HELLENIC REPUBLIC ASSET DEVELOPMENT FUND 1st GREEK INVESTMENT FORUM China, 11 December 2017
Greece at a glance Economy Overview • After a prolonged depression, the economy stabilized in 2016 and GDP is projected to grow by 1.6% in 2017 and 2.5% in 2018. • In 2016, the primary budget surplus was 3.8% of GDP, exceeding expectations and the 0.5% target. The agreement on the second review has improved prospects for a reversal in economic ECONOMY sentiment and lowered bond yield spreads. • Financing conditions remain tight as a large stock of non-performing loans is weighing on banks’ balance sheets, restricting credit supply especially to SMEs and households, though a new resolution framework is now in place for the orderly reduction of NPLs. • The labor market is improving, supporting private consumption, and higher demand from abroad is boosting exports ( 9.5%). LABOR • Unemployment is declining but remains high, especially among the young, contributing to high poverty. • The number of building permits is rising and construction has bottomed out. CONSTRUCTION • Investment has started to recover from very low level and should gather pace. INVESTMENT • Production of capital goods is recovering, pointing towards rising investments. PRODUCTION Source: OECD
Greece at a glance Opportunity • Greece offers some very competitive advantages for investments: Greece Economic Indicators Overview Last Reference ‒ Geographical position GDP Annual Growth Rate 1.6% Nov 17 ‒ Environment (energy resources) Unemployment Rate 20.6% Aug 17 ‒ Tourism & Culture Youth Unemployment Rate 40.2% Aug 17 Inflation Rate 0.7% Oct 17 ‒ Human capital (low labor cost at the moment and very well educated) Government Debt to GDP 179% Dec 16 ‒ Climate & Lifestyle Private Debt to GDP 137% Dec 16 • The basic problem of the economy at the moment is the insufficiency of domestic savings to GDP per capita $ 22,736 Dec 16 meet the investment needs, which are significant – in order to satisfy the agreed growth rates GDP from Agriculture € 1,688m Jun 17 as well as cover the fiscal targets set on the economic adjustment program implemented. GDP from Construction € 868m Jun 17 • The problem worsens by the weakness of the banking system to act its role as a mediator and GDP from Mining € 5,163m Jun 17 support the conversion of deposits to investments. GDP from Public € 9,042m Jun 17 • Foreign investment then provides the only solution to growth, and capital inflow will be Administration achieved by strengthening the country’s credibility as a safe investment destination. GDP from Services € 9,664m Jun 17 • A couple of previous privatization cases prove that Greece is a safe and attractive investment Foreign Direct Investment € 305m Sep 17 destination and the opportunity for Investors remains high. Tourism Revenues € 3,522m Aug 17 Tourist Arrivals 2,743,210 Sep 17 Corporate Tax Rate 29% Dec 17 Sales Tax Rate 24% Dec 17 Social Security Rate 40.06% Dec 17 Social Security Rate for 24.56% Dec 17 companies Social Security Rate for 15.5% Dec 17 employees
Privatizations Development & growth • Privatizations have always been a difficult task and face a lot of opposition from society in One reason people all countries. resist change is • The main obstacle is the lack of information or evidence of the benefits of privatization. because they focus on • Aside from the fact that in most cases the state has proven to be a poor manager, having gained all past international experience , nowadays we may claim that privatization is a what they have to give one-way street for modernizing a company, bringing in new funding and expertise, and up, instead of what making it a profitable and efficient business. • they have to gain. Privatizations have a significantly positive impact on: ‒ the local economy ‒ increasing competition, improving productivity and services ‒ creating new jobs ‒ overall growth of the economy ‒ reducing public debt • Greece has one of the highest degrees of state control in the productive sectors across OECD countries, not only because of direct state ownership but also because of extensive government regulation. • The scaling down of an oversized and inefficient public sector will facilitate the reduction of the excessively high tax rates benefiting the private economy and facilitating return to growth. • Transparency of the bidding process, precise specification of the contract and the monitoring and enforcement of the agreement secure the advantages.
