Greece to Proceed With Piraeus Port Privatization Move Backtracks on Previous Statements From the New Leftist Government

Greece to Proceed With Piraeus Port Privatization
Move Backtracks on Previous Statements From the New Leftist Government
Greece will proceed with the privatization of the country’s main port of Piraeus.PHOTO: AGENCE FRANCE-PRESSE/GETTY
Feb. 10, 2015 8:13 a.m. ET
Greece will proceed with the privatization of the country’s main port of Piraeus, Greek Finance Minister Yanis Varoufakis plans to tell his eurozone counterparts at a meeting in Brussels on Wednesday, backtracking on previous statements from the new leftist government that had pledged to freeze the deal, senior Greek government officials said.

The U-turn comes as Greece’s new leftist, Syriza-led coalition government scrambles to reach a financing deal with international creditors that will keep the country from running out of cash in coming weeks and potentially defaulting on its debts. Since being voted into power just over two weeks ago, the new government has set a collision course with its European creditors by promising to roll back many of the austerity measures and reforms—such as privatizations—that Greece has undertaken in the past five years to secure billions of euros in aid.

Selling the state’s 67% stake in the Piraeus Port Authority is one of the biggest divestments of an ambitious privatization plan agreed to by the previous conservative government with the so-called troika of creditors—the European Union, the European Central Bank and the International Monetary Fund—for the debt-ridden country to continue receiving bailout funds. It is also one of the more symbolic: The port of Piraeus, just a few miles south of the Greek capital of Athens, is the de facto home of Greece’s giant shipping industry and is one of the largest ports in the Mediterranean.

“The Piraeus sale is on. It will proceed as planned,” a senior finance-ministry official told The Wall Street Journal.

People with knowledge of the deal said the port sale could yield up to €800 million ($908 million), and binding offers are expected by the end of March.

Greece had agreed with creditors that it would realize total privatization proceeds this year of around €2.8 billion—a figure Greece may struggle to reach. The full privatization plan was to include selling a variety of assets, including the operating concessions to 14 airports around the country, the natural-gas distribution network and some state-run hotels and property. The new government insists that some things won’t be sold, such as the state-owned national utility, but senior EU officials say the Piraeus sale is a key test case.

Just a few weeks ago, Theodore Dritsas, the new head of the merchant-marine ministry, told reporters that the sale was canceled, in line with the Syriza party’s pre-election promise that “strategic state assets” wouldn’t be privatized and that completed deals would be renegotiated. Party officials told the Journal at the time that the government would work instead to sell Piraeus through a concession to a state-owned entity from countries including China, Russia or Arab countries after a government-to-government negotiated deal.

That sudden policy shift stunned both Greece’s creditors and international investors lining up to buy the Piraeus stake. Among them was China’s shipping and ports giant China Cosco Holding Co., which in 2009 acquired a 35-year concession to part of the port’s container terminal. Hua Chunying, a spokesman for the Chinese finance ministry, said at the time that the Cosco program had become “a model for Chinese-Greek mutually beneficial cooperation” and expressed hope that more deals could be reached.

Now that the government has shifted policy yet again, people with knowledge of the situation said Cosco is the front-runner to win the Piraeus deal given the success of its existing container-terminal concession, which has generated more than 1,000 jobs. They said Greek Prime Minister Alexis Tsipras plans in the near future to visit Beijing, where he would seek further Chinese investments in Greece.

Since first emerging as the main opposition three years ago at the depths of Greece’s debt crisis, Syriza, a coalition of leftist movements, has blasted privatizations as stripping Greece of its most valuable assets. While in opposition, it was at the forefront of demonstrations against the 2009 Cosco deal.

Before the elections, the previous government’s shortlist for the Piraeus port privatization had included Cosco along with APM Terminals, owned by Danish shipping major A.P. Møller-Mærsk A/S; Ports America Inc., the biggest U.S. port operator; and Philippines-based port operator International Container Terminal Services Inc. The current market value of the Piraeus Port Authority is around €278 million, but people familiar with the deal said bidders would be willing to pay a premium given that Piraeus is the closest major Western port to the Suez Canal and sits astride the heavily trafficked Asia-to-Europe shipping route.

“We are awaiting word from the new government on the privatization process,” said Tom Boyd, a spokesman for APM Terminals. “We remain committed to the development of Greece. In terms of reforms, the port privatization is a positive opportunity for investment and growing the economy.”

Write to Costas Paris at and Alkman Granitsas at