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PortGovernanceModels:FinancialEvaluationofGreekPortRestructuring

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Port Governance Models:Financial Evaluation of Greek Port Restructuring

Athanasios A. Pallis and Theodore SyriopoulosDepartmentofShipping,TradeandTransport,UniversityoftheAegean,Greece

Finalversion(January2007)

SubmittedforpublicationinTransportPolicy

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Abstract

In the late 1990s, Greece proceeded to a major port governance reform, aiming to

overcome observed deficiencies of its national port system. Twelve major ports of national

interest were transformed from public law undertakings to government-owned port

corporations. Responsibility of port governance was devolved to autonomous

commercially driven port authorities. At a latter stage, two ports (Piraeus and Thessaloniki)

were listed on the Athens Stock Exchange. Grounding on the discussions regarding port

performance indicators, this paper examines the financial performance of this new port

governance model. It does so through an empirical evaluation of the twelve port entitiesfinancial performance over a time span that corresponds to the sectors reorganization.

The analysis suggests that certain rigidities are still present and further steps of

modernisation and restructuring are essential. Despite profitable financial results, in the

case of most Greek ports of national interest the examination of the financial accounts

raises considerable doubts as to the efficiency of their organisational structures, currently

in a transitional phase. These results are in line with suggestions that port governance in

Greece does not respond, yet, to any of the potential matching framework configurations

of structures and strategies that advance port competitiveness thus have been identified in

the port literature.

Keywords:Port Governance; Port performance; Financial Performance Evaluation; Financial Ratio

Analysis.


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1. INTRODUCTION

Since the late 1990s Greek ports have been in a state of transition. Breaking a long-

standing tradition of state-controlled comprehensive port organisations, twelve ports of

national interest were converted from public law undertakings to government-ownedport corporations. The responsibility of governing these ports was devolved from the

national government to commercially driven autonomous port authorities. The latter

assumed responsibility for port services provision as well. The two major ports of Piraeus

and Thessaloniki are currently listed on the Athens Stock Exchange, with the States stake

being in the order of 75%.

The introduction of a new governance model aims to overcome deficiencies of the earlier

port structures and facilitate adjustment to a complex economic context. Apart from well-

known physical factors such as the location, maritime accessibility and hinterlandinfrastructure, the governance of ports stands as an important determinant of port

performance (De Langen, 2004).

This paper examines the financial performance of the new governance model, and

concludes on the financial implications of the applied national port system restructuring.

In particular, it proceeds to an empirical evaluation of the recently established port entities

financial performance over a recent time span that corresponds to the sectors

reorganisation. The overall aim is to identify performance (d)efficiencies and generate

knowledge on whether the endorsed port policy reforms support an improvement to keyfinancial indicators. This evaluation also offers the opportunity to examining key

characteristics in the sector and assessing vital issues for prospective growth and

development. Such a financial appraisal is surprisingly lacking from the empirical financial

literature, and not least in port studies.

Section 2 presents the scope and the content of the reform that has taken place in Greece,

illustrating that boosting performance through adaptation to complex economic

conditions has been a major driving force towards port devolution. In Section 3, the paper

establishes the importance of examining financial performance. Thus, it develops andevaluates key financial indicators in order to assess individual port performance over time

and within the context of a dynamic sectoral environment. The financial appraisal of the

Greek ports performance is based on a data-set provided by port authorities and refers to

their annual reports and financial accounts. The key objective is to gain a meaningful

insight into the financial impact of the particular institutional and managerial shifts

experienced over recent years.

Presenting the conclusions of the empirical findings, Section 4 suggests that these findings

are in line with both data envelopment analysis (Barros and Athanassiou, 2004) andgovernance studies (Pallis, 2007a) of the post-reform structures of Greek ports. These


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studies are based on the relevant literature of port governance (cf. Brooks, 2004) and

advocate that the specifics of port governance in Greece do not respond to a matching

framework configuration that advances port performance. Given that the governance

structure of ports globally has changed dramatically over the last two decades, this

discussion contributes to a much needed association of the financial performance of

particular autonomous port entities with the broader port governance and performance

literature - i.e. matching framework approach (Baltazar and Brooks, 2001; Brooks and

Cullinane 2007a); and, implications of legislation (i.e. Everett, 2003; Everett and Pettit,

2006).

2. THENEWGOVERNANCEOFGREEKPORTS

2.1

Background

Conditions

and

the

Scope

for

Reform

Following a Mediterranean tradition, in the pre-reform period Greek ports had been

organised as state-controlled public law undertakings and ruled according to the general

regulatory regime of public entities in Greece. The prevailing concept of ports as public

welfare services justified a governance and operational model wherein national level

authorities act both as regulators and as managers responsible for the provision of

services. Brooks and Cullinane (2007b: 415) develop a typology of five governance

combinations that provide an accurate reflection of the port governance models imposed.

The Greek pre-devolution model corresponded to the first one of those models: a

combination of central government-owned ports with central government management

and control specific ownership and management practices.1Governmental activities were

not just core management activities but included operations, planning, financing and so

on. The state appointed and controlled public port authority that owns and maintains the

infrastructure and superstructure and provides all port services. The private sector is

involved in the provision of these services solely in the cases when port authorities lack

the capacity or the equipment (i.e. handling cranes, towing) to provide them, while some

services provision (i.e. pilotage) were directly controlled by the Ministry of MercantileMarine (MMM).

Despite observed deficiencies in these port structures, there had been no interest in

alternative service delivery models before the early 1990s. Ports were overlooked, due to

the small size of the country in the global marketplace. The principal state agent (the

1 The other four ownership and management combinations are: (a) Government owned butmanagement and control are decentralized to a local government body; (b) Government owned(federal, regional or municipal) but managed and controlled by a corporatized entity; (c)

government owned but managed by a private sector entity via a concession or lease arrangement,or owned and managed via a public-private partnership agreement; and (d) privately owned,managed and controlled (Brooks and Cullinane 2007b: 415).


