Greece’s First Privatization Deal Since Third Bailout Hits Snag

First Greek Privatization Deal Hits Snag

Greece’s first privatization agreement since the country’s third bailout hit a snag just one day after the government announced the deal’s approval.

A government council overseeing state asset sales said on Tuesday that Fraport AG and a unit of Greece’s Copelouzos Group had won a 40-year concession to operate 14 regional airports for 1.2 billion euros ($1.32 billion). Fraport commented afterward that the decision was “not tantamount to the conclusion of a contract but rather offers a basis for the resumption of negotiations.”

The Greek government said Wednesday that it had approved the contract based on previous agreements, and that any effort to seek a renegotiation “wouldn’t be limited to the issues raised by the company.” Fraport is “working toward a positive outcome,” said Joerg Machacek, a company spokesman.

The airport deal is meant to be the first in a series of privatizations that Prime Minister Alexis Tsipras agreed to undertake in return for the third bailout package worth as much as 86 billion euros. The most pressing matter is obtaining funding to avoid a default Thursday when Greece must pay 3.2 billion euros to the European Central Bank.

Under the current proposal, Fraport would invest 1.4 billion euros to upgrade the airports by the end of the concession. The German company would also pay an annual lease of 22.9 million euros for the airports, which include the holiday islands of Mykonos and Santorini.

Investment Fund

While opposed to asset sales when elected in January, Tsipras reversed his pre-election promise in order to seal a bailout deal in July. The shift has split the ruling Syriza party with the prospect of new elections as early as September. Tsipras is planning a confidence vote after 44 of his lawmakers voted against him when the bailout deal was approved last week.

Under the latest agreement, the third since 2010, Greece will establish a 50 billion-euro investment fund to use as a revenue source over 30 years. The fund will include state property, shares of public companies and infrastructure, Greek officials said this month.

Following the deal, Greece set deadlines for binding offers to buy stakes in Piraeus Port Authority SA, rail services operator Trainose SA, train maintenance company Rosco SA and Thessaloniki Port Authority. APM Terminals, a unit of A.P.Moeller-Maersk A/S, and Cosco Pacific Ltd., which already operates a pier at Piraeus, are among the groups that have qualified to bid for a stake in PPA. Bidders for Trainose and Thessaloniki include OAO Russian Railways.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE