The Greek Experience in Network Industries

1
The Greek Experience in Network Industries
The Greek Experience in Network Industries
Speaker Mr Nikiforos Manolas Senior
Economist Ministry of Economy and Finance Greece
2
Regional Flagship Initiative Regulatory Reform
in South East Europe In the framework of the
Investment Compact Of the Stability pact
The Greek Experience in Network Industries

• SEMINAR ONREGULATORY GOVERNANCE AND NETWORK
  INDUSTRIES19 APRIL 2002SARAJEVO, BOSNIA AND
  HERZEGOVINA

3
Main Points of my Presentation
The Greek Experience in Network Industries

• 1.Background of the Greek Economy
• 2.Privatisation Process in Greece
• Environment and Methods of privatisation
• Privatisation of ailing(problematic)
  Enterprises(OAE_IRO)
• Privatisation of state-controlled Banks
• Privatisation of Network industries
• 3. Results of Privatisation

4
Background of the Greek Economy
The Greek Experience in Network Industries

• During the 90s, for the first time in post-war
  history, Greek strategies for economic
  development shifted on market forces rather, than
  on state-managed growth

5
Periods
The Greek Experience in Network Industries

• We have three main periods for Greek economic
  Development.
• 1. The pre-1974 period, 2. The period between
  1974 and 1995,
• 3. The period from 1995 till today

6
Periods_Details
The Greek Experience in Network Industries

• In the pre-1974 period Greeces development
  strategy based on
• import substitution,
• credit allocation in such a way to produce strong
  growth (7 with manufacturing on the average at
  11.4 annually),
• a low inflation (4) and,
• A small balance of payments deficits (2.1 of
  GDP).
• From 1974 until 1995 the economy showed a
  completely different picture.
• GDP annual growth rate averaged 2, (
  manufacturing growth slowed to almost zero),
• annual inflation averaged 18, and,
• the average external deficit, as a share of GDP,
  doubled.
• Structural reforms, started timidly in the early
  90s with
• important changes to financial and labor market
  regulations,
• some product market liberalization, and
• initial steps in state reforms.

7
The results of structural reforms
The Greek Experience in Network Industries

• The impact of these structural reforms to Greek
• Economy, along with supportive macroeconomic
• and labor market policies, were that Greece
• achieved, comfortably, the five Maastricht
  criteria
• for membership to Euro-zone area(EMU) by the
• target date of January 1, 2001.
• In the following table 1, you can see the
  evolution
• of main macroeconomic data for the Greek
• economy during 90s.

8
Table 1Main Economic IndicatorsGreece,
Euro-land, OECDSourceHSBC, European Economics,
Q2 2001, OECD Outlook, No 69, June 2001
The Greek Experience in Network Industries
9
The Greek Privatisation Process
The Greek Experience in Network Industries

• Privatisation in Greece started in the early
  1990s and the title of the relevant law was
  (2000/91), on denationalisation, simplification
  of liquidation procedures strengthening the rules
  of competition and other matters
• Greek privatisation programme has been undertaken
  to reduce the dominant role of government in the
  economy.
• The Greek privatisation programme has required
  considerable planning effort and determination.
• Several institutions had to be transformed to
  public companies with shares.
• Furthermore, social security and pension
  arrangements had to be made and considerable
  restructuring was implemented.
• In several enterprises a break up between an
  assets and an operations company was necessary
  the run up to privatisation.

10
Methods and Sectors of Privatisation in Greece

• 1.The main methods used in Greece for the sale
  of assets were
• Initial Public Offering (IPO) in a deep capital
  market
• Asset sales, often following the liquidation of
  the company
• Trade sales to strategic investors
• Management employee buy-outs (small
  companies,labor intensive)
• We must noted that the privatisation methods
  have varied across countries for various reasons,
  including privatisation strategy and market
  conditions.
• 2.The main sectors in which privatisation
  concerns are
• Ailing enterprises
• State-own Banks
• Network Industries
• Water Services,
• Others

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1.Privatisation of Industrial Enterprises
(IRO)-Ailing Enterprises
The Greek Experience in Network Industries

• Greek state gave considerable , since 1983,
  interests in a large range of companies (almost
  100) whose it had de- facto nationalized, as a
  means of rescue-to reconstruct and run around-
  from financial difficulties and particularly from
  the huge debts to the state banks.
• These were grouped together under a state Agency
  (Industrial Reconstruction Organization_IRO or
  OAE) charged with restoring them to profitability
  and subsequently selling the businesses back into
  the private sector, where possible, or otherwise
  liquidating them.
• A large number of small and medium size
  companies were sold (or dissolved) by the IRO.
  The Organisation itself has been put into
  liquidation.

