Strong Momentum in Privatisations Reflects Upturn

Investors focus on across-the-board assets, and public mood on state efforts to privatise assets has changed, says Riccardo Lambiris, CEO of the Hellenic Republic Asset Development Fund (HRADF).

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GIG: Privatisations have not always been widely accepted, but there has been progress lately. What are the key factors that have helped improve the appetite for Greek assets?

Riccardo Lambiris CEO of the Hellenic Republic Asset Development Fund (HRADF)

Lambiris: Today Greece is in a significantly better place than it has been in recent years, demonstrating positive GDP growth, declining unemployment rates, and government bond spreads, etc. Greece has proven itself to be an attractive investment destination, creating significant investment opportunities across sectors. Most importantly, there has been a shift in increased acceptance by the wider public for privatisations as assets have matured, and the increased level of service and efficiencies, more generally, are easier to demonstrate and understand. Furthermore, our strategy has evolved, and the experience we have gained has allowed us to revise and improve how we mature, develop, and actually privatise assets. In essence, we try to build strong support for the project at-hand from all stakeholders, to the extent possible, whilst we also prioritise assets based on potential synergies.

Finally, we have what we call an ‘After Sales’ department that is tasked to make sure investors stay true to their commitments and also act as a bridge between the private and public side – meaning the fund is uniquely positioned to assist in helping resolve potential issues.

GIG: In terms of revenues, can you tell us how 2019 went and what you expect, in terms of results, from 2020?

Riccardo Lambiris CEO of the Hellenic Republic Asset Development Fund (HRADF)

Lambiris: The fund is tasked to execute the Asset Development Plan (ADP) – this publicly available document is revised every six months and approved by the Government Council for Economic Policy (KYSOIP) and creditors. Within this document, there is a detailed outline of all the projects we plan to develop, and key milestones are attached.

Within this context, 2018 was a record year as for the first time we overshot our budget (€2.15 billion on an accrual basis versus €2 billion), which was the highest target ever set. If you run through the ADP, you will see that for 2019 the fund was focused on preparing a great number of assets for privatisation, which began that year, along with others for 2020. Proceeds in 2019 stood at €1.2 billion (on an accounting basis), whilst this year’s target, according to the State Budget, are set for €2.4 billion.

GIG: What are the key projects currently slated for privatisation?

Riccardo Lambiris CEO of the Hellenic Republic Asset Development Fund (HRADF)

Lambiris: As discussed earlier, a significant number of assets are currently being prepared. On the transport/infrastructure side, for instance, we have started with the sale of a 30% stake in the Athens International Airport (AIA). AIA has performed brilliantly, attracting significant investor interest. It is very well managed and is expected to further benefit from the positive trends in international tourism.

Similarly, building on the strong momentum achieved by the privatisations of the Piraeus and Thessaloniki ports, we have an ambitious plan to develop our portfolio of ten regional ports through private stewardship. These ports, coupled with the developments in the railway space, will help contribute strongly to Greece becoming a transportation and trade gateway to Europe.

Opportunities centre around the energy sector where we are privatising 100% of DEPA Infrastructure (gas distribution), 100% of DEPA Commercial (gas wholesale and retail), the underground gas storage facility in Kavala, and are exploring options regarding our 35% stake in Hellenic Petroleum.

Finally, other than finalising the redevelopment of the old Athens Airport in Hellenikon, one of our flagship projects, we plan to put on the market a number of transformational real estate projects, such as the old U.S. naval base in Gournes –  roughly 380 hectares with direct access to the sea; the Markopoulo Equestrian Centre; as well as a number of other diversified real estate assets around the country.

GIG: Where is demand strongest?

Riccardo Lambiris CEO of the Hellenic Republic Asset Development Fund (HRADF)

Lambiris: The country is benefiting at all levels and across sectors. Investors are looking at assets of all sizes and throughout the Hellenic geography. What is important is to have a clear path to completion. In other words, that projects are realisable. On this front, significant work has been done over the past few years to cut through red-tape, speed-up state processes, and reduce transactional cost.

There is still more to do, and at the fund we are working hard in this direction.

GIG: Although Greece is turning the corner, the global economy is slowing down. How will this affect Greece’s privatisation plans?

Riccardo Lambiris CEO of the Hellenic Republic Asset Development Fund (HRADF)

Lambiris: As Greece has demonstrated, success stems from political determination and cooperation, coupled with the right economic recipe, which includes foreign direct investment (FDI). The HRADF is at the forefront of this crucial effort and, often inevitably, on the radar of all parties interested in considering Greece. Continued commitment to proceed with structural reforms and modernisation on all fronts is one of the best ways to shield the country against what is often a fluid and unpredictable international environment, proving to the international community that the Hellenic Republic is a solid investment destination. On the fund’s side, we endeavour to continue implementing the ADP and keeping investors abreast of important developments.

GIG: How are privatisations helping Greece? What kind of impact are they having on the economy?

Riccardo Lambiris CEO of the Hellenic Republic Asset Development Fund (HRADF)

Lambiris: Privatisations have contributed significantly to the development and modernisation of infrastructure, operational rationalisation, and often more efficient governance. HRADF has privatised assets worth more than €9 billion with a total benefit to the economy of €20 billion, including upfront payments, concession fees, mandatory capital expenditure, etc.

Whilst these are the headline benefits, there are two other very important aspects that should be considered as well. Firstly, the fund proved to be a very valuable asset for the recovery of the country’s credibility with its creditors and the international investor community, as well as a strong and recognised brand with a positive footprint, creating a legacy for the future. The fund is an ever developing organisation that tries to build on experience and contribute more to the country.

The second point that is worth noting is that the HRADF aims to cooperate with local authorities and societies. Convincing, to the extent possible, local communities and governments to support a project has proven to add significant value to all stakeholders, and it increases the success of the investment while enhancing the multiplier effect.

Sentiment has changed over the years because the public can now actually see the effects of privatisation on specific assets. For instance, improved infrastructure in airports, significantly more commercial throughput/activity in ports, job creation, etc.

GIG: What is the most common question you hear from foreign investors eyeing Greece?

Riccardo Lambiris CEO of the Hellenic Republic Asset Development Fund (HRADF)

Lambiris: Themes have changed over time. Previously, discussions centred around risk mitigation. Today, I am happy to say, it is around how quickly can we put a specific asset to market. As you may understand, the pressure is on!

GIG: What is one thing that needs to change in Greece for privatisations to go through faster?

Riccardo Lambiris CEO of the Hellenic Republic Asset Development Fund (HRADF)

Lambiris: The country has remained determined to progress on structural reforms. What’s important looking forward is to maintain this level of commitment. One thing remains certain, the HRADF will continue its mission to attract, and support, FDI assisting the country in implementing its national strategy.

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