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MMM) continued to focus on flag-state policies for supporting the Greek owned fleet,

rather than on policies for providing port services. The location of Greek ports and their

potential to become international gates or nodes of major importance in the route

connecting the Far East with Europe were consistently neglected.

However, major changes in the economic context (i.e. restructuring in shipping, recovering

of world trade, advancement of information technologies) continued to expose these

structural deficiencies. In the mid-1990s, it was apparent that ports with an international

reference had failed to improve by any international standard. Low productivity levels and

serious infrastructure shortcomings (i.e. transhipment installations, inland transport

infrastructure) were common (Chlomoudis and Pallis, 1997), although worldwide trends

were transforming ports into a capital-intensive sector that imposes a heavy financial

burden.

Intense port community criticism also focused on unproductive and deficient investment

and the absence of innovative ideas by port managers who lacked sectoral experience (cf.

INU, 1995). An inappropriate legislative regime was produced and port governance

structures were implemented with politically appointed controlling boards of little business

competence.2 Politicians also tended to use ports to exercise social policies as well. In

1997, the Port of Piraeus had a workforce of 1,300 persons and was obliged to spend

almost 20% of its annual income to provide pensions to 1,800 retired port workers

(Psaraftis, 2005). To some, this was a policy of privatisation through bankruptcy

(Goulielmos, 1999).

These practices affected port operations, delaying necessary capital expenditure on

projects required to meet market development. Public investments stagnated, as the

countrys commitment to participate in the European Monetary Union led to economic

policies which reduced public debt and inflation. Such investments in public law

undertakings were further constrained. Despite the then EU initiatives to improve port

infrastructure via public/private partnerships (Pallis, 1997), there was no significant private

capital mobilisation and the situation was deteriorating.

Along with the absence of effective pricing mechanisms (Psaraftis, 2005), the

administrative and operational deficiencies resulted in cargo losses.3 Sub-optimal

performance, short-term planning and lack of commitment to long-term strategies were

apparent. The latter would have enabled Greek ports to meet, either via configuration or

resources, the needs of markets, and to fulfil stakeholder expectations within a changing

2A phenomenon observed in other countries as well: cf. Everett, 2003; Everett & Pettitt, 2006.3An illustrative example is the 1996 decision of container lines Evergreen and Lloyd Triestino to

switch their transhipment hub from Piraeus to Gioia Tauro in southern Italy that resulted in a 25%reduction of transhipment traffic through the port.


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economic environment. When changes in the transportation process (i.e. new

technologies, logistics) demanded specialisation and post-fordist methods of port

operations, the political management structures in Greece impeded public port

organisations from developing sufficient flexibility and versatility to cope with a lack of

productivity and innovation and respond adequately to structural changes.4

On the other hand, the demand for transportation infrastructure has increased

considerably over the last years. This is directly associated with the pace of economic

growth and increase of international trade flows. With a view to seaborne trade,

international competition has increased and the struggle of shipping companies to retain

their market shares has intensified. The volatility seen in the shipping business directly

affects the revenues gained by port corporations worldwide as well. The majority of ports

are promoting their investments in infrastructure, in order to improve their managerial

efficiency, operational processes and customer services. In this competitive environment,

cargo traffic is gradually being channelled towards ports with the most cost-effective

industrial bulk-handling techniques and better intermodal coordination.

Yet, structural reforms in the Greek public sector had remained limited, and this was so

despite changes in other countries in the region. The publication of an EU Green paper

on seaports stating the intension of the EU to create a level playing field between and

within EU ports with international traffic throughout Europe (European Commission,

1997) contributed to a wait and see policy: following EU-level decisions minimised

political costs. The pace towards reforms accelerated in the late 1990s, as the formation of

EU policies proved to be remarkably slow (cf. Chlomoudis and Pallis, 2002) and the

dynamics of the economic context continued to pose adjustment pressures. A new

governance model was finally endorsed, as a means of boosting port performance.

2.2 ContentofPortReform

The first port reform initiatives (1999) considered the two trans-European port

organisations of the country. The ports of Piraeus and Thessaloniki became corporations,

at that time wholly owned by the Greek State (Law 2688/1999). Subsequent to a later

decision, these ports were listed on the Athens Stock Exchange (Thessaloniki since 2001;

Piraeus since 2003), with the state retaining 75% of their shares. Two years later (Law

2932/2001), ten other ports of national interest (Table 1) were converted from Port Funds

to limited companies. Each company has one share owned by the state. These ports are

supposed to operate as private-sector business entities with the objective to develop

infrastructure and offer qualitative and competitive services. Along with Piraeus and

Thessaloniki, the other ten domestic ports participate in the self-governed Hellenic Ports

4This situation was also seen in other countries: Noteboom & Winkelmans, 2001.


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Association, established in 2003, in order to promote port collaboration. In mid-2006, the

MMM decided to dissolve this self-governed institution and re-impose direct rule via the

establishment of a National Centre of Port Development that is governed by the MMM

itself.

TABLE 1

Following the World Bank (2000: module 3: 46) taxonomy, in the case of ports of national

interest, the new forms of port governance in Greece follow a corporatization path in

which a public sector undertaking. is transformed into a company under private corporate law that

conducts the ports business and holds its assets, although the shares are issued andowned entirely by the

government. The main objective is to decrease direct government control over the company and to make it

more responsive to market forces. As regards Piraeus and Thessaloniki, public listing was a

move to secure private funds and limit the fiscal burden of port modernisation. For those

advocating the privatisation of ports, this remains a first step towards this direction.

Local and municipal authorities have undertaken the management of the remaining Greek

ports, replacing managing boards directly appointed by the central administration. The

objective is a more efficient utilisation of the public funds and other resources and better

services for residents and the local tourism industry. Based on recent figures, the gross

weight of goods handled in all Greek major and small ports is in total 111,1 million tonnes,including almost 2 million TEUs container cargo (ESPO, 2005).