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TablePrivatisation Revenues selling IRO
The Greek Experience in Network Industries

13
2. Privatisation of state- controlled banks
The Greek Experience in Network Industries

• Before 1987, state-controlled banks dominated
  banking sector, and the Bank of Greece set
  interest rate and administrative regulations. The
  banking system was used to finance the public
  sector deficit, and negative real interest rates
  prevailed.
• Despite considerable liberalization of the
  financial and banking sectors, state controlled
  banks still account for 45 percent of deposits
  and credits (down from 60 percent in 1995). Due
  to competition, however, and conscious policies
  to restructure the portfolios of several of these
  banks, their performance has improved, despite
  the fact that they have lost market share.
  Nevertheless, considerable effort is still needed
  to make them function like the private banks.
• Privatisations of public banks, mergers and entry
  of new banks have enhanced competition. The
  market share of publicly controlled banks has
  declined. A large number of specialized private
  firms offer a wide variety of financial services.
  
• The privatisation of banks has initiated a major
  restructuring of the financial sector and a
  repositioning of private groups.

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Table Privatisation Revenues from Banks in MUSA
The Greek Experience in Network Industries
15
Effects of banks Privatisation
The Greek Experience in Network Industries

• Profitability has risen considerably in recent
  years
• Technical innovation such as increased automation
  has led to considerable service provision
  improvement, and the variety of products has
  expanded, banking employment has declined, but
  the entry of a variety of private companies
  offering financial services has enhanced overall
  sector employment.
• Salaries for skilled personnel have increased
  rapidly
• Considerable efficiency gains have been obtained
  in the financial service sector, labor
  productivity has increased and costs have
  declined.
• The management of two state -controlled banks
  (namely the National Bank of Greece and the
  Commercial Bank of Greece) will no longer be
  voted by Parliament and would be chosen freely by
  their boards.
• The volume of financial services has been
  increased, prices (fees and commissions
  receivable as a of total assets) have declined
  (from 1.53 in 1994 to 0.85 in 2000) and the
  spreads between lending and borrowing rates have
  declined from 11.3 in 1994 to almost 6.0 in 2000.

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3. Public entreprises-utilities and their main
characteristics
The Greek Experience in Network Industries

• The publicly owned enterprises have the following
  characteristics
• their number was about 50,
• they employ about 6 percent of wage labor,
• they account for about 22 percent of all
  investments in Greece,
• their products account for 7 percent of the CPI
  basket,
• their financing needs have imposed a heavy burden
  on overall
• public debt.
• their contribution to GDP, in 1991 and 1999, was
  respectively 16,1 and 6.1. This indicates,
  in some way, the progress that has been made in
  privatisation.
• 2. The ten largest enterprises among them were
  monopolies or oligopolies in telecommunications,
  energy, and transport sectors. Inadequate
  management, inflexible labor agreements, high
  labor costs, and lags in modernization have
  resulted in performance that has induced
  significant product market distortions, and has
  burdened the cost of operation of other
  sectors.
• 3. Greek public enterprises had often been used
  to implement multiple policy objectives,
  unrelated to their primary objective of
  efficiency, which was to provide quality goods
  and services

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i).Restructuring of Loss Making Public
Corporations
The Greek Experience in Network Industries

• The restructuring of loss-making public
  corporations (mainly in the transport,
  post-office and defense sectors) is well underway
  (law 2414/1996). It includes
• The appointment of high quality management
  consultants to design restructuring plans
  (feasibility study and initial valuation of
  asset, legal restructuring, financial
  restructuring),
• The appointment of high quality international
  management,
• The elimination of restrictive labor practices in
  order to increase productivity and
  competitiveness,
• The transfer of surplus personnel to other areas
  of the public sector with excess personnel demand
  (local authorities, public hospitals etc.),
• The formation of strategic alliances with
  domestic or foreign firms.
• Public corporations listed in the stock exchange
  will enjoy considerable autonomy from the
  government, according to a recent amendment to
  2414/96 law.
• The corporate bodies (board of directors and
  shareholders general meeting) will take from now
  on the major strategic and operational decisions
  and will select and appoint the chief executive.
• Concerning public monopolies in utilities, the
  plan is to offer majority (over 51) shares to
  the public through the stock market, while
  maintaining in many cases a golden share.

