ANALYSIS: Greek nightmare makes poor ad for asset sales

Greece's wretched experience has been a poor advert for asset sales as a tool to cut state borrowings, but others in the euro zone high debt club are much better placed to make a decent fist of privatisations.
Italy, Spain and Ireland, all of which are grappling with towering debt burdens, have the luxury of time, at least relative to Greece, and can structure privatisation deals to maximise their impact and bide their time on pricing.
And though all of these countries have felt the heat from the markets, Greece has become almost synonymous with the deep crisis at the heart of the euro zone, which has hollowed out its appeal to investors.
"It is not clear Greece has the luxury of doing anything in an optimal way; they are basically burning the furniture just to get by," Bill Megginson, Professor of Finance at the University of Oklahoma, told Reuters.
"But other countries, especially where the crisis seems to have abated a bit, like Italy and Spain, they could and they probably will."
Greece came up with plans for asset sales to convince its lenders it was serious about reforming its uncompetitive economy and also to raise funds to pay down its debt mountain.
But the EU and IMF, which pushed Greece for bolder and more detailed plans as to how it would deliver on its promises, have become increasingly frustrated with the country's repeated failure to meet targets.
Despite a reluctance to sell assets in such poor market conditions, Greece – which aims to raise 19 bln euros from privatisations by 2015 – has begun ramping up its efforts, including inviting bids for state-owned natural gas company DEPA and the management rights to its Olympic broadcasting complex.
It plans to put stakes in betting monopoly OPAP and refiner Hellenic Petroleum up for sale by May. But its tight timeframe and ambitious targets, already scaled back from 50 bln euros, suggest it will struggle to meet its price expectations.
"There is a big risk … the long-term strategy for the businesses and getting a fair price for the taxpayer falls by the wayside," said David Parker, Emeritus Professor of Privatisation and Regulation at the Cranfield School of Management. "We are certainly going to have a risk that the government sells off industries without really thinking about the long-term implications."

OPPORTUNISTIC
Countries with the time to get state-owned companies in better shape before selling them, with good management and improving profitability, will get better prices.
Structuring sales right is key to boosting the amount they raise, with the best prices typically achieved either through a public offering or by selling in a series of tranches – both of which take a lot longer than the straight auctions Greece has planned.
"If you sell them in pieces, the first piece may be somewhat underpriced, but then as the firm improves performance you sell the remaining tranches at progressively higher prices," said Megginson, who was a member of the Italian government's global advisory committee on privatisation from 2002 to 2007.
When the British government privatised telecoms firm BT, it sold in three waves over a nine-year period. While it received 1.30 pounds per share in the first sale in 1984, this had increased to 3.35 pounds by the second in 1991, and 4.10 for the final tranche in 1993.