Cosco buys controlling share in Greek port
Updated: 2016-01-22 08:40
By Maria Petrakis(China Daily Europe)
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Chinese shipping giant seals deal after upping bid as rivals drop out
Shipping giant Cosco consolidated its hold over the Greek port of Piraeus on Jan 20, agreeing to pay 368.5 million euros ($402 million) for a 67 percent stake after increasing its offer to clinch control of a key thoroughfare into Europe.
The deal will see the Chinese company pay 22 euros a share, according to the Hellenic Republic Asset Development Fund in Athens.
Piraeus port is seen as a key entry way for Chinese goods. Angelos Tzortzinis / AFP |
Cosco had been asked to submit a better offer last week after it emerged as the sole bidder for the stake in the port, an outcome that Greek officials called disappointing.
The offer accepted was a 70 percent premium to the closing share price of Piraeus Port Authority on Jan 20 - 12.95 euros - and values the entire business at 550 million euros.
The Hellenic fund says the whole value of the Cosco agreement will come to 1.5 billion euros, taking into account purchase price, investments, dividends and income from the concession agreement.
The result could provide Greek Prime Minister Alexis Tsipras with some breathing space as he battles domestic opposition to state asset sales and tries to push through changes to pensions that have prompted strikes, including from seamen. Officials said last week that the government would do its utmost to ensure Greece got the best possible price for a majority stake in Piraeus, the country's largest port and a key part of China's plans to create a modern commercial empire pumping Chinese goods throughout the continent.
State-owned Cosco, which is listed in Hong Kong, was the only confirmed bidder for the 67 percent stake in Piraeus, where Cosco already runs container operations at two piers.
APM Terminals, owned by Danish shipping conglomerate Maersk, and Philippines-based port operator International Container Terminal Services were also short-listed but didn't put in a binding bid. Both dropped out at the last minute in the long-delayed sale.
Analysts see Chinese investment in Piraeus as a key part of China's Belt and Road Initiative, which aims to create 21st century land and maritime equivalents of the Silk Road. Since Cosco started its container operation in 2009, traffic has surged at Piraeus, making the harbor one of the fastest-growing ports in the world. During his visit in June, Premier Li Keqiang called the port China's gateway to Europe.
The Piraeus sale is also seen as a yardstick for Greece's lackluster state asset sales program, a key revenue-raiser tied to the country qualifying for billions in rescue funds from its European partners and the International Monetary Fund.
The Hellenic Republic Asset Development Fund says Cosco has agreed to mandatory investments of 350 million euros in the next 10 years and the income accruing to the Greek state from the concession agreement of some 410 million euros. The amount includes expected revenue from dividends and additional investments up to the end of the concession agreement in 2052.
Of the mandatory investments, 300 million euros will be spent in the first five years, mainly in relation to cruise and ship-repairing operations. Officials expect Cosco could spend another 270 million euros in investments up to 2052. They say Cosco had originally bid 17.5 euros a share for the stake.
The transaction will be a two-step deal: Cosco will buy a 51 percent stake in Piraeus for 280.5 million euros and will acquire the additional stake in the next five years for 88 million euros on completion of the terms in the shareholder agreement, including investments. Greece will initially retain a 23 percent stake, with that dropping to 7 percent on conclusion of the two-step process.
Cosco's supremacy at Piraeus is thought to be a prerequisite to unleashing more Chinese investment in Greece, where unemployment has soared and foreign investment has dried to a trickle amid six years of political turmoil and concerns of financial collapse.
Xinhua, the official Chinese news agency, reported that Li called Tsipras this week to underline China's interest in bolstering ties with Greece.
Greek officials expect Chinese investment in projects such as a major freight and logistics center on the outskirts of Athens, and a new airport planned for the island of Crete.
The Piraeus sale will be the first state asset sale the Tsipras government can claim since the leftist prime minister came to power a year ago, vowing to halt privatizations and tear up the two bailout agreements that forced higher taxes and cuts in wages and pensions on Greeks. He has tempered his tone since July, when he was forced to accept a new 86 billion euro bailout to keep Greece in the eurozone.
In December, the government wound up previously agreed deals for the privatization of 14 regional airports and the sale of seaside resort in Athens. Both deals were halted when Tsipras came to power.
For China Daily
(China Daily European Weekly 01/22/2016 page30)
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