Rationalization and Ownership Options

There are a number of rationalization options available, from mothballing to private sale.

Each activity should be considered unique, with many variables, including: ·

• The corporate structure
• The organization's size and diversity ·
• Its ownership structure (eg state or federal organization owned corporation, private company with large shareholder base).

Irrespective of these organizational variables, most organizations have two clear options for asset rationalization:

• Dispose of /or transfer assets
• Secure (mothball) and hold assets (to achieve risk reduction).

These two options apply to core and non-core assets.

Even core assets can be disposed of or rationalized through a sale and lease back arrangement, with the lessor/buyers being contracted to provide the necessary services.

For example, a large mining activity may have a water supply system that involves significant assets that are owned and operated by the business. By out-sourcing this system via a lease or dual charge arrangement, the mining company can still access the service necessary for its core activity, mining, while releasing the capital value of the system for use in other parts of its business.

It is important to note that core assets need not necessarily be owned by the responsible organization. Worldwide privatization of public businesses (especially in the utility, airports and port sectors) proves that all essential services can be delivered within the regulated framework of a truly competitive environment.

The potential for conflict between security of supply and the high cost of capital, especially for marginal investments, will continue to challenge decision makers in public and private sectors.