Government of the Republic of Slovenia Grants its Consent to Annual Assets Management Plan 2023
Ljubljana, 17 February 2023 - At its meeting held on 16 February 2023, the Government of the Republic of Slovenia gave its consent to the Annual Asset Management Plan for 2023, a key document for SSH as the central asset manager of the State capital assets. The Annual Asset Management Plan is the basis for the implementation of SSH's activities, reflects the expectations of the owner and enables SSH to monitor the achievement of objectives set by the companies in 2023. The 2023 Annual Asset Management Plan (AAMP) also covers the assets of the recently acquired Bad Asset Management Company (BAMC), and new capital assets taken over by SSH under ZSDH-1A.
Dividends received in 2022 above plans, estimates of the total return on equity (ROE) of the SSH portfolio of assets for 2022 marked by the tightening situation in the energy sector
The challenging situation in the Energy Pillar, which represents 30.6% of the book value of SSH's asset management portfolio, is strongly reflected in the portfolio's total return on equity in 2022. It is estimated that the ROE of the portfolio of capital assets in 2022 will stand at 1.5% due to the very poor performance of the Energy Pillar, which is lower than projected by the AAMP 2022 (5.0%). It should be noted, however, that other asset management pillars performed well in 2022 and will exceed the returns projected in the AAMP 2022.
Despite the situation described above, the dividend income received in 2022 for RS, SSH and ZPIZ, amounted to EUR 190.7 million, which is higher than the target of EUR 182.8 million. Dividends are also significantly higher than in 2021, when they amounted to EUR 151.3 million.
Ambitious forecasts for the results of the asset management portfolio in 2023 and highlights in asset management
In 2023, the ROE of the SSH’s portfolio is projected at 7.3%, which is significantly higher than the estimate for 2022, mainly due to the significantly improved performance of the energy companies, as projected. Planning at a time of great uncertainty and under assumptions known at the time, SSH set ambitious but realistic values for the companies' strategic and economic-financial indicators for 2023, recognising that in a rapidly changing environment and significantly increased risks, achieving the targets will be challenging. Strengthened management of key risks for all large companies have been added as an important expectation held by SSH in 2023.
Implementing a relevant dividend policy is one of core activities in the management of state assets, enabling SSH to pursue goals aiming at the maximisation of cash flows for the owner while simultaneously taking into account the performance results of individual companies included in SSH’s management portfolio and their development needs. The total dividend income planned to be received by RS, SSH and ZPIZ is estimated to amount to EUR 159.6 million in 2023.
A slight improvement in profitability in 2023 is foreseen in the Financial Pillar, which also performed well in 2022. Inflationary pressures, combined with the high share of regulated activity, will have a negative impact on the results of the Transport Pillar, leading thus to the ROE 2023 to be slightly lower than in 2022. Some important manufacturing companies from the Economy and Tourism Pillar saw a decline in activity in the latter part of 2022, and 2023 remains to be a challenging year for some of them, which is reflected in the pillar's projected underperformance compared to 2022, when the performance results are expected to be very favourable.
In 2023, the key activities pursued by SSH in managing the capital assets in the Energy Pillar will be focused on managing the financial and liquidity risks of the companies brought about by the energy crisis and uncertain energy markets. The primary objective is to ensure the highest possible energy self-sufficiency of the Republic of Slovenia and to increase the security and diversification of energy supply. In accordance with its competences, SSH will actively contribute to ensure that the necessary conditions are met to implement the green transition, which entails significant investments.
In 2023, the management of all new assets, which were acquired by the State and from the BAMC, will be enhanced. SSH intends to pay more attention to assets in these companies, in particular to the implementation of good corporate governance practices.
By acquiring new business, an effective claims management system has been put in place at SSH. As regards claim management, SSH will continue to pursue those strategies which have been assessed as providing the greatest value for a creditor.
Particular attention will also be paid to the active management of tangible assets, the bulk of which is real estate. The management of real estate will also examine any existing government strategies, for example those relating to housing.
Continuing the development of the corporate governance system and strategic topics to be tackled within the scope of the management of capital assets in 2023
In 2023, SSH will continue to encourage actions pursued in the following areas: risks management, compliance and integrity, corporate sustainability and corporate culture.
SSH intends to update several corporate governance-related instruments, specifically: the SSH Corporate Governance Code for SOEs, the SSH Recommendations and Expectations, and the SSH Asset Management Policy.
Sustainable corporate performance remains an important strategic governance topic, which focuses on gradual moving towards a carbon-neutral economy. Companies should have in place a governance structure, a clear strategy, a risk management framework and metrics and targets to address the impact of climate change on their businesses. In addition to the expectations contained in the General Section of the AAMP, sustainable performance targets for some large companies have been specified in the Special Section of the AAMP; many companies have already developed such targets based on the SSH's expectations.
In the post-epidemic environment, corporate culture and talent management have become an important element of competitive advantage for organisations, which is why it is important that this remains a strategic topic also in the tight economic climate. Corporate culture should also be given a proper place within corporate governance practices, and it is the role of the Supervisory Board to monitor and oversee this area.
Appendix: Annual Asset Management Plan 2023 - General Section