The explicit objective of port reform is to increase the participation of Greek ports in the

global share of maritime transport and promote the greatest possible participation in the

provision of port services (MMM, 2002). The national administration acknowledged that

this policy approach should be based on the circumstances in Greece, new volumes of

international trade, new technologies and the organisational structures that attract high

yield investments. The intention of the reform is to promote: port competitiveness in the

light of the international economic environment; maritime relations with countriesexporting significant cargo volumes; sustainable and integrated port development; social

cohesion of the island area and populations; and safeguarding cargoes transportedthrough

Greek ports. This strategy matches considerably the changes that have taken place in other

Mediterranean EU countries (Italy, France and Portugal). The Spanish case, where the

public entity Puertos del Estadois responsible for the coordination and efficiency control of

25 autonomous port authorities, stands as the example pattern.


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3. TOWARDSAFINANCIALEVALUATIONOFPORTDEVOLUTION

Port governance developments in Greece follow respective major shifts that can be

observed worldwide. The previous status of publicly owned and operated port entities has

left behind lower productivity incentives, inefficient labour and capital resource allocation,as well as constraints imposed by extraneous political influences. Thus, many governments

have introduced autonomy and performance incentives, supporting market-responsive

port management in the attempt to improve competitive advantage.

Rising inefficiencies in ports have forced a growing number of governments in developed

and developing countries (cf. Juhel 2001; Hoffman 2001; Cullinane and Song, 2002; 2007)

to adopt alternative service delivery frameworks and devolve port operational

responsibility and port assets to public and/or private and/or commercially driven port

entities. Some of these port entities choose to go public and are listed on internationalstock markets. Their managerial and financial port performance is subject to the scrutiny

of the market mechanism. The prevailing trend in transferring government port operations

and assets to port level entities stresses the fact that public participation is diminishing in

favour of greater private sector initiatives. In several cases, the public sector retains only a

supervisory and monitoring role. Unlike public management that suffers from a number of

limitations, private sector, and not least autonomous corporatised entities ownership, is

generally concentrated and hence control and accountability are clearer.

Thus, port devolution and a complex mix of public-private arrangements stand as themajor port model development.In a recent study, Brooks and Cullinane (2007b) present

the results of an examination of a sample of 42 ports in 9 countries, and provide evidence

of a full spectrum of models that range from fully public to fully privately managed port

activities; with four ports being the only ones operating under a fully public model, and

only one port being fully private; and, contrary to what would have been anticipated, even

the UK ports apply an extensive mixed governance model of port activities.5

Port privatisation policies have also been employed, targeting improved operational

efficiency and control of the heavy financial burden to support a capital-intensive industry.A number of studies provide evidence that privatisation, although not a panacea, might

lead to improved performance over public sector operations. Cullinane and Song (2002),

however, treat the port privatisation issue with some scepticism, concluding that this is

only a partial cure for what ails the worlds ports. Different views are not rare: Saundry &

Turnbull (1997) concluded that, at least in the early days of reform, the privatisation of UK

5 Because of this plurality of arrangements and the presence of nine groups of products/services

that are significantly correlated in terms of the nature of the provider, the survey of 42 portsproduced 34 different combinations of governance along the private-public continuum (Brooksand Cullinane 2007b: 428-430).


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seaports resulted in private benefit and public loss. Notably, this study was based on

empirical financial and economic data.

In a broader context, a number of studies attempt to evaluate the impact of corporate

ownership structure and corporate governance models on firm performance (cf. La Portaet al, 1999; Demsetz and Villalonga, 2001; Kapopoulos and Lazaretou, 2006). The

empirical findings suggest that an ownership structure concentrated to fewer major

shareholders is positively correlated with higher firm profitability. Higher firm profitability

is found to require a less diffused shareholder ownership structure. In the port sector,

Tongzon and Heng (2005) attempt to model the relationship between port ownership,

structure, and efficiency. They apply a stochastic frontier model, which incorporates the

inefficiency effect, to show whether port privatisation is a necessary strategy for ports to

gain a competitive advantage. The study also investigates the determinants of port

competitiveness. Both, principal component analysis (PCA) and linear regression analysis

are used to analyse the effects of identified key factors on port competitiveness. The

examination of a sample of selected container terminals around the world indicate that

private sector participation in the port industry can improve port operation efficiency to

some extent, which will in turn increase port competitiveness. Yet the authors suggest that

the optimal public/private participation in container ports/terminals is between the

private/public and the private mode as full port privatisation is not an effective way to

increase port operational efficiency. The ultimate aim of this mixture is to lead to an

improvement in economic efficiency and, hence, in both financial and operational

performance.

In this context of institutional reform, managerial restructuring and adoption of different

new port governance models, the evaluation of the financial performance of a port system

(i.e. Greek ports, in the case of this study) can offer insights into the bottom-line financial

impact of the specific major structural adjustments that have taken place either locally,

nationally, or regionally.

A set of financial performance indicators contribute to assessing whether the

implementation of the specific port governance model has been successful or corrective

policies should come into play. According to the matching framework theory of port

governance (i.e. Baltazar and Brooks 2001; Wang et al, 2004; Brooks and Cullinane, 2007a)

there are two configurations of the environment-strategy-structure triangle that might

advance port performance.6 Configuration 1 is marked by an environment of low

uncertainty, low complexity and dynamism, an efficiency-oriented strategy that focuses on

delivery of the basic services, and a mechanistic structure of centralised decision-making

6The theory is grounded on three streams of research: strategic management, organisation theory,and configuration theory.


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characterised by procedural standardisation. Configuration 2 is marked by a highly uncertain

environment, an effectiveness-oriented strategy of peripheral products and services, and an

organic structure of decentralised decision-making. Whilst there is no superior

configuration, a number of studies of port devolution programmes (e.g. Hoffmann, 2001)

conclude that deficiencies in port performance are the by-products of inconsistency

between the characteristics and requirements of the environment on the one side, and the

strategy and structures on the other.

The findings of a recent study (Pallis, 2007a) suggest that in the case of Greek ports the

economic and institutional environment is characterised by high levels of uncertainty,

complexity and dynamism. This is accompanied by a strategy aiming at efficiently

delivering core and additional services. The desired strategy is one that would enhance

ports capacity to integrate in intermodal logistics chains and relationships with port users.

