Could do better: Greece's privatisations


The Greek government tabled its 2017 budget late last month, with hopes to raise €2.03 billion ($2.17 billion) from privatisations revenues in particular from the sale of its 14 regional airports, the sale of Greek gas network operator DESFA and the leasing of the land of the former Hellinikon Airport to Lamda. Last week however saw the collapse of a deal agreed in 2013 to sell DESFA for €400 million to Azerbaijan’s Socar, with the valuation for DESFA being questioned. November’s cabinet reshuffle and an incoming privatisation leadership change are aimed at unclogging the deal pipeline.

Since Socar agreed to pay €400 million for 66% of DESFA in August 2013, the buyer responded to a European ruling by agreeing to let Italian gas infrastructure company Snam take 17%. But Socar has since found it necessary to request its own changes to the deal. Reports emerged in July that Socar wished to lower its valuation of the company, because a new law passed that month did not raise tariffs as much as expected for DESFA. Last week Greece's energy ministry said it was “legally impossible” to accept Socar’s request to pay in instalments.

Target missed in 2016

Greece set a target of raising €2.5 billion in 2016 through its privatisation programme but has only generated €500 million.

The transaction to sell 14 regional airports is yet to close. In November 2014 a joint venture between German airport operator Fraport and Slentel (a subsidiary of the Greek Copelouzos conglomerate) emerged as preferred bidder for the sale.

Fraport and Slentel agreed an upfront payment of €1.234 billion and annual payments of €22.9 million over the 40-50-year concession.  With a €1.4 billion investment commitment by the buyers over the concession, Fraport and Slentel could transform the airport experience for tourists on the Greek islands.

One development bank on the regional airports privatisation told IJGlobal the deal may complete early in 2017. The buyers need €813 million total of debt, equity and operational cash flows. The European Bank for Reconstruction and Development approved a €90 million loan and International Finance Corporation is considering €75 million. With many commercial banks internationally unwilling to lend to Greek deals, development bank support is vital.

While that transaction has slowed, others have progressed.

Italy’s state rail company Ferrovie Dello Stato has been an important participant in Greece’s privatisation programme. Trenitalia agreed in July 2016 to buy 100% of Trainose, the state’s national passenger and freight train operator, for €45 million, pending authority approval.

In an interview with Reuters on 2 December 2016, the chief executive of Ferrovie dello Stato said they are eying up the potential privatisation of the Athens metro system, the Attica Metro Company.

The privatisation of a 24% stake in ADMIE, Greece’s electricity transmission company, by state-owned parent company Public Power Corporation, likewise attracted a state-owned foreign buyer: State Grid Corporation of China, offering €320 million. In late November 2016 PPC’s shareholders gave their approval.

Chinese buyers have been important players for Greece’s privatisations so far, after Chinese shipping giant COSCO agreed in April 2016 to pay €368.5 million to buy 67% of Piraeus Port Authority. COSCO has so far paid €280.5 million in August to buy 51% in the initial instalment.

To come

Waiting in line, but not likely to launch until after the regional airports deal completes, is Greece’s plan to sell part of its 30% shareholding of Athens International Airport (AIA). One source advising on the deal told IJGlobal they hope that in the next few weeks the politicians will reach some resolution on discussions to extend AIA’s concession for a further period, reported earlier this year to be 20 years. As it stands the concession is due to mature in 2026, not an appealing prospect to investors needing to make a return.

The sale of the tolled, operational corridor Egnatia motorway is due to receive expressions of interest on 20 December 2016, and a relaunched sale of the country’s rolling stock company EESSTY is due to reach binding offers on 30 January 2017.

In May 2016 the government announced it would speed up and appoint advisers in 2016 for sales including the Thessaloniki and Athens water utilities, the Public Power Corporation, and the public gas corporation DEPA.

Thessaloniki Port Authority’s 67% sale remains in procurement after a long delay, but it is hoped to get back on track after the Shipping Minister Theodoros Dritsas, who opposed the sale, lost his position last month.  

Government refresh

The removal of Dritsas came about in an early November 2016 minister reshuffle by left wing Syriza party Prime Minister Alexis Tsipras as he seeks to push through further reforms in exchange for bailout funding from the EU by year-end.

An opponent to the privatisation of PPC, energy minister Panos Skourletis, has been moved out to the interior ministry.

The reshuffle also moved Stergios Pitsiorlas, the chairman of privatisation fund the Hellenic Republic Asset Development Fund (HRDAF), to become deputy economy minister.

HRDAF, also known as Taiped, has so far been the body in charge of privatisations, but a newly formed fund is due to eventually replace it – the Hellenic Corporation of Assets and Participations – with new leadership.

The corporation will be headed by Paris’s former inspector of finances Jacques Le Pape, but the other board members from Athens and its creditors have not yet been announced. Establishment of this fund to speed up privatisations was a condition of the 2015 €86 billion bailout Greece received from the Eurozone.

In the latest 5 December 2016 Eurozone meeting, creditors of Greece did not offer any haircuts on the debt pile of Greece’s government, due to be 176.5% of gross domestic product in 2017, but rather discussed waivers on interest rate increases and extensions on repayment.

Privatisations remain vital to the Tsipras-led government, and last month’s cabinet changes and new leadership for the privatisation fund are targeted at helping unblock privatisations obstacles as the country moves into 2017.