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ii) Sectors that have been privatized
The Greek Experience in Network Industries

• Telecommunications sector
• a.Telephony
• i)Fixed telephony services
• ii) mobile telephony
• iii)Independent Authority.
• b. Postal services
• 2. Energy sector
• i). Electricity market
• ii) Oil and Gas Market
• 3. Waters Services
• 4. Other entities-organizations that have been
  privatized
• i). Hellenic Vehicle Industry (ELVO)
• ii). The Stock Exchange (ASE)
• iii). Duty Free Shops (DFS)

Oil market (ELPE)
Gas Corporation(DEPA)
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1.TELECOMMUNICATIONS_Telephony i).Fixed
telephony
The Greek Experience in Network Industries

• The Hellenic Telecommunications Organisation
  (OTE) established by the Greek State in 1949, and
  is the national telecommunications provider.
• It operates in an environment that has become
  increasingly liberalized in recent years, OTE had
  the exclusive right to provide throughout the
  country fixed telephony services until January 1
  2001. In January 2001 the Greek fixed telephony
  market opened to competition according to EU
  stipulations, and this is expected to further
  increase competition.
• Domestic and international telephony services is
  the companys core business, generating almost
  85 of OTEs revenues
• OTE has recorded sufficient gains in efficiency
  and has improved the quality of its services over
  the last few years. Taking in advantage of the
  derogation provided to Greece, OTE progressively
  rebalanced prices of local and distant calls,
  bringing tariffs in line with European
  legislation
• By the end of 2000 the company had some 5.6
  million access lines in service, which
  corresponds to a density of 53,7 fixed lines per
  100 inhabitants, close to EU average.
• OTE had achieved a digitalization rate of 93.4
  in 2000 compared with 42.1 in 1997.
• The Hellenic Telecommunication Organisation has
  currently almost 49 private share ownership and
  it has raised revenues equal to USA 4380
  million or 35.1 of the total amount of money
  raising from Greek Privatisation.

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1.TELECOMMUNICATIONS_Telephony i).Fixed
telephony(continued)

• An important step towards the full privatization
  of OTE was taken through the launch of a one
  billion (GRD 340 billion) bond convertible into
  shares (equivalent to 10 of the share capital
  bringing down the states share to 41). An
  additional sale of a 5 stake is planned to a
  group of selected domestic and foreign banks. The
  banks will keep OTEs shares for a specified time
  period with the objective of placing them with
  institutional investors as soon as the market
  condition permit.
• OTE was listed on the Athens Stock Exchange
  (ASE), for the first time, in March 1996 with an
  initial IPO of 8 of its share capital and at the
  end of the same year has achieved a listing in
  the New York Stock Exchange( NYSE) and the issue
  has been twice over subscribed
• The company is a key player in the telecom
  sector in Balkans through several joint ventures
  and acquisitions, in partnership with other
  international operators.
• Since 1992 OTE has faced stiff competition from
  the two private GSM mobile telephone operators
  (Panafon and Telestet) that has led considerable
  improvement of services and declines in prices.
• About other 240 companies provide a variety of
  services (leased lines, internet access, etc.)

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1.TELECOMMUNICATIONS_Telephonyii). Mobile
telephony
The Greek Experience in Network Industries

• In 1992 two private GSM mobile telephone
  operators (Panafon and STET Hellas) started to
  offer mobile telephony services to Greek people.
• In 1996 OTE established its own mobile company
  COSMOTE, which began to operate in April 1998,
  since when it has enjoyed a consistent increase
  in market share, as the next diagram me
  indicates.
• Cosmote is partially privatised (a 15 stake was
  floated on the Athens Stock Exchange raising GRD
  156 million or 457813,6).
• So today three companies are operating in mobile
  telephony, Panafon (majority-owned by British
  Vodafone), Telestet (majority-owned by Italian
  STET) and COSMOTE (70owned by OTE and the rest
  by Norwegian Telenor).
• The market for mobile services is very
  competitive and has grown very fast. Its
  penetration ratio is steadily increasing,
  reaching 66 by the end of 2001 and it is
  expecting to exceed 80 by the end of 2004.
• Another important development in this sector was
  the sale of three 3G high speed (UMTS-third
  generation mobile telephony) mobile phone
  licenses to the three existing mobile operators.

