Under a deal announced by Greek officials on Monday, COSCO will be excused paying fees to OLP in return for making the investment, removing a question mark over growth at the port and taking the state a step closer to selling its 74 percent stake.
In turn this could add impetus to Greece’s ailing sell-off program, which has been hampered by the wariness of international investors to buy assets in the recession-hit country but which remains vital ifGreeceis to keep receiving bailout funds and debt relief from its international lenders.
“This agreement is as valuable as the initial one which brought the Chinese company to Greece,” shipping minister Miltiades Varvitsiotis told newspaper Naftemporiki.
COSCO took over management of OLP’s container port in 2008.
Under the terms of the agreement, COSCO will spend 230 million euros ($303 million) to increase Piraeus’s cargo handling capacity by two thirds over the next seven years to an annual 6.2 million 20-foot equivalent units (TEUs).
In exchange, the deal suspends the fixed guaranteed fees COSCO was contractually obliged to pay to OLP, until Greece’s gross domestic product (GDP) returns to its pre-crisis level of 2008, “plus 2 percent each year”.
According to Greek GDP forecasts, this concession effectively suspends COSCO’s payments until after 2020, saving the Chinese company at least 250 million euros.
The deal will be submitted to the two companies’ boards for final approval.
Piraeus, one of Europe’s busiest tourism ports handling about 20 million passengers a year mainly to and from the Greek islands, aspires to boost its cargo trade and become a gateway for Chinese trade into the region.
Its container port handled a total of 625,914 TEUs of cargo last year, up 28 percent on 2011 but still 6 percent below its 2009 level reflecting the damage to Greek trade from the economic crisis.
OLP has a stock market value of 421 million euros. Greece hopes to attract private investors to run the company, either through a direct share sale or a concession. COSCO is seen as a possible contender in the sale.
Under Greece’s privatization plans, its second-biggest port at Thessaloniki and other regional ports are also up for grabs. (Reuters)