These strategies are undermined by a centralised decision-making process, characterised by

procedural standardization and bureaucratic interferences. The governmental involvement

is not limited to general regulatory, planning, or financial issues. An interventionist state

interferes in strategic decisions and daily port life.7Port governance theory suggests that

the absence of a matching configuration (Table 2) restrains port competitiveness in

practice. The financial evaluation of Greek ports performance enables to confirm the

validity of this theoretical argument.

TABLE 2.

It has been argued (Su et al., 2003) that focusing on financial aspects and criteria to assess

port performance may not be sufficient to reveal present or future success. This is true,

not least because both port attractiveness and performance depend on a wide spectrum of

factors (cf. Ng, 2006). In fact, performance indicators are numerous, with the focus in

most cases being on operational issues with (container) throughput standing as the most

common (see: Wang and Cullinane, 2006). Thirty years ago, the seminal UNCTAD

monograph on port performance indicators included berth occupancy, revenue per ton of

cargo, capital equipment expenditure per ton of cargo, turn-around time and number of

gangs employed (UNCTAD, 1976). Following this path, a number of past studies focused

7Within the last six years, the ports of Piraeus and Thessaloniki have been managed by five and

three different CEOs, respectively. In mid-2006, the ministry dissolved the self-governed Hellenic

Ports Association (HEPA), only to establish a National Centre of Port Development (NCPD) that

is governed by the MMM itself. Eight months later the minister has not appointed NCPD director.

Interferences in tariff setting are also present (cf. Psaraftis, 2005 the scholar was the first everCEO of the Port of Piraeus SA).


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mainly on operational efficiency and proposed the implementation of an operating index

(i.e. Hoffman, 1985; Thomas, 1985; Tongzon, 1995). Data Envelopment Analysis (DEA)

has been increasingly used to analyse port production in recent years (for a most recent

comprehensive review: Cullinane and Wang, 2007). In a different vein, Talley (1994) put

forward a number of effectiveness indicators.

Such indicators are important, since terminals stand as the most essential function of ports

in transport chains. Still, user assessment of the attractiveness of a port is dependent on

several factors. Assessing this attractiveness in the North European container

transhipment market, Ng (2006) identifies 21 different factors ranging from (perceived)

service quality, to legislation and to pure monetary costs. The scholar emphasises the

highly divided theme of what factors or package of factors to be included in order to

assess attractiveness and capture the relationship between improving service quality and

change in port competitiveness. The study confirms significant divergences in users

opinions on different factors. Users satisfaction is another performance component that is

worth to be further explored (Brooks, 2007a).

Taking also into account the absence of a culture of performance measurement in many of

the relative new devolved ports, it is not surprising that neither the variables to be used as

performance measurement instruments, nor the agencies (stakeholders, authorities,

governmental and non-governmental third-parties) that might collect and monitor certain

performance parameters in the post-devolution era, can be clearly defined.

Thus, there is the potential of decomposing performance to a range of different

performances (i.e. internal, external, operational, financial, efficiency, effectiveness etc.

cf. Brooks, 2007a) with certain stakeholders focusing on some of these types of

performance. Based on the complexity of the contemporary port product, de Langen et al

(2006) suggest that port authorities should apply a multifaceted examination of different

port performances grounded on the distinction between cargo transfer, port logistics and

port manufacturing product and the development of several respective performance

indicators. The addition of more performance indicators - other than simply operational

ones - is turning to common ground in port research (also: Heaver, 2006; Bichou 2007;

Brooks, 2007a; Talley, 2007).

In this vein, the analysis of financial developments in Greek port implies that financial

performance might stand as one, yet not the only, type of performance to be measured.

Focusing on the financial evaluation of port performance bears its own merits for a

number of reasons (see also: Bichou and Gray, 2007). Financial appraisal depicts directly

quantitative as well as qualitative managerial decisions and policy implications; such

decisions are reflected in the financial results. Since Greek ports shift towards a marketmodel and relax their earlier state embracement, financial profitability plays a central role


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to judge managerial efficiency as well as successful asset and capital utilization. Then, port

financial performance is a critical issue for stakeholders and market participants, since it

reflects a dynamic signalling of a companys growth prospects and economic robustness.

Moreover, port management is judged on the grounds of corporate value maximization

rather than simple profit attainment. Since the major port entities (Piraeus and

Thessaloniki) are already listed in the domestic stock market (Athens Stock Exchange), a

robust financial performance is expected to result to an enhanced firm market value with

positive implications for shareholders wealth.

Given the presence of operational deficiencies,8incompatible strategies and structures, and

interferences in port tariff setting, the study of the specific port sample contributes to a

further assessment of the port devolution process in Greece. This is in line with De and

Gosch (2003), who develop a composite performance index that includes financial

performance as one of the three key components, along with operational and asset

performance. Notably, using cointegration analysis, the authors identify a causal

relationship between port performance and port traffic. Most importantly for this study,

the authors have come out with the result that performance precedes traffic: if a port

performs better, then it is likely to get higher traffic.

It might be still argued that a well-performed operation does not necessarily translate to a

profitable financial outcome. To fill this gap, Su et al (2003) propose the balanced

scorecard approach (Kaplan and Norton, 1996) to comprehensively evaluate port

performance, including finance, customer, internal business process, learning and growth

perspectives. More specifically, the approach considers the interests of management,

customers, employees, and equity owners at the same time. Alternative (31) criteria are

proposed as a port performance measuring system, which is then employed for port

performance comparison through the methodologies of the Analytic Hierarchy Process

and Fuzzy Set theory. However, the proposed approach concludes that, for port managers

and investors, port financial performance criteria are still most considered. Nevertheless,

focusing strictly on profit maximization policies alone may lead to a future earnings

decline. Non-financial aspects, such as a well-trained working force, efficient operating

procedures and shipping carrier satisfaction should also be considered. The proposed

model attempts to balance financial and non-financial issues and provides a framework for

evaluating port performance.