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1.Telecommunications(Figure 1. Mobile telephony
Markets shares)
The Greek Experience in Network Industries
23
1.TELECOMMUNICATIONS(Results from Privatisation)
The Greek Experience in Network Industries

• Substantial improvements in the telecom sector
  have taken place in terms of both the number of
  services provided and their quality.
• In the table below terms of quality progress has
  been together with the current value of each
  indicator
• Table Quality of telecommunication's
  services targets and current value

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1.Telecommunications(Independent Regulatory
Authority-EETT_New Entrants_PPC)
The Greek Experience in Network Industries

• An Independent regulatory authority, the National
  Telecommunications and Post Commission (EETT) has
  been established by the Law 2867/2000, to grant
  licenses and to oversee the liberalized market.
• The EETT organized successfully a multiple round
  auction for 9 national fixed wireless access
  (Local Multipoint Distribution Services-LMDS)
  licenses. The licenses include four broadband (25
  GHz) and three narrow-band (3.5 GHz) systems,
  which are based on wireless local loop
  technology.
• Two of the 25 Ghz went to companies Associated
  with existing mobile operators and the other two
  went to joint ventures based on network
  industries one to Public Power Corporation(PPC)
  and the other to Europrom, a consortium of
  Prometheus gas
• In addition to its core electricity business, PPC
  is diversifying into the-business of
  telecommunications, doing a consortium with WIND
  ( a joint venture owned 56 by ENEL, and 44 by
  France Telecom)

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1.TelecommunicationsTablePrivatisation Revenues
The Greek Experience in Network Industries
26
1.Telecommunications_Postal Services

• Up to 1975 the stated owned Hellenic Postal
  Service (ELTA) was the sole provider of postal
  services in Greece.
• Since then, however, a number of postal services
  firms (about 150) have active in Greece providing
  especially courier services. These firms were
  operating with no special license but according
  to the rules for commercial companies.
• According to the framework of ELTA is the
  universal services provider while the other
  segments of the market are open to competition.
• The implementation of the Law 2668/98 provided
  the postal services sector with a new legislative
  framework, in accordance with the EU directive
  97/67, which however it seems to delay full
  liberalisation of the sector until 2003.
• ELTA has been under a restructuring business plan
  since 1998 and the results are very promising.
  Profits are recording, the quality of services is
  also continuously improving and is expected to
  reach the standards set by EU in the coming years
• ELTA is currently searching for a strategic
  partner with who it is planning to establish a
  joint venture of express services. The partner
  will have also the responsibility for management.
• ELTA will be listed on the stock exchange

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2.Energy sector
The Greek Experience in Network Industries

• The Greek energy sector was, until recently,
  dominated by state monopolies. The sector
  consists of
• the electricity market in which still operates
  only one enterprise, the Public Power Corporation
  (PPC-DEH),
• and the oil and gas market where two public
  enterprises are operating, the Hellenic Petroleum
  Enterprise (ELPE) and the natural gas enterprise
  (DEPA), in which ELPE holds a stake of 35 and
  the rest belongs to the state.
• Only in last decade there were some movements for
  partial pravitisation the monopolies and
  gradually opening markets competition.
• We must noted that liberalisation largely has
  been a response to EU directives designed to
  create a continent-wide energy network and market
  that will provide both more secure and cheaper
  supplies.
• Greece is a small energy market and it is
  dependent on imports for two thirds of its energy
  requirements, particularly in oil and petroleum
  products(only 10 of its domestic oil needs are
  covering by its oil field Prinos). The high
  dependency on imported oil, which is greater than
  for other European partners, is a major factor
  influencing inflation.
• The Greek principal hydrocarbon resource is
  lignite, which is of low calorific value and
  highly polluting. However it is still used by
  PPC(only 1 of lignite deposits are used) to
  produce nearly 70 of electricity. The rest of
  Electricity is generated using natural gas (it is
  imported from Russia), Hydro-electric plants
  (10), crude fuel oil (15),and renewable energy
  resources.

