Methods of Privatization
National governments have pursued various methods of privatization--the motivations for which
are as various as the methods themselves. The following are a number of the more common
means of achieving greater private control over energy resources.
Direct Sale of Entire Company to Public
In some instances, countries have chosen to transfer ownership of industries or companies swiftly
and completely. Argentina, the United Kingdom, Chile, and New Zealand have generally
undertaken some of the most ambitious of privatization efforts by auctioning off companies
directly to the public--thereby letting the market determine the value of these companies through
the bidding process. In some cases, (for example, see the discussion on the privatization of
British Energy) the auctioning off of a company has revealed an enormous divergence between
newly-discovered market value and the previous book value of the company as recognized by the
government.
Partial Sale of Company to Public
Most privatizations have been gradual. For example, in the case of British Petroleum, partial
government ownership dates back to 1914. In 1977, the government reduced its ownership share
from 66 percent to 51 percent, to 46 percent in 1979, to 31 percent in 1983, to under 2 percent in
1987, and to zero in 1995. Also, governments have often sold shares of a state-owned firm while
still retaining a portion of the company (a "golden share"), thereby maintaining a limited degree of
control over the company. This practice has been widespread, both in OECD and non-OECD
countries {see Endnote 10}.
Sale of a State-Owned Company to Another Company or Consortiums
Often governments have chosen to sell state-owned utilities directly to companies--either foreign
or domestic.
For example, when Bolivia privatized the state electricity monopoly, Ende, it was broken into
three electricity generation companies and directly sold off to foreign primarily U.S. utility
companies.
Deregulation
Another form of privatization involves deregulation. Deregulation has been the most prevalent
form of energy privatization in the United States, most recently in natural gas transportation and
electric power generation and transportation. Electric power generation, transmission, and
distribution has long been held up as a model for the "natural monopoly." However, as the notion
of a what constitutes a natural monopoly has evolved, so has the justification for maintaining
government-controlled utilities.
Removal of Subsidies
The removal of a subsidy can also be viewed as a form of privatization. The removal of subsidies
for European coal operations, for example, precipitated the constriction of Europe's coal mining
industry and encouraged a large shift in coal investment from European mines to mines in the
United States, Australia, and Latin America.
Voucher Schemes
Another aspect of privatization concerns how public ownership is achieved. In many formerly
Communist countries, voucher schemes have been adopted whereby ownership of an industry is
simply transferred to the general public with no cash exchanged. A lack of developed equity
markets may have encouraged voucher schemes. After the initial distribution of vouchers,
individuals have been allowed to buy or sell these vouchers, thereby encouraging the creation of
stock exchanges. In some instances, the transfer of ownership has been implemented with labor
and management being allotted favored shares.