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The long process of public enterprise disinvestment: the case of privatisation in Spain

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Borja Colón de Carbajal. Career Civil Servant in the Upper Technical Staff of the Generalitat Valenciana

From the eighties onwards, privatisation became a common practice of economic policy in many countries. A practice also undertaken in Spain, after its entry into the then European Economic Community, at the point in time when our country's public companies were forced to start their adaptation to EU legislation deregulation and competition.

between two positions still existing until today: on one hand, precisely the derivative of the principle of competition, which promoted the privatisation of public enterprises preventing them monopolizing a particular sector of activity and, on the other, that which is the principle of non-discrimination, which subjects the already privatised companies to the tight controls of openness and transparency derived from the public contracts regulatory directive.

In 1985, following the international trend, in Spain divestment and sale of public enterprises started. The bodies responsible for carrying them out in Spain have been the National Institute of Industry, TENEO, the National Institute of Hydrocarbons, the State Industrial Agency, the State Industrial Holdings Company (SEPI), and State Assets through since 1996, State Heritage Holdings Company (SEPPa), until its integration into SEPI itself.

In Spain 120 companies have been privatised

Since the process of selling these public enterprises began up to the present, in Spain about 120 companies that had state public participation have been privatised. In economic terms, these operations have provided an approximate income of 45,000 million Euros. Most of these revenues come from sales of public enterprises realised through Public Offering (IPOs), and through this system, 14 companies have been wholly or partly privatised, some of them in several phases. There have been 29 state IPOs to date, with total revenues of around 32,000 million Euros. Up to 20 of these included large retail operations sections, which has prompted the entry of numerous investors into the stock market.

These operations have led to the stock market listing of large Spanish business groups that emerged and consolidated through state action. This is the case of Repsol, Endesa, Telefonica, Tabacalera (Altadis) and Iberia. In addition, some of the privatised companies, through direct sale or IPO, participated in the formation of European industrial groups in areas of great importance in the world, such as aeronautics, in which CASA was integrated into EADS, or ACERALIA with integrated ARCELOR (now ArcelorMittal).

The first Public Offering (IPO) of a public company was held in 1986, specifically with the 39% stake in the gas and electric company, La Compañía Gas y Electricidad, S.A. (GESA), a subsidiary of ENDESA. After this IPO, in 1987 followed 29% of the capital of ACESA, which already had a section aimed at retail investors. However, the first two major operations were conducted in 1988 with 18% of the shares of Endesa and in 1989 with 26% of the share capital of REPSOL, both with major retailers sections.

The 29 state SEOs made to date have lead to, as already mentioned, total net revenues of approximately 32,000 million Euros, the largest proportion raised in 1997 and 1998. Highlights include two SEPI carried out for the complete privatisation of ENDESA, particularly the last one in June 1998, by selling more than 312 million shares, representing 30 percent of the capital. The IPO, in which 80% of the shares were assigned to the retail tranche, provided an income of over 6,000 million Euros. The previous IPO of ENDESA, in October 1997, sold more than 260 million shares (25.44% of the capital), 67% of them among investors, with revenues that exceeded 4,000 million Euros.



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