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2.Energy sector i) Electricity sector
The Greek Experience in Network Industries

• The electricity sector has four main stages in
  production
• Generation-the production of electric power using
  variety of fuels and technologies
• Transmission from generators to industrial
  costumers(High-Voltage)
• Distribution to small customers(low-voltage)
• Retailing or supply to final consumers
• We must noted that transmission and distribution
  will be, even in the future, natural monopolies,
  while both generation and retailing are
  potentially competitive activities.

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2.Energy Sectori)Electricity Market_PPC
The Greek Experience in Network Industries

• The Public Power Corporation (PPC) is the main
  electricity enterprise in Greece. It was
  established in 1950 having as task the exclusive
  generation and transmission of electricity
  through Greece. PPC is vertically integrated in
  all aspects of the electricity sector except for
  system operation. Some industrial companies
  generate 2 of electricity, largely consumed by
  them with the rest sold to PPC.
• PPC is a corporation under private Law. It has
  been transformed into a sociιtι anonymι with the
  State as a unique shareholder. A recent Law
  foresees eventual partial privatisation in that
  it requires that the state retain at least 51 of
  the voting shares,which mean that provision is
  made for privatisation of up to 49 of the
  company.
• The restructuring process for PPC has been long
  and difficult. The company was overstaffed, had a
  huge un-funded pension liability for its staff,
  productivity was low and unions resisted
  privatisation, because of the inevitable jobs
  cuts
• The electricity market is now entered a phase of
  deregulation, since February, 2001 (the market
  has to be fully deregulated by the year 2005).
  Under the EUs directive 96/92/EC, concerning the
  regulation of the internal electricity market by
  the institution of common rules regarding the
  activities of the sector as a whole, and the law
  2773/99 on the deregulation of the electricity
  market and regulation of energy policy matters,
  which was adopted to comply with the above
  mentioned directive, Greece must inter alia
  open,(the inter-connected system), at least 30
  of its electricity demand to competition, meaning
  that those customers (eligible), with annual
  consumption of over 1,5GWh (high and medium
  voltage users of the interconnected system), will
  be free to choose their electricity supplier(any
  licensed generator or importer).This percentage
  is close to the EUs 2005 target of 33.(Greece
  has two years of derogation)

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2.Energy
Sectori)Electricity Market_PPC(continued)

• For eligible customers the prices are negotiated
  with generators, while for non-eligible customers
  the prices are recommended by RAE and finally
  decided by the competent Minister.
• PPC remains vertically integrated, retains
  exclusive ownership of transmission and
  distribution and retains ownership over its
  generation and supply facilities.PPC maintains
  the right to supply the other 67 of
  non-eligible, low voltage customers.
• PPC almost loses control over the operation of
  the transmission grid which will operate by an
  independent entity, the Hellenic Transmission
  System Operator (HTSO), in which PPC participate
  with 49 of its shares.
• The same law (law 2773/99) removes the
  prohibition on entry into electricity generation.
  
• PPC (DEH), according to the previous law must
  produce separate accounts,according to
  International Accounting Standards, for four
  electricity activities, generation, transmission,
  lignite mining, distribution and for
  non-electricity consolidated accounts. These
  activities are required to operate at arms
  length with no cross subsidy.
• Concerning privatisation , the company came to
  the market in December 2001 with 16,5 offered
  for sale(IPO) and the raising revenues were equal
  to MUSA 518,9 or M463.3

31
2.Energy Sectori)Electricity Market_RAE and HTSO
The Greek Experience in Network Industries