This study applies a more standardised, yet well tested, financial evaluation framework,

which, though fairly standard, is still lacking from the empirical literature on port reforms,

8 Based on the examination of four indicators, namely ships, movement of freight, total cargo

handled (dry and liquid cargo, unloaded and loaded) and containers (loaded and unloaded), Barrosand Athanassiou (2004) conclude that Piraeus and Thessaloniki in particular need to improve theiroperational efficiency.


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governance models and performance assessment. The core financial input is provided by

the financial accounts of Greek Port SAs. This remains indeed the sole source to draw

financial information, as detailed financial databases are still lacking. The focus of the

empirical investigation is on the recent five-year period 2000-2005, which corresponds to

the implementation phase of the new governance model.

A better understanding of the developments seen in the Greek port sector could be gained

by comparing and contrasting Greek ports to international competitors. Due to data

limitations, this potentially interesting exercise is postponed to a late date. For the time

being, this study establishes, surprisingly for the first time, a comprehensive financial

evaluation of Greek port performance.

It would also be useful to blend and enrich the current financial evaluation of Greek ports

with complementary analytical tools. Bichou and Gray (2004), for instance, argue that,although there is widespread recognition of the potential of ports as logistics centres,

widely accepted performance measurements for such centres have yet to be developed.

The essence of logistics and supply chain management is an integrative approach to the

interaction of different processes and functions within a firm extended to a network of

organisations for the purpose of cost reduction and customer satisfaction. The logistics

approach often adopts a cost trade-off analysis between functions, processes and even

supply chains. This approach could be beneficial to port efficiency by directing port

strategy towards relevant value-added logistics activities.

As a note of caution, it has been argued that, in most cases, it is not possible to determine

port performance benchmarks which would be applicable for any port; all expressions of

port performance do not address the same requirements (Fourgeaud, 2000). Cullinane et al

(2004) Data Envelopment Analysis (DEA) to a sample of major international container

ports indicates that estimates of container port efficiency fluctuate over time, as well as

that existing programming methods for estimating efficiency are inadequate in capturing

the long-term increased efficiency and competitiveness that accrue from significant

investments. Therefore, the careful identification of problems to be monitored, and studies

which take into account the main characteristics of specific port activities, might lead to

more accurate indicators and targets (Estache et al, 2002).

4. FINANCIALPERFORMANCEOFGREEKPORTS

The sample under study consists of the twelve Greek ports operating in the domestic

territory as Socits Anonymes (SAs). The two largest of these port entities, namely

Piraeus and Thessaloniki, have already been listed on the Athens Stock Exchange since

8/8/2003 and 27/8/2001 respectively. Focusing on the Greek ports financial statements,a careful study would indicate that the new port governance model is struggling to adjust


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its pace. A mixed and rather modest financial performance is evidenced over the recent 5-

year period (2000-2005).

Both revenue and net earnings experience steadily declining trends. Eight out of twelve

ports indicate declining revenue growth rates, and a further one indicates stagnation ofrevenues (Table 3). A highly crucial finding though is revealed when operating profits, in

particular Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) are

examined; the results deteriorate considerably, as ten out of twelve ports show declining

operating profit growth rates (Table 4). This results in six out of twelve ports showing

declining net profit growth rates (Table 5). Comparing net profits against operating profits

(Table 5 vs. Table 4), in some cases net profits appear to be higher than operating profits.

This outcome is mainly associated with the realization of one-off extraordinary earnings

that result to a slight improvement in bottom-line results. The improved port profitability

due to irregular factors imposes some scepticism on the robustness of ports long-term

growth potential. Apart from that, the economic swings seen in the shipping industry

affect the port business as well. As a result, profit margins have been squeezed

substantially, leading to considerable earnings volatility.

The financial evidence supports the indisputable leading position of the Port of Piraeus in

cargo flows, as a major domestic node for international seaways. The Port of Piraeus ranks

on top of domestic ports, in terms of revenue and profits, followed by the Port of

Thessaloniki (Table 6). In 2005, the vast majority of the Greek ports have attained

profitability, with the exception of three out of twelve Port Authorities, namely Volos,

Kavala and Alexandroupoli. Based on revenue, the Port of Piraeus consistently holds the

major market share among its peers and Thessaloniki, Patra and Volos ports follow at a

distance. According to 2005 revenue figures, the market shares of Piraeus, Thessaloniki

Patra and Volos ports were standing at 65.5%, 22.2%, 3.7% and 2.2%, respectively.

Despite the recent positive financial results (Table 7), the operating profit growth rates

over the 2000-5 period deserve closer inspection (Table 8), regarding the major port of the

country in particular. Operating growth rates in the case of Piraeus Port Authority SA

stand at 13.7%. However, the fact that the negative financial results of 2005 were

accompanied by a stagnated general cargo throughput (4,552 m. metric tonnes), a drop in

volumes of vehicle throughput in the car terminal (-10,4% in 2005), and a second

successive year of diminishing container throughput (2003: 1,601 m. TEUs; 2004: 1,536 m.

TEUs; 2005: 1,394 m. TEUs), raises some questions on the potential for more positive

results in the near future.

The equivalent figure is more worrying for the Thessaloniki Port Authority SA, as it comes

down to diminishing operating growth rates of -80.8% and to net profit growth rates of -73.2% within the five year period examined. As regards the rest of the Greek ports, most


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of them experience deteriorating growth rates in operating profitability, particularly the

Heraklio port. All these negative trends were observed within a period that was

characterised by a significant growth in world seaborne trade, and especially in containers.

What is highly worrying, though, is the deteriorating productivity ratio, defined asoperating profits over employees, which is employed as a productivity proxy index (Table

8). Six out of twelve ports indicate worsening productivity ratios; Heraklio and Piraeus

ports rank at the top of the list. Lower labour productivity may indicate that a number of

Greek ports remain overstaffed. This outcome underlines the persisting deficiencies,

experienced during the previous port governance model, where state intervention and

inward-looking policies dominated port management decisions.

