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Greece is rushing to sell some of its state assets before a crucial bailout deadline

Kostas Tsironis | Bloomberg | Getty Images

Greece is in a hurry to sell some of its state assets, in what is one of the most critical issues for the country as it races to end a bailout program in August.

Greece is set to hit lower-than-expected proceeds under a privatization program this year, after it failed to reach its 2017 target.

The country's massive privatization program is a condition of its third bailout. In 2015, Greece received a 86 billion euro program ($105.04 billion) and is obliged to sell several state-owned enterprises to boost its economy. But this financial assistance is set to end this summer.

Previously, Greece requested two financial assistance programs after its debt pile became too big to control. The problems in the country became evident in the fallout of the global financial crisis in 2008. The first assistance was requested in 2010 and creditors provided more than 100 billion euros in financing. The second program in 2012 began with 130 billion euros in funding. The latter program ended up not being concluded and Greece requested a third rescue.

CNBC takes a look at how far Greece has yet to go to carry all the privatizations requested by creditors.

Why the delays?

"Overall the picture is mixed with progress in some areas being offset by delays elsewhere," a report from the European Commission in March said.

In 2017, privatization proceeds reached 1.4 billion euros ($1.73 billion), which fell short by 0.5 billion euros from the target that the country had agreed with European creditors in July of that year.

Drone images of The Port of Thessaloniki one of the Largest Greek seaports with annual traffic capacity of 16 million tonnes. It is a major gateway for the Balkans and southeast Europe. There are warehouses, container terminal, cargo terminal, oil and gas terminal. The port also has a passenger terminal.
Nicolas Economou | NurPhoto | Getty Images

"This was due to delays (mainly on the side of the preferred bidder) in the financial closing of the sale of 67 percent of the share capital of the Port of Thessaloniki and delays in the launching of the process for the sale of 5 percent of OTE (telecom company)," the same report said.

There were several stumbling blocks delaying the sale of the port, which is one of the largest Greek seaports and based in the north of the country. In October, for example, the preferred bidder — the consortium of Deutsche Invest Equity Partners, Belterra Investments and Terminal Link — hadn't yet presented to the Greek authorities the company that would be managing the port.

As a result, the Greek State Audit Council couldn't approve the deal. The sale, which was supposed to be finished in 2017, only concluded last month. The deal was worth 1.1 billion euros.

Privatizations are key to conclude the program, but they are not a make-it-or-break-it issue to determine a clean exit.
Danae  Kyriakopoulou
Chief economist at OMFIF

Meanwhile, Greece's privatization agency HRADF launched an international tender to sell 5 percent of the telecom firm OTE in February.

"We're now in April, the program ends in August, it will be critical to see if the government hits its privatization target," Danae Kyriakopoulou, chief economist at the think tank OMFIF (Official Monetary and Financial Institutions Forum), told CNBC over the phone.

In total, the bailout program includes 19 privatizations. These include the sale of 10 port authorities, real estate assets, the Hellenic Post and the Athens water supply, to name just a few.

According to Kyriakopoulou, privatizations are "key" to conclude the program, but they are "not a make-it-or-break-it issue" to determine a clean exit.

The Greek government does not want any extra financial help or surveillance after August — in what they describe as a "clean exit." This would mean that Greece would be at the mercy of financial markets to finance itself. However, several policymakers and analysts believe that Greece should consider extra help from abroad to avoid suffering from market turbulence, which would raise its borrowing costs.

What's in the pipeline?

"Based on the current state of play, the proceeds for the first half of 2018 are estimated at around 1 billion euro and are also subject to the financial closing of Hellinikon (the former airport of Athens)," the European Commission report also said.

The redevelopment of the site of the former airport of Athens, Hellinikon, has faced several impediments, including forestry and archaeological issues. Greece has to close the transaction before June, in about two months' time.

According to a report following the third bailout program review, these are the main actions Greece needs to take before June:

Asset Task
DESFA (natural gas operator) The sale of 66 percent of the company has to be closed by June 2018.
Hellenikon Airport The agreements to redevelop the site of the former airport need to be closed by June.
Egnatia motorway Implementing a new pricing toll needs to be done by April 2018.
HELPE (Hellenic Petroleum) There is a 51 percent stake of the company to be sold. The transaction should be completed by end-July 2018.
PPC (Public Power Corporation) The sale of 17 percent of PPC needs to be concluded by June.
AIA (Athens International Airport) The extension of the concession agreement will be ratified in parliament by April 2018

A process into the future

Given the delays in 2017 and the complexity of the process, Greece could continue with privatizations into 2019.

"Aggregate proceeds during the entire ESM (European Stability Mechanism — the bailout fund) program period are estimated at 3.2 billion euros ($3.96 billion)," the Commission report said in March.

"Additional proceeds of around 1 billion euros are expected in the second half of 2018," the same report added.

In some of the privatizations, what the creditors ask is for some key milestones to be completed before August, not to fully close the transaction. This means that the proceeds of such deals will only come after Greece concludes the program.

Kyriakopoulou from OMFIF said that "it's possible (the government will hit the privatizations target) but much will depend on the risk returns, market environment, geopolitical tensions,…"

Kostas Tsironis | Bloomberg | Getty Images

Since the last assessment in March, Greece has generated about 500 million euros under the privatization program.

A spokesperson for the European Commission told CNBC via email: "It should be noted that shifts in timing do not affect the underlying commitments by the Greek authorities to implement the agreed Asset Development Plan (the plan that outlines the privatizations)."

In the same report in March, the Commission said that "it remains feasible to complete additional key tenders in 2019 which could generate potentially significant yields, although this falls outside the program horizon."