• In mid-2000, a Regulatory Authority for Energy
  -RAE was established to regulate the sector, and
  to propose to the authorities the enactment of
  measures to protect competition and consumers
  interests. We have to note from now that RAE if
  for the whole energy sector.
• By the same law an Independent entity the
  Hellenic Transmission System Operator-HTSO has
  been set up.
• The Regulatory Authority for Energy (RAE) is an
  administratively and financially independent
  authority and has a mixture of advisory,
  decisive, and monitoring powers. Its main duties
  consist of delivering opinions on the license
  granting to new-entrants, monitoring the
  operation of the energy market, enhancing
  competition, supervising prices and protecting
  consumers.
• Regarding tariffs the Minister of Development
  asks RAEs opinion on the tariffs for offered the
  licenses for supplying electricity to eligible
  customers, and on the prices to be charged for
  non-eligible customers.
• An additional objective of RAE is the
  establishment of a forward market for energy,
  which it would be supervised in order to smooth
  out fluctuations in energy prices.
• HTSO is a new entity owned by 51 by the state
  and 49 by licensed generators(for the time being
  PPC is the only shareholder but as the
  independent power producers enter the trading
  system, they acquire shares in the proportion to
  their installed capacity), will operate, use,
  ensure the maintenance and development of, and
  interconnections with other networks of
  transmission system.
• It must be noted that the above-mentioned law
  made some provisions on social security rights of
  PPCs employees, and thus the privatization of
  PPC will be easier.

32
2.Energy Sectori)Electricity Market_New
Entrants(Importers_IPPs)
The Greek Experience in Network Industries

• 1 Importers
• The imports from other EU countries and the
  large-scale domestic entry are the necessary and
  sufficient conditions to increase competition in
  Greek electricity market.
• As far as the imports are concerned for EU
  generators there are some weak links through the
  Balkan Peninsula, (because of damage to the
  transmission system in Croatia and
  Bosnia-Herzogovina) and weak legal framework for
  transit. Thus, competition is virtually precluded
  except from Italy (a small inter-connector (about
  4000GWh-with Italy (part of EUs Trans-European
  Networks-TENs) can deliver power quantities equal
  to 10 of total Greek demand or less than 1/3 of
  demand that has been liberalised. However, since
  electricity prices in Italy are higher than in
  Greece, the flow is likely to be westward. Thus
  the competitive impact of this link will be
  limited.
• We must note that small imports are made from
  some Balkan counties (Bulgaria, Fyrom, Albania,
  Turkey, but their volume is to little to
  influenced competition.

33
2.Energy SectorI)Electricity Market_New
Entrants(Importers_IPPs
The Greek Experience in Network Industries

• 2. New Entrants
• As far as the domestic entry concerns there are
  serious problems for entry because entrants face
  high barriers, like access to transmission and
  distribution, access to fuel, switching costs of
  potential customers, and low prices to large
  industrial customers.
• The Ministry of Development, though RAE, has
  invited Greek and foreign companies to express
  their interest bidding for electricity generating
  and supply licenses. Until March 2001 RAE has
  received 996 applications from domestic and
  international companies which wish to generate
  electricity in Greece with proposals for a total
  installed capacity of 20.130 MW.
• Five of the 996 applicants were approved by RAE,
  with a capacity of 1.350 MW. From them only two
  have independent access to fuel, one is ELPE
  which may construct a plant at one of its
  refineries (Thessaloniki) and the other
  Prometheus Gas which has the right to use part of
  the gas pipeline from Russian. However the 1999
  Law removes the legal prohibition on entry of new
  generators.
• According to Law other possible entrants are auto
  generators-IPPs, who by definition would use most
  of the electricity themselves. The independent
  generators were reported to have obtained
  preliminary site installation permits but they
  argue that the liberilisation regime as set out
  in Law 2773/99 does not established a market in
  which they can compete.

34
2.Energy Sectorii)Oil and Gas Marketa). Oil
Market
The Greek Experience in Network Industries

