The Greek privatisation programme has so far been every bit as fraught and hesitant as the sceptics insisted it would be. The sale of government assets is meant to do much of the heavy lifting under the bailout agreements that Greece has reached with its creditors since 2010.

But the process has been marred by false starts and opposition from public sector unions. Greece’s left-wing Syriza-led government agreed to pursue a privatisation programme as a condition of the bailout led by the troika of the European Commission, European Central Bank and International Monetary Fund. But it did so reluctantly, ministers have promised not to pursue some privatisations, and the sales are a reliable way to bring thousands of demonstrators to the streets of Athens.

But a more prosaic explanation for the poor rate of progress is that Greece’s economy, which has been contracting in the face of the government’s austerity programme, is making government assets less attractive. Potential buyers also worry that the Greek government might take measures that are popular with voters but undermine the value of their investments.

The sale of 66% of the Greek gas distribution network DESFA to Azeri national oil company Socar collapsed last year when Socar tried to reduce the price tag for the stake from €400 million to €260 million after Greece’s parliament did not pass transportation tariffs at the level promised in the tender for the shares.

So far the headline infrastructure sales that Greece has completed are the 2016 purchase of 67% of the Piraeus Port Authority by Chinese shipping group Cosco for €368.5 million, and the acquisition of rolling stock operator Trainose by Ferrovie Dello Stato Italiane. Most recently, Greece’s national power utility PPC has completed the €320 million sale of 24% of independent power transmission operator ADMIE to China’s State Grid Corporation.

This sets the stage for two moves to improve the balance sheet of PPC, which is itself a candidate for a future privatisation. In the first, PPC is nearing an agreement with the EU Competition Authority for the proposed sale of 40% of its coal-fired generation authority. The sale, which would comprise the operational Melti 1, Megalopolis 3 and 4 and planned Melti 2 units, is more designed to open up the coal market to competition than make a huge dent on PPC’s debt burden.

The second move may lead to a more profound improvement in PPC’s finances. PPC has awarded a mandate to advise it on how to improve its customer portfolio management to a consortium of Qualco, Financity, IBM, Deutsche Bank, Estia Business Group, Deloitte Business Solutions, KPMG, ΚΑΠΑ Research and Nikolaos Α. Αndrikopoulos & Partners Law Office.

Securitising PPC short-term receivables

Within this group, Finacity and Deutsche are working on a proposal to securitise short-term receivables from PPC’s customers. This might, if it is feasible, provide PPC with access to liquidity at a lower cost than issuing corporate bonds. PPC carries a rating of CCC- from Standard & Poor’s and has been paying an average interest rate of around 9% on its credit lines with three Greek banks.

The most obvious inspiration is the process by which Greek banks have securitised their non-performing loans, which, at €103 billion, account for as much as 37% of their outstanding portfolio. In June, Attica Bank securitised €1.5 billion of NPLs with Aldridge EDC Specialty Finance.

Jason Kim, senior director of deal structuring, management and execution at Finacity, acknowledges that the NPL securitisations provide some context for the PPC mandate, but notes that PPC’s receivables are shorter-term, often between 30 and 60 days, and better quality. “The receivables include performing accounts, non-performing accounts, and re-performing accounts, where customers have resumed payments after being put on an installment plan,” he says.

He adds that the legal and financial infrastructure to support a securitisation looks like it is in place. “There are no issues with assignability and true sales that we can see.” However, if a deal happens, it is likely to be one of the first corporate receivables securitisations in Greece.

Significant hurdles

Given the issues that PPC has faced in collecting bills, and the acute political dimension to utility bills, which have been used as a vehicle to collect unrelated taxes, this first transaction is likely to be the hardest.

There have been few examples of such securitisations by utilities elsewhere in the world, though many have monetised future flows from regulatory agreements, for instance surcharges on customer bills to compensate them for obsolete assets, or of tariff deficits, as in the Volta transactions that Portuguese power utility EDP has closed.

But as a balance sheet management tool for utilities bracing themselves for greater competition, any PPC deal could prove influential. Utilities in emerging markets are often under pressure to control the price of power they charge to consumers, creating a mismatch between revenues and what they have to pay generators. During economic downturns, customer delinquencies may rise.

The PPC mandate is at an early stage, and the consortium is unlikely to make its recommendations to PPC until the end of the first quarter of 2018. But the process will be worth following, not just for the Greek structured finance market, but for utilities worldwide.

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