Abstract
This quarter we reiterate our concerns regarding the health of Greek finances,
the problems of which have
cascaded into infrastructure-sector
investments. A growing budget deficit and burdensome public debt are
severe threats to the Greek economy. Not only is the government’s
ability to finance large public
infrastructure projects constrained by its
aim to bring down the GDP deficit to 3.7% by the end of the
year, to be in
line with the 3% GDP deficit clause of the Maastricht Treaty, but in addition
public finances
are so dire that they would simply be unable to take any
further strain.
Greece’s deficit malaise has been chronic, and thus
the concept of utilising public private partnerships
(PPPs) for
infrastructure projects has gained traction in recent years. Greenfield PPP
projects have been
welcomed by the public – though there remains
opposition to the idea of the private sector owning and
operating
infrastructure assets. The perceptions about concessions operating existing
assets remains
largely negative, bordering on hostile in some cases. A
case in point is the opposition to the privitisation
of part of the
container operations at Pireaus Port, which has come not only from trade
unions – which
have a vested interest in seeing the port remain in
public hands – but also from a large part of the
population, who
oppose the idea of private ownership of infrastructure assets.
Public
opinion is not the only hurdle to PPPs. The burdensome bureaucratic edifice of
Greece is costly to
investors and is a major obstacle to doing business in
the country. This is reflected in BMI’s
Infrastructure Business
Environment Ratings and Project Finance Ratings for Western Europe.
On a
positive note, we can start talking about a maturing PPP market. Though the
largest number of
projects take place in the social infrastructure domain
(schools, hospitals, courts, etc.), transport PPPs
have by far had the
largest investment volumes in recent years. Successful PPPs include the
Athens
Metro, the new International Airport in Athens, the
Eleusina-Tsakwna motorway and Egnatia Odos. In
the pipeline are many
regional airport concessions, more motorway and urban railway concessions.
In BMI’s Q309 Greece Infrastructure Report, we forecast that
construction sector real growth will
continue along the downward trend it
embarked on in 2008 as revised data from the national statistics
agency
revealed. First-quarter data came in negative, broadly in line with our
expectations, through the
fall was not as abrupt as we had expected.
Accordingly, gross fixed capital formation for non-residential
construction (including infrastructure) declined by 0.7% compared with Q408,
while seasonally adjusted
construction industry value registered real
growth of -4.5% compared with Q408, but positive 1.4%
compared with the
corresponding quarter of the previous year. The latter figure is a very
positive sign for
our forecasts for 2009, which show that we expect to see
a contraction, albeit one that is less steep than
last year. Indeed, the
first forecasts for the year seem to validate this view, with the year-on-year
growth
figure in positive territory.
Major players in the Greek
infrastructure industry include locals Elliniki Technodomiki-Aktor-TEB
Group, J&P-AVAX, Terna, Mytilineos, Aegek and Athena, some of which also have
significant
operations abroad, mainly in the Balkans and Middle East. We
anticipate that expansion abroad will
become an even greater of part of
the corporate strategy of these firms in the coming years, as it will help
offset the downturn in Greece. However, it should be noted that, with the
possible exception of Saudi
Arabia and Qatar, the Middle East and the
entire Balkan region do not look too promising for 2009-2010
either. It is
worth noting that at least for 2008, their strategy of internationalisation
paid dividends, as the
three companies reviewed in this report (Terna,
J&P-Avax and Aktor) showed robust revenue growth for
2008, beating the
downward trend set by many of their European rivals.
| 
View Cart