• The Greek oil market has long been a
  public-private hydrid. Since 1970s there have
  been private refineries but, until 1992 were
  styled as export refineries and sold the majority
  of their products abroad,unless there were
  shortfall at home. Once the market was
  liberalised the private sector refiniries began
  to sell on the inland market providing stiff
  competition for the state refiniries, because
  then the market has been liberalised wholeshares
  and retailers are free to charge what prices they
  think the market will bear.
• The whole market was open to both domestic and
  foreing private companies but legislation
  regarding security stocks made it virtually
  impossible for the large multinational
  distribution companies to import cheaper products
  from their own refiniries abroad.
• The Greek oil market today consits from four
  refineries (two are in the state sector and the
  rest_Motor oil and Motorola in private sector),
  but the market is dominated by the Hellenic
  Petroleum Enterprise (ELPE) which is today partly
  owned by the state. ELPEs core bunisens is
  refining of crude oil, the marketing and trading
  of refined petroleum products. ELPE now operates
  largerly on private sector criteria and has
  branched out into upstream (with the AustriaOMV,
  the Hungarian MOL, and the Polish PKN Orlen) and
  dowstream ventures.
• ELPE owns three refineries one is the former
  ELDA, in Aspropyrgos area that has nominal rated
  capacity of 7,6 million tonnes(mtn) per year, the
  second is the EKO, at Thessaloniki(3.4mtn) per
  year and the thirt the OKTA at SKOPJE in
  FYROM(3.5 mtn per year)
• In June 1998, ELPE was listed on the Athens (ASE)
  and London Sock Exchanges offering of 46.4 mn
  shares (23) to international and domestic
  investors and company employees(about GRD 35bn).
  In march 2000 the state sold a second tranche of
  shares (12,9) thought a public offering which
  raised GRD 121,5bn. So the total amount riased
  from ELPE partial privatisation accounted to
  MUSA 840.8
• So ELPE are partly privatised (35.9) and the
  share of the state in ELPE is now only 58 with
  rest belonging to retail and institutional
  investors.
• Last year the state has been issued an invitation
  for expression of interest for a strategic
  investor to take a 23 stake in the company.Three
  potential bidders met the deadline for
  expressions of interest for the strategic
  stakeYukos of Russia, OMV of Austria,and a
  consortium of Lukoil of Russia and the Greek
  Latsis Group. Originally it was planned that
  bidding expressions of economic interest should
  be in by the end of 2001 but this has been
  posponed untill the April of 2002.
• So as long as present policy is maintained this
  will create a company owned 35 state, 23
  strategic investor, and 42 floating.

35
b). Gas Corporation.(DEPA)
The Greek Experience in Network Industries

• The public Natural Gas Corporation (DEPA) is
  almost a state owned enterprise in which the
  state holds 65 of its share and the rest belongs
  to ELPE.
• Natural gas is currently imported mainly from
  Russia, through a pipeline and, and on smaller
  part, from Algeria in liquefied form (LNG). For
  this reason it has been given the right to Greece
  to derogate from the EU gas directive (98/30) on
  the liberalization of the gas market, up to
  November 2006.
• During the last few years significant progress
  has been made in the construction of gas supply
  network, which consists of
• The transmission network (high pressure trunk
  line and branches, metering and operation
  stations and maintenance centers), which is
  already in operation.
• A liquid natural gas terminal (storage
  facility) in Revithousa and
• A distribution network consisting of low and
  medium pressure networks. Some of the medium
  pressure pipelines are in operation while the low
  pressure are not yet operational
• Legislation passed in 1995 to comply with EU
  liberalization rules, provides for third party
  access to the natural gas network created by the
  Public Gas Corporation (DEPA) and for the
  licensing of pipeline companies to provide gas to
  areas of the country that DEPA grid does not
  service. However pipelines cannot be established
  until the national grid has been operational for
  seven years, nor can trading company licenses be
  issued until 10-years after the transportation
  system has begun to function.
• Under the terms of the governing legislation DEPA
  owns the network and operates the high-pressure
  distribution system.
• As far as the distribution of natural gas in the
  major urban areas is concerned, companies whose
  shares will be in the private sector for at least
  at 49 level and the rest to the subsidiaries of
  DEPA and local authorities, will be operated.
• We must point out that the Ministry of
  Development has decided to reduce its stake in
  this company below 50 from 65 today. An
  international tender is planned for the sale
  before the end of the year.

36
3.Water services.
The Greek Experience in Network Industries

• Athens Water and Sewage Company (EYDAP) were
  partially privatized in December 1999 by a
  listing of 30 of its shares on the Athens Stock
  Exchange.
• Prior to listing the company was restructured and
  broken up into two entities. The main assets of
  the company have been transferred to one entity.
  Through a leasing agreement EYDAP will secure the
  use of assets in exchange for covering
  maintenance costs. The other entity includes the
  networks, which remains in the possession of
  EYDAP.
• The rate of tariff increases for the period
  2000-2004 has been set water tariffs increase in
  line with inflation while sewage tariffs have
  been aligned with the cost of providing services.
• Regarding the Sallonica water and sewage company
  partial privatization was taken placed in the
  autumn of 2001.

