It’s time to take out the family silver for many of Europe’s indebted sovereigns, as they struggle to make ends meet. From the floundering PIIGS (Portugal, Italy, Ireland, Greece and Spain) to non-euro zone countries like the UK and Iceland, a range of state assets are going up for sale; choice pickings for those with a spot of spare cash.
The epicenter of the sale is Greece, the worst-off of the region’s fiscally-insolvent peripheral states. Athens plans to sell ¤50-billion assets by 2015 to help repay ¤110-billion bailout from the European Union (EU) and International Monetary Fund (IMF).
While a 50 per cent stake in Athens international airport is probably the best-known asset on the block, it is the government’s 74 per cent stake in the ports of Piraeus and Thessaloniki that have the greatest historical resonance. For the historian Thucydides, born in 460 BC, the Port of Piraeus was the commercial heart of the Athenian democracy. “From all the lands, everything enters,” he wrote of it.
Other assets available include OTE, the largest telecommunications company in the Balkans; PPC, the country’s biggest electricity producer; horse-racing organisation ODIE. Also up for sale is the state’s 34 per cent stake in Europe’s biggest betting company OPAP, another 34 per cent stake in Hellenic Postbank and train operator TrainOSE, besides thousands of acres of land for development.
In the meantime, Portugal, also the recipient of ¤78-billion bailout, has announced the rushed sale of the state’s stake in the utility company Energias de Portugal (EDP) and the power-grid operator Redes Energéticas Nacionais (REN). Plans have also been announced to sell up to 49 per cent of water utilities and several state media interests. The state airline TAP and the national airport authority ANA are further due to be sold along with the insurance business of the state-run bank Caixa Geral de Depositos.
Europe’s auction continues in neighbouring Spain where the authorities in Madrid are attempting to sell their profitable national lottery as well stakes in the national airport authority. Madrid’s Barajas airport and Barcelona’s El Prat will also be auctioned off by the end of the year.
In Ireland, even the National Stud, home to the country’s most prolific thoroughbred male horses is being considered for sale as is the state’s share of Aer Lingus, the national airline, Rosslare port and Dublin Bus.
And it’s not only euro zone governments that are struggling with debt. In Britain, Westminster is in the process of offloading the 49 per cent state share in the air traffic control service Nats as well as the state-owned bookkeepers called the Tote. Also up for grabs is the HMS Ark, a decommissioned aircraft carrier and even the wine seller of the House of Commons.
But while governments across Europe draw up plans to raise money by disposing of assets they are also wary of selling at the wrong price. Madrid for example, recently delayed the sale of its 30 per cent stake in the national lottery slated for October because the market price was unacceptably low. It had been expected to raise up to 7.5 billion euro. In Ireland the government has decided to put on hold the recommendations of a commissioned review that argued for the sale of 5 billion euro worth of state assets, until market conditions improve.
Greece on the other hand, is desperate to sell but is not having much luck obtaining the right price either, given investor concerns over the country’s strong unions, corruption and lack of transparency. Despite its ambitious plans only one stake has actually been sold in recent months: 10 per cent in the telecommunications group OTE to Deutsche Telecom for 44 million euro. The chances of Athens reaching its professed target of 5 billion euro from asset sales by year-end are thus not looking good.
Nonetheless, in the coming months, many sales will go through and while the majority will likely be bought by bidders from Europe’s stronger economies, companies from emerging markets and other parts of the developing world are also casting an assessing eye.
Portugal’s sale of EDP for example has piqued the interest of China Power, Brazil’s Eletrobras and India’s Aditya Birla Group, amongst others. India’s State-owned Power Grid Corp. of India Ltd (PGCIL) is also reportedly looking to acquire a 5-10 per cent stake in REN. Even former Portuguese colony Angola wants in on the action. In fact Angolan BIC bank recently concluded its acquisition of Banco Português de Negócios for 40 million euro, a fraction of the 180 million euro that the Portuguese government had been looking for.
