Greece a key investment destination for Macquarie

“Greece is a priority investment destination for Macquarie, and our teams continue to actively assess a number of opportunities locally where we believe we may be able to add value,” notes Martin Bradley, senior managing director at Macquarie Asset Management, in an interview with Kathimerini.

This is the asset manager that is acquiring 49% of the Hellenic Electricity Distribution Network Operator (DEDDIE) from Public Power Corporation for €2.1 billion in cash and debt.

Meanwhile, he stresses that “the government’s willingness to partner with the private sector through its privatization program is sending a very strong signal that Greece is a stable destination business.”

What is your assessment of the prospects of the Greek economy and its ability to attract foreign direct investment?

Despite the impact of the pandemic, it is encouraging to see the strong sense of momentum building behind Greece’s economic recovery. The reforms and policies that have been implemented in recent years have clearly had an impact, and this is being noticed by the international investment community.

We have had a lot of positive feedback from our clients and other investors in the sector who are interested in exploring opportunities to invest locally. I think the government’s willingness to partner with the private sector through its privatization program is sending a very strong signal that Greece is a stable destination business.

You have also expressed interest in the tender for 30% of Athens International Airport. Is your interest still active?

The aviation sector has obviously faced a lot of challenges over the past year, and the process to find an investor to support the long-term development of AIA has been disrupted. However, we are already starting to see global air traffic rebound as the pandemic recedes. This is a very positive development and should enable major investors in airport infrastructure, such as us, to pursue new opportunities in the sector when sellers come back to the market.

Big Greek tenders are set to happen in the coming years, such as the concession of Attiki Odos. Many estimate that you will be in a scheme of interested investors. Are they right?

Greece is a priority investment destination for Macquarie, and our teams continue to actively assess a number of opportunities locally where we believe we may be able to add value. Ultimately, we hope our partnership with PPC through our investment in DEDDIE is just the beginning of a longer-term commitment to developing essential Greek infrastructure, across a range of different sectors.

Do you consider the Greek regulatory, legal and judicial framework to be competitive enough to attract investments?

When we enter a new market, we spend a lot of time trying to understand the local legal and regulatory framework that exists. Reflecting our long-term investment horizon, we often remain invested in a business over multiple regulatory cycles. If we are committing to a business for 10, 15, or sometimes 20 or more years, we need to be confident in those systems, their transparency, and stability. 

We believe Greece is succeeding in developing such a market, and that was the key factor in our decision to invest in DEDDIE. We have seen a clear focus on protecting customers and investors, setting a fair return, and stimulating investment to ensure security of supply, network quality, and decarbonization. Competitiveness is just one element, and we believe regulatory regimes should work to meet the specific needs present in the market.

DEDDIE has started the implementation of its approved €1.6 billion, four-year investment program. Its success will be judged to a large extent by the pace at which the €830 million smart meter installation “mega-project” will run. Will you speed things up?

We will fully support DEDDIE in the planned rollout of its investment program. Installation of smart meters in individual homes requires public support, in a very physical way. Our success will be in providing the public with the opportunity and information to participate, house by house. In general, we are supportive of maintaining a pace of change which demonstrates progress to customers. We will support DEDDIE in accelerating projects where the benefits to customers can be readily appreciated, for example, enabling grid flexibility to allow for the replacement of polluting fuels with cleaner power to help achieve net zero.

DEDDIE’s distribution network carries many “wounds” that need to heal so it can play its important role in the stability of the country’s electricity system and meet the challenges of the energy transition: high rates of power thefts and energy losses, for the most part poorly maintained and above ground, which means exposed to extreme weather conditions. How do you evaluate them?

We know there is some work to do alongside PPC to bring DEDDIE up to speed with some of Europe’s best-performing electricity networks. Its current strategy has a series of key industrial targets that we will work with PPC and the company to deliver and improve on, including minimizing network losses and interruptions, and improving service quality and capacity to support the energy transition. We are committed to supporting DEDDIE on this journey, alongside PPC, by providing the right level of investment, with the support of the regulator.

What are your priorities? How long is it estimated it will take Greece to have a modern and reliable network?

Modernizing energy networks across Europe to meet the future challenges presented by climate change is a generational program, and the steps we take this decade will be incredibly important if we are to be successful in transforming our energy systems and economies to achieve net zero. 

We hope to partner with PPC and DEDDIE to continue to focus on enabling connections for renewable energy generation, as well as the introduction of new technologies to Greek consumers, such as electric vehicle charging infrastructure. We intend to support plans to replace and reinforce the network to enable consumers take steps to improve their environmental footprint, such as adopting more efficient heat pumps, smart meters, solar panels, and storage.

We also share DEDDIE and PPC’s focus on bringing down system costs to deliver value to end-users. The work under way to connect non-integrated islands to the mainland will allow for greater operational efficiencies and flexibility, while lowering costs. Investing in technology to make DEDDIE’s grid smarter will also help to manage energy more efficiently, reduce losses and outages.

DEDDIE operates in a regulated framework, as do all managers. Do you think that it is sufficient, or does it need modifications? And, if so, in what direction?

We are comfortable with the regulatory system in place and being implemented. All systems evolve over time, and we expect the nature and the levels of incentives to be fine-tuned as the regulator pursues broader and more specific objectives.

The Regulatory Authority for Energy has placed the managers under close supervision and has even hired certified accountants to control their financial data, a move that shows a direct questioning of their credibility. What will be your contribution to the issue of reliability and protection of consumers from unnecessary charges?

We are acutely aware of the social responsibility companies like DEDDIE have to their customers. These businesses play a major role in the economy and people’s lives, so it is right that they are focused on service quality and affordability. Regulators across Europe understand this too, and are constantly seeking new and innovative solutions from the industry to increase efficiency and reduce costs for end-users. We welcome transparency and hope it is a path to a shared appreciation of the scale of development and investment needed in our essential infrastructure.

What will you do with the employees? The management is implementing a program of voluntary redundancies and simultaneous recruitments in order to face the shortages of technical staff, but also to improve the average age. Are these measures sufficient to improve the company’s efficiency?

We support the sustainable development of the businesses in which we invest, and for a company like DEDDIE – which will significantly increase investment in its network over the coming years – it will need to have the right skills and expertise in place. DEDDIE has a talented workforce, but we will be supporting the business to bridge technical gaps and invest in upskilling to support the transformation of the network. This will need to be done in a way which delivers efficiencies for customers too, as expected by the current regulatory framework. Indeed, PPC and DEDDIE​​​​​​​ have already shown they understand this balance.