Construction firms look to PPPs for recovery

Major construction companies have seen their turnover decline dramatically after the staging of the 2004 Olympic Games. Until then the sector had seen very strong growth due to the influx of EU funds, the Olympic projects and favorable developments in the housing market, according to a survey by Hellastat. The completion of works for the Olympics, the change in the institutional framework of allocating projects, the downsizing of the Public Investment Program by about 40 percent in 2005, considerable delays in payments for completed works and significant discounts (up to 49 percent) in public project tenders have contributed to the drop of construction activity. Since most of the revenues of major firms come from public works, the firms’ turnover showed a considerable drop, with many of them resorting to staff cuts and to extensive borrowing from banks to cover accumulated obligations. In the first nine months of 2005, 19 out of 25 construction firms saw their revenues decline by up to 50 percent. In total the group revenues of the 25 firms showed a 12.1 percent annual drop in the January-September 2005 period to 3.78 billion euros. Except Technical Olympic, the biggest firm, whose revenues rose by 27 percent, the decline totaled 28 percent to 2.2 billion euros against 3.1 billion euros in the same period in 2004. Operating profits fell by 12.5 percent year-on-year, as did pretax profits by 10.3 percent. Private construction activity is now the engine of the sector, which recorded a steep rise last year, particularly in the second half, due to the new property tax law. In the first 10 months of 2005 as many as 69,088 construction permits were issued in Greece, up by 4.2 percent from the same period in 2004. Some 30 percent of them were issued in Attica. The survey qualifies as important the institutional changes in public works’ allocation which enforce a new way of conceding public projects through tenders. It also notes the planned Public Private Partnerships (PPPs), involving public sector bodies and private companies, and aimed at co-funding and realizing projects or providing services. Hellastat also estimates that projects allocated through PPPs will have positive effects on the quality of works, the Public Investments budget, the time of the projects’ completion, employment etc. Sixty projects totaling 5 billion euros will be included in the EU-subsidized Fourth Community Support Framework for the 2007-2013 period.