37
4. Other entities-organisati
ons that have been privatised
The Greek Experience in Network Industries

• i). Hellenic Vehicle Industry (ELVO)
• ELVO manufactures jeeps, buses and armoured
  personnel carriers for the Greek Army. Last year,
  a domestic consortium consisting of the
  metals-trading group Mytillineos bid to acquire
  43 of the company.
• ii). The Stock Exchange (ASE)
• The Athens Stock Exchange was established in
  1876. Under the provision of Law 2324/95 the
  company was transformed into a joint-stock
  company operating under the name Athens Stock
  Exchange SA with the Greek state as the sole
  shareholder.
• In December 1997, it was decided that
  institutional investors, brokers and issuers of
  listed shares could participate to the companys
  share capital via a private placement. The Greek
  state offered 39.7 of ASEs share capital,
  raising GRD 22.8 billion.
• In November 1998, the second private placement
  took place- to the same categories of
  investor-with the offering of another 12 of the
  companys share capital. The proceeds from the
  second trance amounted to GRD 10.2 billion. After
  that the Greek state has an equity stake of 48.3
  in ASE share capital, while the rest is owned by
  companies listed on the ASE, brokerage firms and
  institutional investors, such as banks, pension
  funds, mutual funds and insurance companies.
• The Greek state, as majority holder, has agreed
  to the listing of the companys shares on ASE in
  the coming years.
• iii). Duty Free Shops (DFS)
• Duty free shops were established in 1979 and
  were operated 33 outlets at airports, ports and
  border crossings throughout Greece. Following the
  abolition of duty free sales within EU, the
  company proposes to offset the inevitable
  reduction in the sales by expanding its
  activities in non-duty free retail sales. Today
  67 of the shares of DFS have been transferred to
  Agricultural Bank of Greece.

38
5. Results of privatisationa) Revenues raised
The Greek Experience in Network Industries

• The following Table indicates that the total
  money raised from privatization during the period
  1992-2000 has reached the level of GRD 3.6
  trillion (USA 12 663,14 million) or 9,1 of
  2000 GDP. These revenue were used mainly to
  retire government debt, or to funding adjustment
  policies for employees, where was necessary.

39
i)Total Revenues raised per yea The total
revenues in firure terms the following diagram
also illustrates that there was a sharp increase
of privatization revenues during the period
1997-1999. In 2000 the speed growth rate of
privatization was low because the market
conditions were deteriorated.
40
ii)Privatisation Revenues by Method of
PrivatisationThe following Figure presents the
revenue of privatization by method of
privatization
41
iii)Privatisation revenues by SectorThe
following Figure presents the revenue of
privatization by sector
42
b.Price reduction and growth increases
The Greek Experience in Network Industries

• Structural and regulatory reforms that have been
  implemented over the past decade have made an
  important contribution to the main macroeconomic
  magnitudes.
• In the 1998 OECD economic Survey of Greece you
  can find some estimation of the potential long
  run gains from the broad structural changes in
  Greece. It found that the potential cumulative
  (direct and indirect) national income gains from
  restructuring the main public enterprises and
  introducing competition in the markets, where
  they operate, could be of the order of 5-7
  percent of GDP. The total effect could be
  possibly as high as 10 per cent of GDP, if the
  impacts of higher quality products and
  improvements in the budget balance were taken
  into account.
• On the other hand a more efficient public
  enterprise performance could have a downward
  impact on the aggregate price level-one
  percentage point off the CPI price level.

43
c.Employment and salaries results
The Greek Experience in Network Industries

• In some sectors there was a reduction in the
  employment during the period of restructuring.
  However the entry of a variety of private
  companies to different sectors (telecom,
  electricity, financial services) enhanced overall
  employment.
• We must point out that Greek government in some
  cases of privatization have been addressed labor
  issues to privatization candidates, for the
  purpose to keep the employment stable for some
  time.
• On the other hand because the competition was
  increased in the innovation enterprises, salaries
  for skilled personnel have increase rapidly.
• The privatisation of the above mentioned public
  sector companies and banks would enhance the
  efficiency of the corporate sector. It also
  entails a lower burden for the state budget and,
  consequently, for the taxpayer.