Greece Counts on Gas, Gambling to Revive Asset Sales Tied to Aid
Greece is banking on its gas and gambling companies to revive a state-asset sales plan that underpins 240 billion euros ($310 billion) of foreign aid.
The Hellenic Republic Asset Development Fund expects to receive binding bids for lottery operator Opap SA (OPAP), gas monopoly Depa SA and grid operator Desfa SA by the end of April, said Ioannis Emiris, the privatization agency’s chief executive officer. The proceeds will make up the bulk of the 2.3 billion euros Greece needs to raise from sales this year, he said.
“There is no turning back,” Emiris said in an interview at his Athens office on March 13. “It’s a program that must proceed. It has been decided by law, and it has already begun. There’s no stopping it.”
The program has been stop-start since international creditors including the International Monetary Fund pushed the government to pledge 50 billion euros rather than 7 billion euros by selling assets ranging from island properties to airplanes. The plan is central to paying down a debt load that threatened to push Greece out of the euro last year.
Locked out of bond markets since April 2010, Greece is the only nation to receive two bailout packages from the euro area and IMF as public opposition to pension and wage cuts derailed the pace of promised economic reforms. Loans to Athens were frozen in June as voter opposition to fiscal austerity grew.
The sales now are designed to signal that Greece is laying out the red carpet for investors, said Emiris, who took over running the privatization agency in July last year after a change of government following two elections.
“Depa and Opap are the most important,” said Emiris, 49. “If we make it with these two, then we will make the greater part of the revenue target.”
Anti-bailout parties gained support among Greek voters last year, forcing the suspension of asset sales. Prime Minister Antonis Samaras emerged as the head of a three-party coalition in favor of staying in the euro. He said on July 6 that asset sales agreed with the so-called troika of creditors was a priority of his coalition government.
Progress has been slow. The IMF warned in January that the government needed to match “results with rhetoric,” calling the performance so far “extremely disappointing.”
Asset-sales targets were revised lower, to 22 billion euros by 2020, instead of a previous 45 billion euros. This year, Greece will raise about 2.6 billion euros, and 2.3 billion euros will be from new sales, Emiris said.
Depa supplies gas to Greek companies and households while Desfa operates the infrastructure to deliver it.
Russia’s OAO Gazprom (GAZP), the biggest natural-gas company in the world, is the most prominent of the five bidders who have expressed interest in buying Depa.
Gazprom, which supplies about a quarter of the European market with gas, is competing with a joint venture by Greek companies Mytilineos SA and Motor Oil Hellas SA for Depa, OJSC Negusneft which has bid for both Depa and Desfa, and Gekterna SA and the State oil Co. of Azerbaijan, or Socar, which made separate bids for Desfa.
Opap, which had sales of 4 billion euros last year, has drawn interest from seven companies for a 33 percent stake, including private equity firms BC Partners Ltd. and TPG Capital.
Greece has to deliver on state-asset sales to cut a debt mountain that will peak at 179 percent of gross domestic product this year and threatens the flow of funds from the IMF.
European leaders have cut the cost of rescue loans for Greece, suspended interest payments for a decade and given the troubled nation more time to repay, while the government carried out a bond buyback last year.
Emiris, formerly head of investment banking at Alpha Bank SA, said one primary challenge for building momentum in the program was the shortage of money among local banks, which suffered nearly 40 billion euros of losses in the country’s sovereign debt restructuring last year, the largest in history.
Creditors have earmarked 50 billion euros to recapitalize the banks, whose functioning is key to real-estate sales and development, Emiris said.
“Real estate is a local business, which needs local knowledge, local funding and possibly local partners,” he said.
Projects under way by the fund include sales of properties in London and Belgrade and the development of Hellenikon SA, the site of the former Athens International Airport, he said.
The fund said in September it selected London & Regional, Elbit Cochin Island Ltd. and Lamda Development SA (LAMDA) for the second round of bidding for Hellenikon, which at 6.2 million square meters, is more than three times the size of Monaco. Qatar Diar Real Estate Investment Co. has also expressed interest.
The government won’t hesitate to halt a sale if the price isn’t right, Emiris said.
“We are obliged both by the charter and the law as well as by our opinions on the real value” of an asset, he said. “All the sales we do have to be successful and convince public opinion that what we are doing is right and proper.”
The slate this year includes sales of stakes in Thessaloniki Water and Sewage Co., which is 5 percent owned by Suez Environment Co., majority holdings in ports, Public Power Corp. SA and the biggest airport, Athens International.
Emiris said Hochtief AG (HOT), which owns 40 percent of the airport plus one share, “wants to sell as far as we know.” Greece wants to coordinate efforts with the German builder so that investors can be offered about 95 percent of the company along with an extension of the concession to run the airport.
“Any investor coming to Greece right now is coming into a situation which will continue to improve,” Emiris said. They are “investing in a country which will be completely different in two years’ time,” he said.
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