Greece forced to reconsider stake sales

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As part of its €110 billion bailout package, the Greek government has committed to selling stakes in two statecontrolled water companies. It marks a clear U-turn in strategy for the socialist administration.


The Greek government announced on 2nd June that it would sell stakes in two state-controlled water operators as part of a wide-ranging privatisation package, designed to raise cash and meet the conditions of the recently signed EU-IMF austerity programme.

The commitment to sell 10% of Athens Water (EYDAP) and 23% of Thessaloniki Water (EYATH) marks a forced U-turn for Greece’s socialist government, which overturned the previous conservative administration’s decision to sell 23% of EYATH last October.

Shares in both companies rose by 6-7% on news of the plans, which would leave the Greek government with 51% stakes in each. “There’s a traditional reluctance of the Greek state to cede total control of its utilities,” noted Mina Lagounari, an analyst at EFG Eurobank Securities.

“Maybe in the forthcoming period, given the budget needs, you’ll see more aggressive moves towards that front, but you cannot really see such a radical change within a short period of time,” she observed to GWI. “The first moves are very conservative.”

Analysts believe that selling down the stakes to strategic investors makes most sense, although the government is still understood to be in the process of selecting advisers to co-ordinate the sale process. Whether the government hands over responsibility for the day-to-day operations of the companies to the private sector as part of the stake transfer will influence the price at which the deals are struck.

“If they want to cede management, the Greek state typically gives the CEO position to the strategic investor, and they retain the chairman position,” said Lagounari.

The failure of the new socialist government to appoint a special secretary of privatisations will be one obstacle to the smooth roll-out of the process. “Surprisingly, there’s no one co-ordinating the whole issue,” one analyst confided to GWI. “All these decisions were taken at the cabinet level.”

While EYATH has been steadily increasing revenues and profits over the past five years, EYDAP lost its way in 2009. Both turnover and EBITDA dropped sharply, chiefly as a result of lower volume sales to local authorities and industrial customers, coupled with a drop in the volume of bulk water supplied to municipal networks.

The company’s first quarter results for 2010, released on 1 June, show a similar picture of decline, and although the company’s growth is hampered by debts from municipal authorities, the prospects for expansion into new areas by acquiring additional municipal networks have already borne fruit.

Last year’s request for expressions of interest in the EYATH stake sale drew responses from international consortia led by aqualia, Suez Environnement and Veolia – all of whom teamed up with local partners. The dimensions of the deal this time around could draw in a wider selection of interested parties – EYDAP’s market capitalisation is two thirds of what it was in July last year, while EYATH’s has halved.

What’s on the block?

* EYDAP is the largest Greek water company, serving four million people with potable water and 3.3 million with sewerage services in the Attica region (which includes Athens). It is 61% owned by the Greek government and 10% by Agricultural Bank of Greece, while 29% is in free float on the Athens stock exchange. EYDAP operates publicly owned infrastructure under a renewable concession which expires in 2019. Market capitalisation: €533 million.

* EYATH serves 1.1 million people in the region of Macedonia (which includes Greece’s second city of Thessaloniki). It is 74% owned by the Greek government and 5.3% by Suez Environnement, while 20.7% is in free float on the Athens stock exchange. EYATH operates publicly owned infrastructure under a 30-year contract which expires in 2031. Market capitalisation: €143 million.