôts, also the 51% parent of the FSI), OSEO, Avenir Entreprises, etc, and the challenge is how to make them all work effectively together.

To delve deeper into the French local regions, Sarkozy wants to create a new fund called FSI-Régions. He did acknowledge that there would be a slowdown in the pace of investment because of the current crisis, and made no mention of new capital injections for the FSI. He stressed that the FSI, whilst serving the national interest, aims to make a reasonable profit, “but not obscene levels of profit like hedge funds”. He also lashed out at the banks, saying that they should declare less bonuses and dividends, and concentrate more on lending to industry. In spite of the pressure to meet new capital adequacy standards, the banks must not neglect the SMEs, he said.

The reaction of the attendees was mixed. Aside from questions over its purpose, the FSI has also been criticized for investing in companies that have sold defense systems to the Libyan and Syrian regimes.

No mention of an international strategy was made – cooperation and co-investment with foreign investors could serve to attract the additional capital that the FSI needs.

Alexia Wai-Chun Tye is a Partner at AddVenture, a private equity advisory firm.

The views, opinions, positions or strategies expressed by guest contributors and those providing comments are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of the Sovereign Wealth Fund Institute or any employee thereof.

GDF SUEZ and China Investment Corporation (“CIC”) have signed a Memorandum of Understanding (“MoU”) for cooperation across multiple businesses and regions, in particular in Asia Pacific. GDF SUEZ and CIC will cooperate on a non-exclusive basis to help accelerate their respective strategies by exploring areas of cooperation and co-investment opportunities. The MoU will be deployed across GDF SUEZ Group’s businesses (gas, power, water and waste, and energy efficiency services) and sets up the framework for cooperation in three areas:

(i) joint investment opportunities in existing and new energy-related projects in Asia Pacific;

(ii) financing cooperation in new projects in Asia Pacific;

and (iii) commercial sponsorship and support to GDF SUEZ in Asia Pacific region, including China, by CIC’s affiliates.

The MoU will be administered through a Steering Committee chaired by the two groups’ respective CEOs.

As the first milestone of this cooperation, CIC is in advanced exclusive talks with GDF SUEZ regarding a €2.3 billion minority investment in the Exploration & Production division of GDF SUEZ (“GDF SUEZ E&P”) (excluding the 22.5% equity stake in E.F. Oil and Gas Limited (“EFOG”)). CIC will own 30% of GDF SUEZ E&P, following a capital increase and a financial restructuring of GDF SUEZ E&P reducing its net financial debt to €0.7 billion.

The minority investment of CIC will reinforce GDF SUEZ E&P’s capital structure and will contribute to accelerate the development of this important activity for GDF SUEZ by providing the appropriate financial flexibility. Initiated in the 1990s via acquisitions followed by strong organic development, GDF SUEZ E&P has 2P reserves of 815 mmboe at the end of 2010, an annual production of 51 mmboe in 2010 and a significant portfolio of contingent resources and exploration prospects. With more than 1,500 employees in 13 countries, it generated €2.2 billion of revenues and €1.4 billion of EBITDA in 2010. The transaction values GDF SUEZ E&P (excluding EFOG) at c. €8.1 billion in enterprise value.

As part of the transaction, CIC would also acquire from GDF SUEZ a 10% stake in the train 1 of the Atlantic LNG liquefaction plant located in Trinidad and Tobago as well as production payments associated with trains 2, 3 and 4 for an amount of €0.6 billion.

The potential acquisition by CIC of a 30% stake in GDF SUEZ E&P and of its 10% stake in the LNG Atlantic liquefaction plant is part of GDF SUEZ’s portfolio optimization program of €10 billion, announced at the 2010 annual results presentation and would result in net cash proceeds of €2.9 billion. The transaction will be subject to condition precedents being satisfied and will be presented for consultation to GDF SUEZ’s employee representative bodies. The transaction could be finalized by the end of 2011. The GDF SUEZ Board of Directors views the cooperation with CIC and the transaction as having a strong strategic interest for GDF SUEZ.”

Read more: GDF SUEZ Press Release

Guest Contributor

France’s Fonds Stratégique d’Investissement (FSI) generated creditable results for 2010, reinforcing its raison d’être as France’s answer to the sovereign wealth fund model, albeit with a distinct national development mandate focusing solely on French domestic markets.  [Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

The views, opinions, positions or strategies expressed by guest contributors and those providing comments are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of the Sovereign Wealth Fund Institute or any employee thereof.

“The first phase of the recapitalization of Areva, you’re right, it’s imminent,” Besson said. “The negotiations are ongoing” and talks with the Kuwait fund “are advancing well.”

French Finance Minister Christine Lagarde said Dec. 1 that the country was in “active” talks with the Kuwait Investment Authority about selling a stake in Areva.

Source: Businessweek

Guest Contributor

During a visit of a high level presidential delegation in Paris on 27 October 2010, Samruk-Kazyna, Kazakhstan’s Sovereign Wealth Fund signed a master contract with France’s Caisse des Dépôts. Caisse des Dépôts, the 51% controlling shareholder of the French sovereign wealth fund FSI, was represented by its CEO Augustin de Romanet, concurrently President of the Board of FSI. The cooperation contract covers infrastructure, financing of SMEs, innovation, sustainable cities, and more generally, long term investment strategies.[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

The views, opinions, positions or strategies expressed by guest contributors and those providing comments are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of the Sovereign Wealth Fund Institute or any employee thereof.

Guest Contributor

Whilst the FSI’s newly appointed CEO Jean-Yves Gilet has yet to take up his position after the summer lull, the President of the Board, Augustin de Romanet, has been speaking publicly on a variety of issues facing the FSI and its 51% controlling shareholder, the state institution Caisse des Dépôts (“CDC”).

A frequently asked question concerns the financial resources of the FSI and its longer term future.  With the double threat of new prudential regulations Basel III and Solvency II that will soon come into force, de Romanet sees a shrinking of the traditional sources of funding for fast-growing, innovative companies, acting alongside the FSI and CDC.  In the medium term FSI will need further capital injections in order to ensure that promising French companies receive the support they need.  In the shorter term, de Romanet sees the solution coming from long term international investors, including in particular sovereign wealth funds, co-investing alongside the FSI and its parent CDC.  He also mentioned soliciting investors from Singapore, Malaysia and Kuwait. [Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

This article will appear in the Sovereign Wealth Quarterly Q3Y2010.

The views, opinions, positions or strategies expressed by guest contributors and those providing comments are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of the Sovereign Wealth Fund Institute or any employee thereof.

Under the terms of the transaction, Apollo would become the majority and managing shareholder in AEP with a 51 per cent stake in a new holding company for AEP, with the FSI holding 10 per cent. Rio Tinto would hold a 39 per cent stake.  Rio Tinto will respond to this binding offer following consultation with the relevant employee representatives.

Guy Elliott, Chief Financial Officer, Rio Tinto, said: “This potential sale of a majority stake to Apollo and FSI is in line with our strategy of divesting non-core assets of Rio Tinto Alcan. When this transaction is completed, we will have exited all downstream businesses, except Alcan Cable. We look forward to participating in the upside potential of AEP, both as a minority shareholder and key supplier to the business.”"

Read more: Rio Tinto Press Release