Not Another False Start For Privatisations


BMI View : The privatisation of Greek energy and infrastructure assets is proceeding at full-speed, with the government planning to re - launch the entire process over the coming weeks. This is the third time in two years that the venture will have been launched, although this time the government has thrown its weight behind the process, making another false start unlikely. We believe there will be significant efficiency gains for the Greek energy and transport networks, following the liberalisation of the sectors which will pay dividends for wider economic activity in the coming years. Some existing privately run assets create a positive precedent (COSCO in Piraeus Port, the Athens International Airport for instance) ; this, combined with increased investor interest in assets, suggests that if the privatisations proceed as planned, momentum will be gained quickly.

Fact Box: Greece Privatisation Plans
Sector Sub- sector Asset Estimated Timeline Potential Interest from (BMI assesment)
Source: BMI
Greek Privatisation - Phase 1: August - December 2012
Energy Natural Gas T&D DEPA/ DESFA Binding offers by end-September 2012. Final decision by end - Q4 2012 Gazprom, SOCAR, Israel, Institutional Investors
Transport Airports Former Athens International Airport (Elliniko) by end- 2012 GCC-based investors, Israel
Greek Privatisation - Phase 1: 2013 onwards
Energy Power generation, T&D and mines PPC assets 2013/2014 European utilities, Chinese
Meliti 1 - 289MW
Megalopoli 3 - 255MW
Amidaeo 1 -273 MW
Amidaeo 2 -273 MW
Hydropower plants
Gas fired power plants
Coal mines
Transport Roads 8 Toll Roads, including Egnatia Odos 2013-2015 European transport operators, institutional investors
Transport Ports 23 commercial and tourist ports 2013 - Chinese, GCC port operators
Transport Airports Regional airports 2013- Global airport operators, institutional investors
Utilities Water EYDAP na
Transport Railway OSE/Trainose na Chinese

Based on previous reports of expressed interest, we expect to see strong interest from Russian, Chinese and Middle Eastern players for various different assets. DEPA and DESFA are going to be fiercely contested as the Greek transmission network forms part of the Southern Gas Corridor, transporting gas from Azerbaijan, or Russia in the case of the South Stream, to Western Europe. We reiterate our long-held view that the value of DEPA and DESFA does not lie in the scale of the domestic market, on the contrary, gas penetration in Greece remains low. Currently, their value lies in their northern Greek pipeline transmission assets and the role these will play in the southern European pipeline web ( see our online service, January 13 2012, ' SOCAR Weaves A Web Of Pipelines In Europe's South '). Russia's Gazprom has expressed an interest, as has Azerbaijan's NOC Socar.

Israel has also openly expressed an interest in the Greek privatisation process, especially for energy, tourism, services and real estate assets. Greco-Israel ties have been deepening, culminating in an official state visit by Israeli President Shimon Peres in Athens in August. Underpinning this growing relationship is nascent gas exploration in the south-eastern Mediterranean, which has uncovered a major gas region stretching from Israel and Cyprus, possibly all the way to Crete. Israeli interest in possible resources offshore southern Crete has been high, with Israel's Delek and US-based Noble showing keen interest to explore the acreage. We expect this relationship to gain momentum in the coming months as Greece moves to begin exploration and production (E&P) in its Exclusive Economic Zone (EEZ). Therefore, in an effort to cement ties with the country and sweeten the deal, Israeli interest in privatisations could become prominent.

China could be another active bidder, especially for transport and power generation assets. Chinese state utilities have been combing the Balkans and snapping up a string of coal-fired power plants, as part of an effort to gain a foothold in the European energy landscape. PPC's assets (most likely to be bundled up in smaller companies and sold) align well with the existing portfolio of Chinese assets and their wider Balkan strategy ( see our online service, January 25 2012, Chinese Stake In PPC - A New Strategy Into Europe?).

Strong Precedent from the Port of Piraeus
COSCO Piraeus Container Terminal Throughput, TEUs / Port of Piraeus and Port of Thessaloniki TEUs, y-o-y growth (%)

China's COSCO has been the most prominent player in Greek transport however, and has expressed an interest in the intermodal hub at Thriasio Pedio, as well as container terminals in Thessaloniki ( see our online service, May 21 2012, 'Interest For Concessions Intensifies As Core View Plays Out'). Its container terminal in the Port of Piraeus, which it has owned and operated since October 2009, has been outperforming the other container terminals at the port and has prompted a much better recovery in volumes in Piraeus over Thessaloniki. We consider COSCO to be one of the successes of privatisations/PPPs in Greece, along with the Athens metro and the Athens international airport. These highlight the significant efficiency gains that could be made across transport and energy networks in the country, which have been weighed down by Byzantine bureaucracy, a very heavy handed state approach and management inefficiencies.

This article is tagged to:
Sector: Infrastructure
Geography: Greece