RiskAugust 13, 2024

Greece, BlackRock Move Forward With SWF Creation

The country is moving to quickly privatize key assets to pay back bailout loans and launch its new sovereign wealth fund.

Reported by Bailey McCann

At the start of this year, Greece set out on an ambitious plan to raise 5 billion euros ($5.47 billion) as part of an ongoing privatization and economic recovery plan. The country is on track to meet that goal.

Last week, the Hellenic Republic Asset Development Fund announced it was proceeding with the examination of six proposals for an operating agreement on its Lavrio port. Lavrio is the third largest port in the Attica region and, due to its proximity to Athens International Airport and the ports of Piraeus and Rafina, is a desirable asset for cruise operators and developers focused on tourism.

This agreement follows the privatization of several Greek banks, as well the successful initial public offering of the Athens airport in February. The IPO netted the country 785 million euros at the time of its listing, according to Bloomberg data. HRADF is also moving forward on the privatization of Attiki Odos, the toll motorway system in Greece, with a 25-year term. The current favored offer for that concession is 3.27 billion euros.

Alongside these transactions, Greece is progressing with a plan to create a new sovereign wealth fund. The fund will sell state assets that include real estate, ports and public utilities. It will begin with an allocation of 300 million euros and use the proceeds from the asset sales to invest in green projects, infrastructure and new technology, according to a statement from Finance Minister Kostis Hatzidakis. Giant asset manager BlackRock Inc. will advise the country on how best to structure the fund to accomplish these goals.

In February, BlackRock was reported to have reorganized its influential Financial and Strategic Investors Group, which provides services to central banks, sovereign wealth funds, insurers and financial services firms. At the time, BlackRock announced it wanted to “accelerate the momentum” in this area of the firm and, therefore, rearranged top leadership within the group. Since then, BlackRock has partnered with Saudi Arabia’s sovereign wealth fund to launch BlackRock Riyadh Investment Management. The multi-asset firm is designed to encourage investment in the region. The group’s next project appears to be Greece.

Greece’s new sovereign wealth fund will be separate from its existing national fund, the 5.5-billion-euro Growthfund. That fund manages a 25% stake in Athens International Airport and a 34.12% stake in the Public Power Corp. SA. As CIO reported in July, Vasilis Theofanopoulos was appointed CIO of Growthfund. The organization is in the midst of an effort to transform into a national investment fund similar to those that operate elsewhere in Europe.

As part of this work, the government also plans to consolidate HRADF, the Hellenic Financial Stability Fund (the country’s bank bailout fund) and the Hellenic Corp. of Assets and Participations into a single agency.

The new sovereign wealth fund could play a role in ongoing efforts in Greece to build more sustainability into its energy infrastructure and other parts of the economy. Greece has announced several policy reforms and investments in projects in line with the EU’s REPowerEU Plan, which will phase out Russian oil imports. REPowerEU was launched in May 2022.