Greece’s privatization battle — Failed deals on port, airline undermine government’s goals
By Ayse Ferliel and Alkman Granitsas
ATHENS — The Greek government may have trouble meeting its 2009 privatization goals in the current economic climate, adding pressure to an economy already burdened by high levels of debt.
The government aims to net 1 billion euro ($1.29 billion) this year with a round of privatizations.
Economists, however, say that target may be overambitious, citing the recent failure to sell state-owned carrier Olympic Airlines SA and the container-handling operations at the port in Thessaloniki.
Not meeting the privatization goal could be a major problem for Greece, which desperately needs to sell off state-owned assets. With a debt burden equal to more than 90% of gross domestic product, Greece has the second-highest debt ratio in the euro zone after Italy.
As a result of the economic crisis, the cost of servicing that debt has risen to a forecast 12 billion euros this year from under 10 billion euros two years ago. The cost now consumes about one-sixth of budget outlays.
“The privatization target . . . sounds rather overambitious and excessively optimistic,” said George Pagoulatos, an associate professor of politics at the Athens University of Economics and Business. The unfavorable economic climate, lack of liquidity in the markets and increased credit risk could further jeopardize the privatization program, Mr. Pagoulatos said.
The latest blow came last week when state-owned Thessaloniki Port Authority SA, which operates Greece’s second-largest port after Athens’s Piraeus Port, formally invalidated a bid by a consortium including the ports unit of Hong Kong-based ports operator Hutchison Whampoa Ltd. The Hutchison-led consortium had already withdrawn its winning bid of 419.5 million euros to manage the container operations at the port in December after failing to secure financing for the project.
The formal invalidation of the bid paves the way for either a new privatization tender or fresh talks with second- and third-placed bidders Cosco Pacific Ltd. and Dubai Ports World Sokhna.
The announcement came less than two weeks after the government canceled the long-awaited privatization tender for unprofitable national carrier Olympic Airlines after failing to receive satisfactory bids. The highest bid for Olympic’s flagship flight operations was 24.5 million euros, roughly half of what the government had set as a minimum price.
The Greek government has a long list of companies slated for privatization — ranging from small banks to state-owned tourist enterprises and casinos.
Newly appointed Finance Minister John Papathanassiou earlier this month told reporters the government would announce its privatization plans in greater detail in the next few weeks. “The privatization process will continue, despite the currently unfavorable conditions of the financial markets, and is expected to yield at least 1 billion euros,” Mr. Papathanassiou said.
One possibility could be for the government to exercise its option to sell a 5% stake in former telecom monopoly Hellenic Telecommunications Organization SA to Deutsche Telekom AG. Last year, the government reached a three-way 3.2 billion euros deal with Deutsche Telekom and Greek private-equity fund Marfin Investment Group Holdings SA under which the German company acquired 25% of OTE.
The agreement envisions a series of put options under which the government could sell an additional 5% stake in OTE to DT at 27.50 euros a share. If implemented, this sale would raise just under 675 million euros — more than half the government’s privatization target for 2009.
But economists say this may prove difficult with OTE shares currently trading at around 12 euros a share.
A likely possibility is for the government to complete a revamped privatization program for Olympic Airlines. The three separate components of Olympic — flight operations, ground handling facilities and the technical base — could, combined, net more than 100 million euros.