29 municipal and state owned units, limited companies and some private entities were analysed using the financial statement data for 2002-2009. The study covered water supply, roads, streets, ports, airports, railways and energy networks. The report annexes even wider empirical material.
According to the research, the cash-based returns has been very stable during the studied period (2002-2009). The volatility of the cash flows has been almost risk-free compared to investments in Finnish stock markets.
The best sectors were energy with its average annual cash-based return of 13% for the invested total capital and ports with about 10% average annual return.
The study also looked into the returns of state-owned companies. VR, the national state-owned rail operator yielded to 5% average annual cash-based return on invested capital. Accordingly Finavia, the state's airport owner returned annually 4% on average, and the state-owned road contractor Destia about 7%.
The form of ownership has a clear effect on returns. The ownership models covered traditional municipal entities, municipality and state owned companies as well as fully private units. Traditional public entities had the best cash-based returns to their owners. Municipal ports exceeded with about 4%-units the returns provided by municipal limited liability companies for the period of analysis. Difference of same magnitude was identified with waterworks.
The differences can be explained largely by different accounting practices. With limited liability companies, the accounting standards are dictated strictly by different laws and generally accepted accounting principles whereas the accounting of municipal units and enterprises follow a more liberal practice. The latter entities are mostly exempted from taxes and have more freedom to return profits to their owners. In the long run, however, these liberal practices may lead to "over-milking" of the utilities, hence resulting a risk of under-investments in infrastructures. Many municipalities and cities are concerned for example on the technical condition of water supply network.
The researchers recommend that accounting practices should be more specific in terms of reflecting the technical condition of the infrastructure and making it sure that necessary investments are not neglected while seeking high returns. On the other hand it is evident that municipalities and cities have financed some of their basic services – such as education or healthcare - with the help of revenues raised from infrastructure and utilities.
The Finnish Ministry of Finance has initiated last year a proposal to renew the legislation on municipal enterprises.Media material: Financial performance of Finnish technical networks
Pekka Leviäkangas | EurekAlert!
Innovative genetic tests for children with developmental disorders and epilepsy
11.07.2018 | Christian-Albrechts-Universität zu Kiel
Oxygen loss in the coastal Baltic Sea is “unprecedentedly severe”
05.07.2018 | European Geosciences Union
A new manufacturing technique uses a process similar to newspaper printing to form smoother and more flexible metals for making ultrafast electronic devices.
The low-cost process, developed by Purdue University researchers, combines tools already used in industry for manufacturing metals on a large scale, but uses...
For the first time ever, scientists have determined the cosmic origin of highest-energy neutrinos. A research group led by IceCube scientist Elisa Resconi, spokesperson of the Collaborative Research Center SFB1258 at the Technical University of Munich (TUM), provides an important piece of evidence that the particles detected by the IceCube neutrino telescope at the South Pole originate from a galaxy four billion light-years away from Earth.
To rule out other origins with certainty, the team led by neutrino physicist Elisa Resconi from the Technical University of Munich and multi-wavelength...
For the first time a team of researchers have discovered two different phases of magnetic skyrmions in a single material. Physicists of the Technical Universities of Munich and Dresden and the University of Cologne can now better study and understand the properties of these magnetic structures, which are important for both basic research and applications.
Whirlpools are an everyday experience in a bath tub: When the water is drained a circular vortex is formed. Typically, such whirls are rather stable. Similar...
Physicists working with Roland Wester at the University of Innsbruck have investigated if and how chemical reactions can be influenced by targeted vibrational excitation of the reactants. They were able to demonstrate that excitation with a laser beam does not affect the efficiency of a chemical exchange reaction and that the excited molecular group acts only as a spectator in the reaction.
A frequently used reaction in organic chemistry is nucleophilic substitution. It plays, for example, an important role in in the synthesis of new chemical...
Optical spectroscopy allows investigating the energy structure and dynamic properties of complex quantum systems. Researchers from the University of Würzburg present two new approaches of coherent two-dimensional spectroscopy.
"Put an excitation into the system and observe how it evolves." According to physicist Professor Tobias Brixner, this is the credo of optical spectroscopy....
13.07.2018 | Event News
12.07.2018 | Event News
03.07.2018 | Event News
20.07.2018 | Power and Electrical Engineering
20.07.2018 | Information Technology
20.07.2018 | Materials Sciences