The Greek Experience in Network Industries

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The Greek Experience in Network Industries


... mobile telephone operators (Panafon and STET Hellas) started to offer mobile ... Telestet (majority-owned by Italian STET) and COSMOTE (70%owned by OTE and the ... – PowerPoint PPT presentation

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Title: The Greek Experience in Network Industries

The Greek Experience in Network Industries
The Greek Experience in Network Industries
Speaker Mr Nikiforos Manolas Senior
Economist Ministry of Economy and Finance Greece
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

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)
  • Privatisation of state-controlled Banks
  • Privatisation of Network industries
  • 3. Results of Privatisation

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

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

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
  • 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,
  • Structural reforms, started timidly in the early
    90s with
  • important changes to financial and labor market
  • some product market liberalization, and
  • initial steps in state reforms.

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
  • for membership to Euro-zone area(EMU) by the
  • target date of January 1, 2001.
  • In the following table 1, you can see the
  • of main macroeconomic data for the Greek
  • economy during 90s.

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

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
  • 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
  • 2.The main sectors in which privatisation
    concerns are
  • Ailing enterprises
  • State-own Banks
  • Network Industries
  • Water Services,
  • Others

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

TablePrivatisation Revenues selling IRO
The Greek Experience in Network Industries

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
  • 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.

Table Privatisation Revenues from Banks in MUSA
The Greek Experience in Network Industries
Effects of banks Privatisation
The Greek Experience in Network Industries
  • Profitability has risen considerably in recent
  • 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
  • Considerable efficiency gains have been obtained
    in the financial service sector, labor
    productivity has increased and costs have
  • 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.

3. Public entreprises-utilities and their main
The Greek Experience in Network Industries
  • The publicly owned enterprises have the following
  • 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
  • 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
  • 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
  • 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

i).Restructuring of Loss Making Public
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
  • The appointment of high quality international
  • The elimination of restrictive labor practices in
    order to increase productivity and
  • 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.

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
  • i). Hellenic Vehicle Industry (ELVO)
  • ii). The Stock Exchange (ASE)
  • iii). Duty Free Shops (DFS)

Oil market (ELPE)
Gas Corporation(DEPA)
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
  • 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.


  • 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.)

1.TELECOMMUNICATIONS_Telephonyii). Mobile
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
  • 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.

1.Telecommunications(Figure 1. Mobile telephony
Markets shares)
The Greek Experience in Network Industries
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
  • Table Quality of telecommunication's
    services targets and current value

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
  • 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)

1.TelecommunicationsTablePrivatisation Revenues
The Greek Experience in Network Industries
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

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
  • 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
  • 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

2.Energy sector i) Electricity sector
The Greek Experience in Network Industries
  • The electricity sector has four main stages in
  • Generation-the production of electric power using
    variety of fuels and technologies
  • Transmission from generators to industrial
  • 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.

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
  • 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
  • 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)

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

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
  • 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.

2.Energy Sectori)Electricity Market_New
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
  • 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.

2.Energy SectorI)Electricity Market_New
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
  • 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.

2.Energy Sectorii)Oil and Gas Marketa). Oil
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
  • 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.

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.

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
  • 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
  • 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.

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
  • 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.

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.

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.
ii)Privatisation Revenues by Method of
PrivatisationThe following Figure presents the
revenue of privatization by method of
iii)Privatisation revenues by SectorThe
following Figure presents the revenue of
privatization by sector
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
  • 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.

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
  • 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
  • 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.
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