Greece is leaving behind a sustained period of difficulties and a decade of fiscal crisis. In the post-memorandum period Greece will emerge as a stronger, reformed and more attractive investment destination. The nation’s economy is growing at a faster rate than in previous years on the back of several structural reforms that have reshaped society and the economy.
Investments in strategic projects are improving transport links, logistics and other essential infrastructure. Therefore the flow of goods and services will continue efficiently and cost effectively. Through private investment, infrastructure assets in Greece are entering a new era.
Greece holds a crucial geopolitical location – as the bridge between east and west it serves as Europe’s gateway to international trade and tourism. In regards to energy, the country is becoming a hub for Europe’s natural gas network and has the potential for production of all types of energy. Last but not least, real estate is growing and will continue to do so.
Privatisation is a key component in the development and modernisation of infrastructure, operational rationalisation, and often, more efficient governance. The country’s commitment to privatisation is best demonstrated by the fact that in 2011 it established the Hellenic Republic Asset Development Fund (HRADF) as a Societe Anonyme.
The HRADF has continued to have a key role in Greece’s transformation through a privatisation programme it is implementing. The HRADF has already privatised assets worth upward of 8bn euros, with a total benefit to the economy of 20bn euros. This includes up-front payments, concession fees, and mandatory capital expenditure in projects such as regional airports, the Hellenikon estate, and the ports of Piraeus and Thessaloniki.
According to Aris Xenofos, Executive Chairman of the HRADF: “The importance of the privatisation programme lies not only in the proceeds but in the growth multiplier effect the programme can produce. Committed to a challenging and demanding programme in a consistent and disciplined manner, we have developed a roadmap that considers the growth and social benefits our actions inevitably will and should have for our country and our people.”
Since the beginning of 2018, the key transactions are the sale of 67% in Thessaloniki Port for 232m euros, providing for 180m euros mandatory Capex; the sale of 5% in Hellenic Telecommunications Organisation for 284m euros; the sale of 66% (31% HRADF, 35% HELPE) of DESFA for total consideration of 580m euros (including dividends), with an investment plan of approximately 330m euros already budgeted in company’s strategy until 2023; and 166m euros for the sale of mobile frequencies.
The HRADF’s asset portfolio is highly diverse, comprising a variety of assets across a wide range of sectors, including regional ports, marinas, airports, water supply companies, gas companies, highways, energy companies, and real estate, and is described in its Asset Development Plan. Depending on the asset and subject to market conditions, the Fund uses a whole array of privatisation methods, from the sale of shares to long-term concessions and capital markets transactions, all examined and executed individually. Where possible and applicable, the HRADF includes mandatory investments in its tenders to further promote growth for the asset, the local society and the economy.
The Fund has successfully privatised over 40 assets (including real estate assets through e-auction) and has been able to attract a very broad universe of investors – this is obviously due to the attractiveness of the asset base as well as the unbiased, open and transparent processes it executes. This is achieved through robust governance via the active involvement of three independent parties safeguarding the decision-making process: the Council of Experts, independent valuators and the Court of Auditors. By the end of this year the Fund will also be ISO certified.
Whilst the statutes of the HRADF are to maximise proceeds, as any funds collected are used to repay state debt, significant thought and care is taken to maximise value to all stakeholders, including local communities, the relevant industry and the investor. It is of great importance to the Fund to ensure that FDI increases and, to this end, it is absolutely critical that investors who acquire state assets are successful. To assist with the above, the Fund has established a special unit that is tasked to monitor the agreements with investors, ensuring they abide by and – just as importantly – to help them develop their investment plan. Like an after-sales service, the Fund is uniquely positioned to act as the intermediary between the investor community and the state, ironing out teething problems, supporting investment, and providing relevant guidance and support.
Since its establishment, the Fund has developed significant competencies and recruited highly skilled personnel to assess the process and execute its development plan. At the same time its strategy has evolved from micro strategy to a holistic approach that considers synergies among assets and potential interrelationship among them, raising their potential value and attracting strong domestic and global interest from reputable investors. The Egnatia Odos motorway and its strategic location, with ports at each end (Alexandroupoli to the east and Igoumenitsa to the West), is representative of the new management’s policy.
But there is more to come, Mr Xenofos says: “Transforming Greece into a natural gas energy hub by enhancing its distribution and storage capacity, [making it] a gateway to Europe for commerce and trade through infrastructure and port development plans, and a prime destination for high profile tourists by reshaping our marinas and our thermal springs resources, is the dream that drives our initiatives and actions.”