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NATIONAL FUND FOR THE FINANCING OF THE PERUVIAN STATE'S BUSINESS ACTIVITIES

NATIONAL FUND FOR THE FINANCING OF THE PERUVIAN STATE'S BUSINESS ACTIVITIES. Titto Almora Ayona Legal Manager FONAFE. FONAFE. 18 electricity generation and distribution companies. 2 Oil and remediation companies. 3 banks and finance companies. 1 water and sewer company. 6

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NATIONAL FUND FOR THE FINANCING OF THE PERUVIAN STATE'S BUSINESS ACTIVITIES

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  1. NATIONAL FUND FOR THE FINANCING OF THE PERUVIAN STATE'S BUSINESS ACTIVITIES Titto Almora Ayona Legal Manager FONAFE

  2. FONAFE 18 electricity generation and distribution companies 2 Oil and remediation companies 3 banks and finance companies 1 water and sewer company 6 service companies 5 infraestructure and transportation companies FONAFE: THE EXPERIENCE OF THE PERUVIAN HOLDING

  3. WHAT DOES FONAFE MEAN? CONTRIBUTION TO THE PUBLIC TREASURY THE FONAFE CORPORATION contributed S/. 5,000 MM ( US$ 1 877 MM) to the Public Treasury in 2010, through the payment of taxes and direct net transfers.

  4. WHAT DOES FONAFE MEAN? Evolution of Equity, Operative Income, Assets, and Personnel of the FONAFE Corporation's companies (2000-2010) (In millions of Nuevos Soles and in Number of People) E Q U I T Y - I N C O M E - P E R S O N N E L A S S E T S Equity Income Assets Personnel Note: As far as Assets and equity are concerned FONAFE is not considered a company. This includes personnel on payroll, allocation services, outsourcing and interns, except in the case of PETROPERU where only the personnel on payroll is considered.

  5. WHAT DOES FONAFE MEAN? Evolution of the Return on Assets (ROA), of the Return on Equity (ROE) and the Operational Income per worker of the FONAFE Corporation companies (2000-2010) (In percentage and in Thousands of USD$ per worker) T H O U S A N D S O F U S D $ P E R W O R K E R P E R C E N T A G E Operating income per worker Operating income per worker Note: In 2002 there were losses as a consequence to the sale of ETECEN's assets to the Ministry of Energy and Mines, a simbolic value, before it was turned over as a concession to the Red de Energia del Peru S.A. (REP). A concession contract was signed on September 05, 2002.

  6. WE HAVE MADE PROGRESS... SERVICE HUMAN RESOURCES TECHNOLOGICAL RESOURCES PROCEDURES STRATEGY

  7. WE HAVE MADE PROGRESS... STRATEGY Guidelines for Strategic Planning The objective is to align the companies' Strategic Plans with FONAFE'S and with the State's strategies. Besides, having elaborate Strategic Plans presented in a homogenous manner to facilitate transparency. Scope of Corporate Processes Good Corporate Governance

  8. WE HAVE MADE PROGRESS... STRATEGY Operations Management Guidelines for Strategic Planning Companies Distrib. I Companies Distrib. II Power Companies Companies Non-Electrical Infrastructure Diverse Companies Financial Companies Scope of Corporate Processes Management Corporate TIC Corporate Management of RRHH Corporate Purchasing Management Good Corporate Governance Investment Project Office

  9. WE HAVE MADE PROGRESS... STRATEGY Guidelines for Strategic Planning Codes of   Corporate Governance       for  different         state companies      (since 2005) Framework Code of GoodCorporate Governance of State EnterprisesUnder the scope ofFONAFE - 2005 Scope of Corporate Processes Good Corporate Governance

  10. WE HAVE MADE PROGRESS... SERVICE HUMAN RESOURCES TECHNOLOGICAL RESOURCES PROCEDURES STRATEGY

  11. WE HAVE MADE PROGRESS... HUMAN RESOURCES • The Boards of Directors are made up of 5 Directors, 4 who are appointed by the Minister of the Sector the Company is affiliated with and 1 who is appointed by the Minister of Economy • FONAFE evaluates that the appointments comply with the General Director's Profile. • FONAFE's Board of Directors has to approve the appointment. • The General Shareholder's Meeting of the Company has to approve the appointment of the Director. Director Profile Manager Head Hunter Minimum 10 years Minimum 05 years Besides, the rules in effect, the incorporation of at least one independent Director is considered for each Board of Directors, said procedure is in the process of being executed and some companies consider the incorporation of more than one.