The Fund Hellenic Republic Asset Development Fund S.A. • Established in 2011 following a severe sovereign debt crisis, in order to privatize public assets yielding Background significant revenues to reduce public debt. • 30m euros ( € ) Share • Shareholder: capital Hellenic Corporation of Assets & Participations (HCAP) • Attract direct investment Key • Maximize revenues to the Greek State objectives • Restart the Greek economy
Hellenic Republic Asset Development Fund S.A. Core principles of operation Clarity of purpose Transparency of the process Hellenic Corporation of Assets & Participations • Adapting to market trends. • Corporate Governance Policies. • Internal & External Auditors. • Pursuing clear & market-oriented • Tenders announced to media and corporate privatization concepts. Financial, Legal, HRADF ’ s website. • Restructuring/Reforming operations & Technical staff Advisors • Three independent parties involved in every financial status of assets to achieve HRADF higher revenues. privatization: BoD & Council of Experts – Independent Evaluator – Observers Court of Auditors. Council of Independent Experts Evaluator Swift action & focus on results Value • Engagement with Government • Privatizations and mandatory investments Preferred Bidder Departments, Local Authorities, State included in infrastructure tenders, promote Agencies and other appropriate bodies growth, increase competition, create new to eliminate regulatory, administrative jobs, and restore the country’s credibility . Court of and technical barriers. • Two-way communication with local Auditors communities to consider and address their concerns and decide on optimum solutions. • Ongoing & “after - sales” service to Investors , CONTRACT to facilitate transactions.
Key achievements Transactions Overview Transactions 38 privatizations completed or 1.378,70 put on track 1.165,70 ( € ) million 1.040,40 1.000 properties reviewed for development 498 419,6 289,1 € 7.5bn completed 5,2 transactions from 2011 to date 2011 2012 2013 2014 2015 2016 2017 € 4.7bn collected until today Proceeds’ split 1.364 € 1.4bn Current Status ( € ) million 1.165,70 total proceeds in 2017 929,1 352,4 277,1 14 235,1 134,7 111,3 117 25,4 15 0 5,2 0 projects in progress/in 2011 2012 2013 2014 2015 2016 2017 preparation Corporate & Infrastructure Real Estate
Portfolio Corporate Company Market Shares (%) Status • RFP for the appointment of Strategic Advisors - Dec. 2017 Energy – Electricity 17% PUBLIC POWER CORPORATION (PPC) • In the process of evaluating optimum ways of privatization • RFPs for the appointment of Legal Energy – Oil 35.5% Consultants, Greek and Int’l & European Law – TBC GREEK PETROLEUM (HELPE) • In the process of evaluating optimum ways of privatization Energy – Natural Gas 65% PUBLIC GAS CORPORATION (DEPA) • RFPs for the appointment of Legal Consultants, Greek and Int’l & European Law Telcos 5% OTE
Portfolio Infrastructure assets Company Market Shares (%) Status • In the process of evaluating optimum ways of privatization Water 11% Athens Water supply & Sewerage • In the process of evaluating optimum ways of privatization Water 23% Thessaloniki Water supply & Sewerage • Approvals for the extension of the concession agreement until 2046 pending • Transport 30% RFP for the appointment of Legal Consultants (TBC) Athens International Airport • Long-term concession Phase A (EoI) – deadline for submission Jan. 26, 2018 • Length: 670km Transport • Stretching from Western Greece (Igoumenitsa) to the Eastern borders with Turkey (Kipi) Egnatia Motorway • Phase B – deadline for submission of binding offers Feb. 14, 2018 Infrastructure 100% Rolling stock maintenance for railways • Phase B – deadline for submission of binding offers Dec. 22, 2017 Infrastructure 66% Hellenic Gas Transmission System Operator
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