PRIVATIZATION

Tension between Cosco and the state

tension-between-cosco-and-the-state

Relations between the Greek state and Cosco Shipping have entered a critical phase as of last Friday, as the deadline has passed for the friendly arrangement of their differences, namely the concession of the 16% stake in Piraeus Port Authority’s (OLP) share capital.

Cosco staked this claim last November, after realizing it could not implement its contractual obligations concerning investments that were necessary for the expansion of its stake in OLP from 51% to 67% – the Chinese giant argues that the state had not licensed those investments in time, among other reasons.

The next step after the friendly arrangement is resorting to arbitration. Government sources estimate that the Chinese group has a strong chance of winning the case.

Nevertheless a competent government official commented to Kathimerini that an agreement will eventually be reached with Cosco: “The government has the will to end up in a friendly arrangement with Cosco Shipping and honor the contractual obligation for the concession of 16% of OLP, but only with the absolute securing of the state’s interests and with strict clauses safeguarding that all investment will eventually be implemented.”

According to the same source, these clauses will provide for the reversal of the 16% stake’s concession if the investments are not realized. They will also provide for the rejection of letters of guarantee Cosco will need to produce in order to obtain a two-year extension for the completion of the mandatory investments.

This is a model close to that of the privatization of Thessaloniki Port Authority, where 67% of its stake was directly sold, with a seven-year period granted for the implementation of the compulsory investments, while the investor has produced letters of guarantee, to be returned in accordance with project realization.

Nevertheless Cosco has not asked for an extension – only for the 16% stake, which will render it stronger in the decision-making process and more profitable through the dividends distributed.

Legal sources following the case say there is still some time to reach a friendly arrangement and are optimistic that arbitration can be avoided.