  12. WE HAVE MADE PROGRESS... HUMAN RESOURCES The “Applicable Guidelines for Managers of the Companies under FONAFE”, seek to have these positions filled by professionals who comply with the profile required to be able to perform the duties of the position, it is also important that the Board of Directors has several candidates to choose from. Director Profile Year 2006: Applicable guidelines for the appointment of Managers of the State Owned Companies under FONAFE's scope. Year 2009: Order applicable to the selection of managers and equivalent positions in the Companies under FONAFE's scope. (Appointment of the GSM in case the Board of Directors doesn't do it within the established time-frame). Additionally, and internal manager rotation was incorporated at the same level with validation from the Head Hunter). Manager Head Hunter

  13. WE HAVE MADE PROGRESS... SERVICE TECHNOLOGICAL RESOURCES HUMAN RESOURCES PROCEDURES STRATEGY

  14. WE HAVE MADE PROGRESS... TECHNOLOGICAL RESOURCES • History • The great geographical distances made it complicated and tiresome to gather the managers and professionals of the related companies, so that they could share better practices or design and implement ad-hoc solutions to common problems that they faced. • Transportation and travel expenses and increase drastically. It would become very expensive to control if the trips were necessary and the internal auditor oftent penalized the workers. • Proposed Solution • Implement a video conference network in all the companies under FONAFE's scope, that will allow them to meet from one point to another or even five different positions at a time. • Results • Increase inter-company meetings and ordinary sessions on "corporate networks" • Reduction in transportation and travel expenses • A better use of the workers time in their companies. • Reduction of reprimands to workers and comp time in expense control Video Conference Network Electronic Document Exchange System Shared Data Center

  15. WE HAVE MADE PROGRESS... TECHNOLOGICAL RESOURCES • History • The documents sent from FONAFE to the Companies and viceversa, could take days to reach their destination and in many cases there was not the certainty that the document had been received by the apropriate person. • This caused a delay in gathering information in order to make decisions, as well as the communication of FONAFE's dispositions or guidelines. • Proposed Solution • Implement a data system that allows instant communication between FONAFE's companies, with the legal value and adequate security levels (digital signatures ) • Results • Speed in communication, identifying if the document has been received (Online) • Reduction in courier and printing expenses • Fluidity in the communication between FONAFE's companies • Elimination of lost or misplaced documents. Video Conference Network Electronic Document Exchange System Shared Data Center

  16. WE HAVE MADE PROGRESS... TECHNOLOGICAL RESOURCES Physical infrastructure Management and Operation Applications Communications Corporate Chat Video Conference Network Processing Electronic Document Exchange System Storage Mail Shared Data Center Active Directory and DNS Remote Access Internet Access • Contract with IBM: US$. 9.7 MM • 5 year term • 9 companies involved

  17. WE HAVE MADE PROGRESS... SERVICE HUMAN RESOURCES TECHNOLOGICAL RESOURCES PROCEDURES STRATEGY

  18. WE HAVE MADE PROGRESS... PROCEDURES • The State Owned Companies are grouped through an agreement with FONAFE, to acquire, or contract goods and/or services in a joint manner. Corporate Purchasing Mandating Company 1 Mandating Company 1 • The mandating company performs: • The preparation • The selection Process The execution of the contract with the selected provider Stock Market Listing Mandating Company 2 Mandating Company 2 Mandating Company Mandating Company 3 Mandating Company 3

  19. WE HAVE MADE PROGRESS... PROCEDURES Corporate Purchasing Stock Market Listing

  20. Pending Assignments... PROCESSES • GOOD BUSINESS PRACTICES • Incorporate independent Directors (director head hunter). • Market control (inclusion of private market). • INTERNAL CONTROL SYSTEM • COSO implementation • MANAGEMENT AGREEMENTS • Relaunching COSO

  21. PENDING ASSIGNMENT... SERVICES • Reduction of un-billed Water, and Coverage Increase. • Increase of power generation • Increase the power distribution coverage without increasing power losses. • Increase banking at the national level.

  22. "IT IS ALL IN THE PHILOSOPHY OF GENERATING VALUE FOR THE SHAREHOLDER, THE PERUVIAN STATE" THANKS

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