Table 8 summarises the overall financial performance of the Greek ports over the 2000-5

period. The picture appears to be far from promising, especially in the light of Greecescompetitive advantage in its strategic location with respect to international sea trade flows

and the intensified competition in the Mediterranean. A number of ports - such as Volos,

Kavala, and Alexandroupoli - exhibit consistent losses over the last three years. This

outcome may be related to excessive administration and labour costs and inefficient capital

utilization. In fact, in 2005, administration expenses as a percentage of revenue accounted

for 60%, 57% and 30% in the case of Kavala, Alexandroupoli and Volos Ports,

respectively.

The examination of key financial indices as shown in Table 9 supports the conclusionsdrawn upon profitability trends. The liquidity ratio (current assets over short-term

liabilities) is found to be low, predominantly in the case of Lavrio, Elefsina and Piraeus

ports. Similar conclusions hold for the capital adequacy ratio (own equity over total

liabilities) that appears low, especially in the case of Lavrio, Elefsina and Rafina ports.

Furthermore, with the exception of Piraeus, Thessaloniki and Lavrio Ports, return on

assets (ROA) and return of equity (ROE) appear exceptionally low and in some cases even

negative; this outcome points to poor asset and resource utilization rates.

The financial ratio analysis of the Greek ports is further enriched by a useful as well asrevealing exercise. A summary of key financial ratios is compared and contrasted to a

benchmark level, that has been set a priori. Although somewhat arbitrary, this benchmark

ratio level is chosen on the basis of standard empirical finance and practice (rules of

thumb), related, in other words, to cumulative conventional corporate wisdom for

(conservative) empirical valuation of the firms financial decisions. The benchmark ratio

level is set at four percent (4%) annual growth rate for revenue and net profit; two percent

(2%) for liquidity and capital adequacy; and, seven percent (7%) and twelve percent (12%)

for ROA and ROE, respectively (Table 10).


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TABLES 3-10

As part of the recent port governance reform, the two major domestic port organizations,

Piraeus and Thessaloniki Port Authorities, were listed on the Athens Stock Exchange(ASE). Thessaloniki Port Authority was listed first on 27/8/2001 and Piraeus Port

Authority followed on 8/8/2003 (Table 11). In order to gain some insight into market

evaluation of the institutional and managerial port reforms, we briefly examine the stock

market performance of these two Port Authorities. As can been seen in Figure 1, the stock

price predominantly of the Piraeus Port Authority performs consistently better than the

ASE General and FTSE/ASE-20 (blue chip stocks) Indices. Similar conclusions hold for

the Thessaloniki Port Authority, particularly in relation to the FTSE/ASE-20 Index.

The consistently upward stock price trend of both Piraeus and Thessaloniki Port

Authorities indicates a steadily robust stock market performance. This has resulted to a

significantly higher market value for both Ports Authorities relative to their Iinitial Public

Offering (IPO) levels. It is indicative that the stock price of Piraeus Port Authority has

been overvalued by 96% from its IPO price (17.22 euro on 22/9/2006 from 8.8 euro on

8/8/2003). Similarly, the stock price of Thessaloniki Port Authority has been overvalued

by 100% from its IPO price (13.50 euro on 22/9/2006 from 6.7 euro on 27/8/2001).

TABLE 11 and FIGURE 1

These findings indicate that investors appreciate the key role of the major domestic ports

in international seatrade and the transportation business, as well as their contribution to

economic growth. Overall, market participants appear to be in favour of the port

governance structural adjustments under deployment, and to support the relevant

institutional and managerial reforms, appreciating the associated economic prospects. To

expand the analysis, a meaningful exercise would be to include comparative peer groupanalysis of port authorities listed on other stock markets.

To summarise the relevant empirical findings, it can be seen that most of the Greek Ports

perform higher than the set benchmark levels in terms of liquidity and capital adequacy.

However, their performance is extremely poor in terms of return on equity (ROE) and

return on assets (ROA). This outcome is directly related to weak profitability (revenue and

net profit) growth rates for the vast majority of the Greek Port Authorities. It appears that

Greek ports should accelerate their pace towards relaxing earlier state embracement and

intervention, in an attempt to improve key financial ratios, such as ROE and ROA. On theother hand, low productivity rates, for instance, reflect overstaffed business units, an


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outcome associated with political decisions rather than rational resource planning. The

peripheral Greek ports appear to exhibit a weak financial performance, which implies that

they should attempt to improve their service mix and quality standards (a development

path that is suggested by several CEOs of these entities see: Pallis and Vaggelas, 2005).

5. CONCLUSIONS

Greek ports are currently going through a transitional phase of transformation and

restructuring. The inefficiencies of the existing traditions of port organisation, the

adjustment pressures of the economic environment, and the fiscal constraints have

exposed the absence of a matching framework and have contributed to the

reconsideration of the Greek port policy in the late 1990s. Following international trends,

a new port governance model has developed, aiming to support autonomous andcommercially driven port entities. Until now, policy reforms have been marked by the

corporatization of ten ports and the public listing of the two major trans-European ports

of Piraeus and Thessaloniki. Whether these developments constitute a permanent pattern,

or the prelude to privatisation of some or all of these ports, remains to be seen.

Meanwhile, this paper provides a financial evaluation of the observed reforms, not least

because in the recent port literature, financial performance is identified as part of the

performance indicators that contribute to traffic expansion. The analysis adds to the more

general discussion on the extent that the specific port governance configurations advance

port competitiveness.

The financial analysis suggests that certain rigidities are still present. Despite the fact that

most Greek ports exhibit positive bottom-lines in their financial accounts, they still have

not attained a solid course of robust growth and competitive development. Scrutinizing

the financial accounts of Greek ports has raised considerable doubts as to the efficiency of

their organizational structures, currently in a transitional phase. Following many decades of

an interventionist public sector management and inward-looking policies, the evaluation of

the Greek ports financial performance underlines an imminent need for further reforms.

