ECONOMY

Construction firms looking abroad to recoup losses

The lack of new public works, major road projects that have come to a standstill and, obviously, the general consequences of the financial crisis are fully reflected in the financial results of Greek construction companies for the first half of the year, which are disheartening.

Virtually all listed construction firms posted losses in the first six months of 2011. At the same time the state appears to owe huge amounts of money for projects that have been completed, rendering the situation even worse. Institutional representatives of the sector estimate the total amount owed by the state at over 2 billion euros.

The Ellaktor group suggests that the margin of profit from the first six months of the year has gone into negative territory, amounting to -5.2 percent from the same period last year, when it had posted growth of 2.4 percent from the year before. The group registered losses of 24 million euros in H1, with its balance reduced to 2.4 billion euros, against almost 5 billion two years ago.

The main reason for the blow that the major construction companies in the country have sustained is the cessation of most major road projects that were being carried out by public-private partnerships (PPPs). The projects have come to a standstill since the end of last year, with attempts by the Infrastructure Ministry to find a solution proving poor to date. However, there are developments to be expected in the coming months as negotiations have started to pick up speed.

Another more positive development is the recent agreement between Athens and the European Commission for the latter to take on a bigger share in the funding of projects and the supply of technical assistance required for restarting a number of projects.

Competitiveness Minister Michalis Chrysochoidis stated last week that there are 64 technical documents concerning major projects that have been forwarded to the European Commission, with a total budget of 11 billion euros, including comments and notes about the problems each projects has run into, so that troubleshooting can start for each project as soon as possible.

Chrysochoidis also stated that with the increase of the EU-subsidy share to co-funded projects to 95 percent and based on the payments already made, some 875 million euros can be expected to return to the state budget retrospectively. Based on the payments expected by the end of the year, another 400 million euros will also come into state coffers, for total savings of the public investment program of 1.275 billion euros this year.

In the midst of the ongoing financial crisis, tenders for new construction projects have practically frozen, so that the framework of their funding can be cleared up. PPPs such as the extensions to the Attiki Odos ring road and the new airport at Kastelli on Crete have been repeatedly postponed, mostly due to the reluctance of banks to participate.

As a result, the domestic construction companies able to retain an outward-looking character are turning their attention abroad, aiming to bolster their works and recoup some of their losses in the local market.