Greece reinvigorated by PPP projects

World Finance examines how PPP projects in Greece are boosting the country's economic prospects

November 19, 2014

From the roads you drive on to the hospitals you attend, an increasing number of public institutions around the world are being delivered through public-private partnerships. Greece has been a continental leader in its enthusiasm for them. World Finance speaks to representatives from Attika Schools PPP, Constantine Stavridis, Nikos Matzoufas, and Ellie Kakoullou, to discuss how such programmes are being rolled out.

World Finance: Greece of course has been hard hit by the recession; can you tell me, how does a country stand to gain from the introduction of PPPs?
Nikos Mantzoufas: Indeed, infrastructure projects are needed in the world: the same is valid for Greece. Greece has a long history of PPP projects, and a bright future.

During the crisis, during the first semester of 2014, we actually achieved the financing of three projects, being ranked fourth at the European level compared to GDP.

So Greece has good projects, and we’re hoping more and more projects come to market.

Ellie Kakoullou: Our bank has been particularly interested in these projects. Banks in Greece have traditionally financed the public sector and the private sector, and PPPs have given us the opportunity to finance a combination of both, with a well-balanced risk allocation, allowing us to finance private sector companies that can efficiently and effectively, with few time delays and fixed-price-dates certain contracts undertake these projects. With the public sector angle of a steady flow of payments that will repay these projects.

Our bank has particularly targeted all these projects since their inception

Our bank has particularly targeted all these projects since their inception. This year we’re actually targeting four waste-management projects that we hope to go ahead with in 2014 and 2015.

Constantine Stavridis: National Bank of Greece had a significant contribution to the country’s PPP history. It has been involved also in the latest generation of projects, through its management of the Jessica urban development fund.

PPPs will give the opportunity to develop expertise in the country, enhance the ability of our private-owned companies to create a new market, and also expand abroad.

World Finance: Right, now, Nikos, of course we know that there have been a number of funds that have played a significant role in the execution of PPPs, one of them being the Jessica fund. Tell me about it.
Nikos Mantzoufas: The Jessica Fund was vital for the PPP projects that we have financed this year.

It was vital because of a scarce liquidity of the market, and at the same time it developed a unique structure at the European level.

The schools projects that we reached the financing was the first project at the European level that combined Jessica funds, EAB loans, commercial banks, and private capital.

This unique structure has been achieved and developed something that is quite unique and many other countries with liquidity issues will also follow.

So the Jessica fund, coming from European structural funds, has become a very crucial and vital element for the financing of Greek projects.

World Finance: Now from the perspective of commercial banks Ellie, can you tell me, do you see the number of PPPs increasing?
Ellie Kakoullou: A lot of these projects have high capital expenditure, so commercial banks obviously are no better equipped to cover a greater proportion of these projects, but are still very happy to see the EAB and Jessica join them in these structures.

Greece is lagging behind in this sector, and we are aiming through PPPs to deliver good projects, environmental projects

And yes, all four systemic banks are very interested in moving these projects ahead. We’ve now undertaken the advisory of the waste management projects that we expect to mature in 2014 and 2015, and we’re very enthusiastic about going ahead with them.

World Finance: Now I had a chance to speak with Minister Notis Mitarachi, and he had this to say about why it was more fiscally responsible to rely on PPPs than government funding for these types of projects.

Notis Mitarachi: We believe that the private sector is a better executor for this project. We have passed the construction and finance to the concessionaire. That is important from our point of view, because we can control the cost to the public coffers of these projects. Historically – and this is not only the case in Greece but in many other economies – public projects have overrunning costs. With PPPs, this is now secured.

World Finance: Now Nikos, of course part of the funding that backed this project’s €35.8m that came from EIB. Now that is a large amount of money, but also finite. What are you going to do five to 10 years down the road when you have to continue to fund these schools?

Nikos Mantzoufas: This is a very important element of these PPP structures. These PPP structures are for 25 years; the total amount of the value is €110m, so the total development was €110m, enabling and mobilising private investment and private banks.

And all these payments will be repaid in the long run by the state through availability payments on what is called the typical UK PPP structure.

That means that we are paying as public when the service and the building is delivered, and only if the maintaining is being provided. Otherwise no payments will be made.

This will improve the projects and improve the state budget, since it’s paying for something that’s been delivered.

World Finance: Now one more thing that Minister Notis Mitarachi said was that these PPP projects are eventually going to trickle down in terms of their impact at the municipal level. Can you tell me what sectors really stand to gain from such a move?

Constantine Stavridis: The total at the moment, we have projects in the pipeline of around €1bn. These are in many sectors. One very important sector that involves municipalities is waste management.

Greece is lagging behind in this sector, and we are aiming through PPPs to deliver good projects, environmental projects.

Another very promising sector is the rural broadband sector: bringing fast internet to many municipalities around Greece: rural areas that cannot have access there.

Recently we have a project of telematics at the urban transportation system, a project that is like the one in London, knowing where the buses are arriving. But this is a 12 year period project where the contractor is keeping it and maintaining it over the long run.

As a closing remark, I can say that the PPP structure can bring the best of all worlds: of the world of the private sector, of the banks, and of the public. We do believe in that: making better projects for the public.

World Finance: Very exciting times of course for Greece with these PPP projects on the horizon. Nikos, Ellie, Constantine, thank you so much for joining me today.
Nikos Mantzoufas, Ellie Kakoullou, Constantine Stavridis: Thank you, thank you very much.