In certain aspects, it is debatable how substantive the national policy reforms have been in

practice. For instance, many of the internal stone-age regulations (i.e. organisational

structures, operational practices, dockers payment schemes) remain the same. The attitude

in pushing port policy reforms forward was to let the real reforms be done by the ports

themselves but the central government continues to control several critical aspects (i.e. the

process of hiring employees). This trend ignores previous experiences of port reform,

where the benefits of labour reforms in terms of port efficiency and productivity exceeded

the, potentially questionable, benefits of privatisation (an illustrative example is the case of


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the UK seaports privatisation and performance in the 1980s and 1990s see: Thomas,

1994; Saundry & Turnbull, 1997).

Then, due to a slow transformation of the regulatory framework, there is still no element

of intra-port competition, even though port authorities identify certain benefits from sucha prospect (Pallis and Vaggelas, 2005). Discussions in this direction have value place

recently without any decisions being reached.9 This situation diminishes, inter alia, the

advancement of specialization and adaptation to users requirements, while it generates the

potential of excess rent seeking by port authorities (de Langen and Pallis, 2006a). 10

Lowering legislative entry barriers in port services provision can introduce competition

and reverse this situation (de Langen and Pallis, 2006b; Goss, 2006).

These results are in line with the conclusions of other studies that port governance in

Greece does not respond to the demand for enhanced port competitiveness. The precededanalysis suggests that the absence of a matching environmental-structure-strategy

framework (Pallis 2007a) is reflected on the financial performance of Greek seaports since

2001. Yet, as in a growing number of countries (Musso et al, 2006), the improvement of

the financial performance (profitability, economic impact of mobilised private capital, and

financing of investments) was, and reportedly remains, among the primary objectives of

the attempt to reinforce market mechanisms within the context of port operations.11

Properly adjusting the environmental-structure-strategy configuration (cf. Brooks and

Cullinane 2007b) stands as one of the means to overcome operational deficiencies and

governmental interferences; thus improving, inter alia, the financial performance of Greek

ports.

The Greek ports do not appear ready as yet to fully reap or yield potential economic

benefits. In the international arena of intensified competition, Greek ports are most likely

going to face losses in market share in favour of other Mediterranean competitors. Further

empirical research on this particular issue would be useful, as would comparisons with

other models of port governance. In any case, in the process of redefining national port

strategies and adjusting port governance models, policy-makers should pay attention to the

promotion of key market niche comparative advantages. Domestic ports do not share

similar characteristics and serve a diversified group of end-users, placed at a strategic

geographical location in the cross-roads of international trade flows.

9Cf. Naftemporiki, Decisions on investments in ports to be reached soon, 11.10.2006.10For example, the Competition Regulatory Authority already examines port users complaints

regarding the Piraeus Port Authority practices.

11There are commonly more objectives when a port undergoes reform, including economic, social

and political factors (notably: the share of power and uthorities between different parties, bothpublic and private). These issues might be implicit in the Greek and other cases of port reform andprovide an interesting strand for future research.


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As national port reforms began only five years ago, the governance of Greek ports is still

in a state of flux. Infant autonomous corporate entities have yet to finalise their business

plans, organisational structures, and strategies. Moreover, both the national and the

relevant EU institutional settings (cf. Bergantino, 2002; Chlomoudis and Pallis, 2002) are

in transition. The rules that would allow direct private sector involvement in the provision

of port services are under consideration, both at national and EU level. Following the

rejection of the proposal for a port services directive (cf. Pallis, 2007b), the EU is

expected to publish relevant guidelines within 2007.

As regards national developments, the Ministry of Mercantile Marine (MMM) has been in

direct talks with several terminal operating companies (COSCO, HPH, DP International,

APM Terminals, MSC, and ) and governments (China, Korea) that are interested in

investing and providing services in the Greek ports. COSCO, long seen as a front-runner

in partnering the development of container business in Greeces two biggest ports, has

stated it wants to develop Piraeus as a transhipment hub in the Mediterranean by

establishing a facility that would eventually be able to handle up to 1 million TEUs

annually.

There have been no decisions drawn yet. A number of critical parameters of the regulatory

framework remain under discussion, including whether intergovernmental agreement or

port level concession will be preferred; length of authorisations/concessions, presence of

intra-port competition, role of port authorities, extent of labour reform, endorsement of

privatisation or not, inter alia. These decisions can be deterministic for both the operational

and the financial results of any port. As the Canadian (Brooks, 2007b) and the Australian

(Everett, 2003) experiences suggest, the devil might be in the detail of the reform and the

governance model. For instance, it has been recorded (i.e. UK seaports - Saundry &

Turnbull, 1997) that outright privatisation might lead, at least for a certain period of time,

to inferior financial results.12 Then, certain regulatory reforms of labour (new working

arrangements rather than institutionally minimalist forms of organisation) might prove to

be facilitators of change and competitiveness (cf. the case of Antwerp - Barton &

Turnbull, 2002).

Importantly, the specific design of the foreseeable concessions, their regulatory regime, the

tariff regime, and the way the concessions might be awarded can structure the supply and

encourage port service providers to optimize the use of scarce resources. Autonomy in

deciding the proper strategy is essential. Otherwise, political decisions might result in

situations that port authorities may come to find themselves bound by lengthy contracts

12

Notably, during the same period, the performance and financial results of Felixstowe, which is aprivateport that distincts from aprivatisedport as it has never been in public ownership, followed adifferent trend (see: Baird, 1999).


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which they need never have entered. In short, decisions for a specific concession type

might (positively or negatively) influence the prosperity of a port and its community

(Notteboom, 2007).

Thoughts of completing the reform process in Greece within the near future are at leastquestionable. In late 2006, when moves seemingly designed to put the Piraeus and

Thessaloniki container terminals under Chinese management sparked controversy, the

government confirmed plans for an international tender for a period of 30 years, only for

port unions to call an industrial action in opposition. Port employees opposed such moves

and their exclusion from relevant discussions, refused overtime and weekend works and

applied a go-slow during weekdays. With the two major ports effectively closed for two

months (December 2006- January 2007), losses in income were reported to have reached

12 million euros in Piraeus (where weekday work handling fell by 60%) and 3.2 million

euros in Thessaloniki.13 The disruption ended by the MMM decision to postpone any

tendering plans. In the meantime, all sides committed themselves to a process of dialogue

about the future development of the container terminals, with port management accepting

that a public sector model for growth would be given equal consideration.

