Israeli firms compete in Greece fire sale

Companies competing for purchase of Greek state assets as it pushes ahead with its world-record 50 b. euro divestment program.

HELLINIKON, Athens’s abandoned former airport  370 (photo credit: Courtesy Hellenic Republic Asset Development Fund)
HELLINIKON, Athens’s abandoned former airport 370
(photo credit: Courtesy Hellenic Republic Asset Development Fund)
Several Israeli firms are competing for the purchase of Greek state assets as the debt-stricken country pushes ahead with its world-record 50-billion-euro divestment program.
Mekorot Israel National Water Co. is in informal discussions to purchase the Athens and Thessaloniki water and sewage companies. One Israeli group is among 17 anonymous foreign bidders for natural-gas company DEPA. Another has expressed interest in buying weapons manufacturer Hellenic Defense Systems.
Hellenic Republic Asset Development Fund CEO Costas Mitropoulos revealed the above to reporters in Tel Aviv on Sunday, in between meetings with about 50 different potential Israeli investors. He said he hopes to attract Israeli interest in tender processes for other assets, including The Hellinikon, Athens’s abandoned former international airport and the site of Europe’s largest urban regeneration project.
HRADF has been given the enormous task of facilitating the privatization of dozens of public assets, with the aim of reducing Greece’s massive public debt and averting a sovereign default. Real estate accounts for about 55 percent of the expected proceeds, infrastructure (including energy) for 35%, and the sale of government shares in corporations such as Hellenic Telecommunications will account for the remaining 10%.
The fund, which was established last August, aims to raise 19 billion euros by 2015. Total cash proceeds from the sale of gaming and mobile telephony licenses last year amounted to about 1.6 billion euros and accruals to 1.8 billion euros.
Mitropoulos and his team are under no illusions about the difficulties they face. However, he said, the 17 expressions of interest for DEPA represent “a major sign of confidence” – especially when compared to the 2011 privatization of Portugal’s electricity corporation, which received official interest from only five parties.
“We are inviting investors from around world that take a similar view to us, who look at the long-term horizon and who believe that in Greece they can make the extra return they are after,” Mitropoulos said. “Its success depends primarily on international market conditions and also on our ability to proffer the assets and put them on the market.”
Each asset will ultimately be rewarded to the highest bidder, he said. The state’s 65% share in DEPA, 51% share in the Public Power Corporation and 35% share in Hellenic Petroleum will all come under the hammer. So, too, will 12 major seaports, about 350 smaller seaports, 37 regional airports, six highways and prime tourism land.
Greek economists estimate the privatization program will add .3% to gross domestic product over the period in which it takes place, Mitropoulos said.
The Organization for Economic Cooperation and Development expects the Greek economy to contract by 3% in 2012, before beginning the slow path to recovery with 0.5% growth in 2013.
Mitropoulos said one of his main challenges would be selling under pressure.
“There is a divide between the value of the assets that we receive under normal conditions,” he said, “and the price we are likely to achieve in the [current] market… To bridge this gap, we are consistently and deliberately employing earn-out or drawback schemes, where we will draw more value as things get better.”
Mitropoulos acknowledged that a large portion of the population is unhappy about the program, but recent attitude surveys conducted by the fund found that 84% of Greeks are willing to see assets sales if this translates to real value.
“Real value for the population means investment and jobs,” he said. “Everybody realizes that there will be real investment, [and] there will be jobs generated from the privatization program.”