Piraeus saga: to be continued?
COMMENT: The point was made in Port Strategy last month that the price paid by COSCO for the port of Piraeus, taking into account investment commitments as well, was a rich one – one that perhaps only a sovereign state-owned company would make, writes Mike Mundy.
Our calculation of the known facts suggested it would be over a quarter of a century before it made its money back and this is with just scheduled capital expenditure factored in and undoubtedly further capex will be required.
Reaction to the announcement of COSCO as Preferred Bidder (an ironic statement in itself as COSCO proved to be the only bidder) has not been overwhelmingly positive. In the terminal operating sector there was surprise at the price paid, it being described as “way beyond what a fully commercial entity might pay”, by one commentator. But then as another put it, “what you are seeing is a privatisation to a state-owned company, an irony in itself, so this probably explains this different view on pricing”.
As a further fly in the ointment, in mid-February there was a two-day strike by Greek dockworkers to protest against the sale of the country’s two biggest ports, promised by Athens to international lenders. The unions fear job cuts and wage reductions. There is, for example, a major difference between what the port workers at COSCO are paid (who are hired in via a third party labour supply company) and the remuneration of the port employees at the Piraeus Port Authority (OLP)-operated container terminal.
Strings attached
The privatisation itself is not what can be regarded as a clean one. It has strings attached, most notably in the fact that COSCO will acquire 51% of OLP, the port company, when it signs the contract and 15.7% in January 2021 provided it has completed an agreed investment programme which over the next 10 years will entail expenditure of €350m.
It also seems that there are certain parties in government that despite the privatisation being approved by the Greek Parliament are still not keen on it going ahead. Specifically, there are suggestions circulating in Athens that the draft law for the creation of the new Piraeus Port Public Authority (DALP), currently being drawn up by the Merchant Marine Minister Theodoros Dristas, is a clandestine way to renationalise OLP.
The first draft of the bill has been seen by external sources and they allege that it contains two provisions that generate more questions than they answer. It defines DALP’s field of competence as, “the formation of proposals and their submission for approval by the Merchant Marine Minister regarding the development and modernisation of the port of Piraeus”. This basically creates a fuzzy picture concerning the status of the various authorities active in the port.
Secondly, the draft law states the public authority’s revenues will be a “one percent share of the gross revenues of all enterprises providing services within the Piraeus port zone”. This means OLP will have to pay one per cent of its turnover to DALP on top of the 3.5% levy on its turnover it has to pay every year.
It seems the saga of the privatisation of the port of Piraeus may roll on for a while yet.