By George Vaggelas and Thanos Pallis
The port is Thessaloniki in Greece. The date is March 2018. A long port privatization process that lasted almost 13 (!!) years is finally concluded, with the Greek state handing 67% of the shares of the Thessaloniki Port Authority S.A. to the new owners of the port, the South Europe Gateway Thessaloniki (SEGT) Ltd.
This transaction is the outcome of an international call by the Greek government, that was initiated in 2014 and the winning of the tender by SEGT; the other two binding bids for a majority stake in the second-largest port in the country were Philipines -based International Container Terminal Services (ICTS), and Dubai-based P&O Steam Navigation Company (DP World).
But what are the terms of this privatization?
The new owners of the port
The new major shareholder of the Thessaloniki Port Authority S.A. is the Cyprus-based consortium established under the title the South Europe Gateway Thessaloniki (SEGT) Ltd.
Interestingly enough none of its members has any association with the island. Deutsche Invest Equity Partners GmbH, a German fund, which holds the 47% of the SEGT shares, leads the consortium. The second partner is Terminal Link SAS, an international terminal operator, affiliated with CMA-CGM, which holds the 33% of the shares. The rest 20% belongs to Belterra Investments Ltd, a holding company based in Cyprus, owned by the Russian entrepreneur and active investor in Greece Ivan Savvidis.
Following the privatization, SEGT holds 67% of the listed ThPA SA, the Greek State retains a minority stake of 7%, and the other 26% is traded at the Athens Stock Exchange.
What do the new owners inherit?
The new owners of the second biggest container port in Greece and the major dry bulk and break bulk port of the country inherits an operating port with six piers, 6.150 m. of docks, 1,55 million square meters of port land and several buildings and warehouses. The port of Thessaloniki is part of the core TEN-T network and is in proximity to the Trans-Adriatic-Pipeline (TAP).
According to the Financial Report of ThPA S.A., at the end of the fiscal year 2016 cash and cash equivalents of the company were almost €48,5 m. while for the pending fiscal year 2017 this amount is expected to be significantly higher.
How much did it cost to buy this port?
The total amount paid by SEGT for buying the 67% of ThPA S.A. shares was €231.9 m.
The financial offer for this acquisition was €34,34/share, standing at a premium of 67,4% to the then (24.4.2017) share price at the Athens Stock Exchange. The transaction concluded at this price/share, which equals to a 14,68 P/E ratio.
The new owner will also pay to the Greek State an annual fee equal to the 3,5% of the consolidated revenues of the port, with this amount standing at a minimum of no less than €1.8 m.
Guaranteed investments
The new owner guarantees minimum investments of €180 m. Although the investment plan is still unclear and according to the new owner will be published on May 2018, an investment of €130 m. is planned for the expansion of the container terminal Pier VI, an investment of €30 m. for the modernization of the cargo handling equipment at both the container and the conventional cargoes terminals and finally an extra €20 m. are for the restoration of the passenger terminal building and the general port development.
The Greek State will sustain its role as investor, as it will complete two significant investments that will increase the port’s connectivity with the land transport networks. The first one is the integration of the port with the national Rail Network and the completion of the necessary works for the connection of the container terminal with the Thessaloniki-Athens and the Egnatia Motorways. Failing to do so, will result in penalties by the new owner to the Greek State.
Guaranteed (minimum) efficiency
The clauses of the agreement include the minimum throughput scales for both the container and the conventional cargo terminals.
For the container terminal the minimum throughput has been set at 370.000 TEUs for the period 2024-2027, to progressively increase to 650.000 TEUs for the period 2038-2051.
For the conventional cargoes, the minimum throughput has been set at 3.8 m. tones annually for the period 2024-2027, increasing to 5 m. tones for the period 2038-2051.
Notably in 2017 the terminals of the publicly owned and operated port of Thessaloniki handled already 401.473 TEUs and 3.808.951 tones.
Performance guarantees: The agreement foresees several minimum performance standards, including a minimum rate of 18 moves/gantry crane and a 45 minutes turn-around time for trucks at the container terminal; 100 tones / hour / gang for the dry bulk cargoes; and 90 tones or 25 tones per hour/gang for the break-bulk cargoes for high and low performance cargoes respectively.
Stock exchange reactions
The privatization resulted in a significant increase of share prices, as shown in the table below. Given the €1,3973 earnings / share for the fiscal year 2016, the majority of the shares was sold at a P/E equal to 14.68. The share value rised the day after to a P/E equal to 15,24 and concluded the trading year 2017 at P/E = 17,68. Today, almost a year after the announcement – and few days following the completion of the transaction the shares are traded at a P/E=20,18
Table 1. ThPA S.A. share prices and P/E ratio
| 31.12.2016 | 24.4.2017 (announcement) | 24.4.2017 | 31.12.2017 | 15.4.2018 | |
|---|---|---|---|---|---|
| Share price (Athens Stock Exchange) | €17,55 | €20,51 | €21,30 | €24,70 | €28,20 |
| Earnings /share (2016) | €1,3973 | €1,3973 | €1,3973 | €1,3973 | €1,3973 |
| P/E | 12,56 | 14,68 | 15,24 | 17,68 | 20,18 |
A bid of history
The story goes more than a decade before: an initial call for tenders was seeking a more conventional privatization model via a concessioning of the container terminal to an international terminal operator. This had led to the nomination of Hutchison Whampoa Ltd as the preferred bidder with Hutchison abandoning the project in the light of the global financial crisis of 2008-9 and its implications.
And an interesting note
Now Greece, under the coordination of a ‘left wing’ government, has sold the port authorities of both major ports of the country, Piraeus and Thessaloniki, configurating a very unique port governance prototype – detailed in: Pallis, A.A.and Vaggelas G.K. (2017).Port governance: A Greek Prototype. Research in Transportation Business and Management, 22, 49-57 (for the authors’ version of the study: visit www.PortEconomics.eu).
* The article is an extract of the 2018 edition of the business intelligence report GREPORT (Piraeus: P&S Advisory) to be first circulated at Posidonia Exhibition in June 2018.
** Dr. Thanos Pallis and Dr. George Vaggelas are directing the Jean Monnet Action in European Ports Policy (EPP) at the Department of Shipping, Trade and Transport, University of the Aegean. This June 28-29 they celebrate 15 years of the Action hosting in Chios Greece the Jean Symposium on the Future of the EPP (for more info #EPPSymposium2018).
