Head of Greece's assets and participations company: 'Centralized management of public assets brings results'

The difficult task of transforming several state-owned companies, some of which have been operating for decades with distortions, while generating deficits and without reaching their full potential, now rests with the Hellenic Corporation of Assets and Participations (HCAP), a so-called “Hyperfund”.

The role, actions and prospects of HCAP until the end of the year, and more importantly, for 2020, were outlined by Ourania Ekaterinari, the CEO of HCAP, in an interview to “N”.

Ekaterinari implied that HCAP will not hesitate to undertake the role of arbitrator in the coordination and cooperation between the state-owned enterprises, such as the Athens Mass Transit System (OASA), the Greek Post Office (ELTA), for instnce, and the state.

HCAP is the largest holding company in the country with four subsidiaries, which control and manage all public real estate properties and share holdings in a variety of public utilities, all of which employ thousands of people.

In specifying these benefits, Ekaterinari stated: "The immediate benefits include directly stimulating cash flows to the State through, for example,increased dividends or by generating additionalrevenues through assets exploitation or by securing that subsidies are at the right level and providedonly where needed.The indirect benefits are even more prominent and are related to the mobilization of investments within a positivelychanging  economic climate, introducing transparency and accountableadministration, simplifying procedures and introducing digitalization, etc."

As Ekaterinari revealed to "N", after the state real estate company(ETAD), GAIAOSE  takes the lead to digitally map  all its assets, which, will allow a fair valuation of the railway company real estate assets and will help to create the right expectations for such assets exploitation.

Specifically, the CEO of HCAP stated:

On which operational model was HCAP‘s constitution based?

HCAP’s operating model was based on the practice of other countries that have already assigned the management of their propertyportfolio to a holding company (Public Sector Holding - PSH)in order to apply a more professional approach to the management of their public assets.

In such a way the separation between the responsibilities of the shareholder and the regulator, is achieved,as proposed over time by the OECD: the holding company exercises the rights and responsibilities of the shareholder and the state assumes the role of the regulator.

When implementing sucha separation, adequate communication lines between the holding company and the State are also created so that the holding company receives a specific mandate from the state, which is called upon to achieve.

For HCAP, this means, above all, that the Corporation is able to register and evaluate the public assets transferred to it. This will allow the State to have a clear and exact picture of what it exactly owns through a balance sheet approach, depicting with precision the value of its assets.”

What opportunities does this provide the State?

“On the one hand, the State can better decide on its fiscal policy, what revenues to expect and what ithas to spend on subsidies, and on the other hand the State can decide which assets it wants to exploit commercially through privatisations or other methods and which assets are of strategic or national importance or for serving the public interest, and therefore should remain under statecontrol. The latter, in most cases, are subsidised since they are engaged in the provision of certain social services (Services of General Economic Interest - SGEIs)”.

So how can HCAP help and has helped on this?

“It is obvious from the above that by centralizing the public property management creates multiple benefits for the country.The organization that undertakes the centralized coordination acquires also the relevant critical size that can affect key economic factors such as employment, foreign direct investments and others, through the mobilisation of targeted strategies(e.g. privatisations, private and public partnerships etc.), but also through professional management tools following private sector standards, as mentioned above”.

What actions has HCAP undertaken with regards to the Public Companies under its control?

Although HCAP is a relatively new organization (it was set up in early 2017) and has obtainedthe specific portfolio of state owned enterprises in 2018 (the majority of Public Companies were transferred to HCAP in 01.01.2018), the Corporation has already taken specific actions regarding the SOEs such as:

• Improving the overall corporate governance framework for SOEs by introducing new CG rules and policies that are communicated to the management of the companies and executives through workshops and specific training material produced by HCAP.
• Improving the level of financial reporting by directing these companies to the use of International Financial Reporting Standards (IFRS) and a specific reporting framework. For the first time, 15 SOEs have consolidated their financial data, some of which are consolidating their own subsidiaries.
• Establishing a specific target setting framework, using key Performance Indicators (KPIs)
• Prioritising investments through the identification of funding sources either from Structural Funds in cooperation with the Ministry of Development and Investments or from other institutional organisations such as the EIB.
• Launching a digital transformation roadmap for each company individually or collectively for companies in cases of synergies, where possible.
• Implementing a specific framework for the coordination between HCAP, SOEs and the State. A typical example of its implementation is the Athens Urban Transport Organization (OASA), which is entrusted with the fulfillment of specific social policies as applied also in other European countries: for example it is required to provide transportation for free or at a reduced rate to specific groups of citizens such as the unemployed, people with special needs, etc. For these assignments, HCAP coordinates actions between OASA, itself and the ministries."

What actions have you taken concerning real estate management?

“Special reference should be made to the Greek State real estate property, part of which is owned by thestate real estate company (ETAD). Traditionally, the quality of data in Greece was poor or inadequate, while the situation is held back by exogenous factors, for example due to the delay of the Cadastre completion. To be honest, in most countries, public real estate is not clearly identified as a tool for economic development, as only a part of it is usually registered, thus a large part remaining unused or unexploited."

In which stage stands now?

“It is an obligation and priority to properly registerthe public real estate transferred to the state real estate company (ETAD), so that it can implement a holistic exploitation strategy based on the characteristics of each asset category. Clearly, the above applies to properties that can be commercially exploited and do not fall into exceptions (i.e. archeological or natural places). It is noted that from 2017 till the end of 2018, ETAD has registered and valuedmore than 2,500 of the transferred real estate properties,compared to approximately 900 properties identified up to 2016, with today's value approaching € 1 billion”.

What are the next steps?

“An important step is the digital mapping of these properties into an integrated geographic information system (GIS), something that ETAD is already implementing. A similar initiative is also coordinated by HCAP through GAIAOSE aiming at digitally mapping the real estate of HCAP’s subsidiaries in combination with the networks they operate. Thus, for the first time, there will be a digital registration of the assets of large  organisations, which will allow of the fair valuation of their properties and help create the right expectations for their exploitation”.