The eight-week crisis, which was the second within less than two years (the first one

evolved in summer 2005), prompted port users reactions. Piraeus largest user, MSC,

switched some services to rival Mediterranean hubs in Italy and Turkey; China Shipping

announced a surcharge for cargo transported to Greece and stopped taking cargo from

North America to Piraeus and Thessaloniki; feeder lines and the International Maritime

Union of shipping agents also imposed surcharges; and Zim Lines warned of impending

legal action to seek compensation for damages it allegedly incurred during the dispute.

Given the dynamics of the economic and policy environment and the challenges and

opportunities they pose to the port hierarchy, further legislative amendments and a re-

consideration of political practices might further modify the structures of the sector; thus

enable Greek ports to adjust their strategies towards a more competitive stance and

advance toward a more positive financial performance. Yet, the existing situation has in

effect settled nothing so far. As the recent crisis emphasised, there is a need for

completing the reform and secure a stable and competitive environment for major port

users. Lengthy controversies regarding the details of port reform are costly and non-

captive users shift ports easier than in the past both situations might deteriorate port

entities financial performance.

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13Lloyds List, Greek port strike ends, 3.1.2007.


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Table 1. The Greek Port System

PortGoods

Throughput(in tonnes)

PassengerTraffic

(in persons)

Piraeus * 19.814.061 12.410.545Major Trans-European Ports

Thessaloniki * 16.722.343 217.538

Heraklion 3.350.000 1.651.946

Patra 3.399.034 1.263.124

Elefsina 3.249.750 800.000

Kavala 1.633.445 1.454.222

Volos 1.240.911 392.395

Igoumenitsa 494.826 1.193.148

Rafina ** 96.772 1.760.776

Corfu ** 642.432 2.146.179

Alexandroupoli 638.660 168.604

National Ports

Lavrio 208.500 213.412 Total of the 12 Ports 51.490.734 23.671.889

Peripheral Ports 1,250 Peripheral ports, marinas, fishing harbours subject to thejurisdiction of 188 port authorities.

Municipal Port Funds 53 Municipal Port Funds

Note: 2004 Data; * 2005 Data; ** 2003 Data.Source: Data provided by Port Authorities and the Ministry of Mercantile Marine.

Table 2. Greek Port Governance: A Matching Framework ApproachConfiguration 1 Configuration 2

EnvironmentHigh uncertaintyHigh complexity and dynamism

Current

Efficiency-oriented

Focus on delivery of the basic productand service

Strategy

TargetEffectiveness-oriented strategy Focused ondelivery of peripheral product and services

Structure

MechanisticCentralized decision-makingcharacterized by proceduralstandardization(subject to bureaucratic interferences)

Source: Pallis (2007a).


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Table 3. Greek Port Revenue (euro)

PORT 2000 2001 2002 2003 2004 2005%

2000/5

PIRAEUS 179,001,069 117,383,692 130,846,198 142,362,164 147,994,873 139,978,022 -21.8%THESSALONIKI 68,946,813 37,875,826 38,895,028 40,242,193 45,782,232 47,462,190 -31.2%

VOLOS - - 4,598,899 4,180,338 4,151,968 4,603,294 0.1%KAVALA - - 462,117 886,930 1,049,344 1,172,695 154%

ALEXANDROUPOLI - - 470,044 483,349 667,333 372,162 -20.8%IGOUMENITSA - - 4,466,652 3,341,370 3,429,633 3,590,825 -19.6%HERAKLIO - - 1,962,087 1,989,635 1,961,389 1,794,974 -8.5%KERKYRA - - 1,608,769 1,624,058 1,473,598 1,553,942 -3.4%PATRA - - 9,533,237 8,037,782 7,125,930 7,844,425 -17.7%ELEFSINA - - 2,388,097 1,964,233 1,913,378 2,174,943 -8.9%LAVRIO - - 494,076 800,321 1,277,530 1,560,194 216%RAFINA - - 1,132,496 1,194,765 1,319,617 1,586,334 40.1%

Source::Company Financial Accounts. Piraeus & Thessaloniki port figures are based on the InternationalAccounting Standards (IAS) approach.

Table 4. Greek Port Operating Profits (euro)

PORT 2000 2001 2002 2003 2004 2005%

2000 / 5PIRAEUS 15,019,479 26,995,599 28,772,498 30,950,527 28,697,391 17,082,724 13.7%

THESSALONIKI 21,205,925 6,567,837 4,082,145 4,500,704 4,947,550 4,069,946 -80.8%VOLOS - - -823,952 -675,343 -782,941 -584,589 171%KAVALA - - -162,739 -300,306 -137,470 -302,329 -85.8%

ALEXNDROUPOLI - - -106,261 -40,104 58,462 -156,845 -47.6%IGOUMENITSA - - 1,833,980 678,267 524,372 354,624 -80.7%HERAKLIO - - 8,699 221,106 -150,771 -785,116 -9,126%KERKYRA - - 182,614 -13,155 -427,090 55,325 -69.7%PATRA - - 2,635,883 696,337 532,860 601,375 -77.2%ELEFSINA - - -3,010 -6,566 5,789 5,011 267%

LAVRIO - - -77,004 84,704 189,183 226,449 394%RAFINA - - -179,650 186,025 3,090 365,199 303%


Table 5. Greek Port Net Profits (euro)

PORT 2000 2001 2002 2003 2004 2005%

2000 / 5PIRAEUS 15,531,259 28,771,553 30,070,813 30,545,998 20,904,656 17,082,724 10.0%

THESSALONIKI 21,219,857 6,508,016 4,326,998 4,686,577 6,165,664 5,695,859 -73.2%VOLOS - - -813,928 -810,456 -766,113 -539,352 33.7%KAVALA - - -141,340 -299,040 -130,611 -301,320 113%

ALEXNDROUPOLI - - -106,261 -45,780 51,895 -167,540 57.5%

IGOUMENITSA - - 1,833,873 674,986 510,566 204,285 -88.9%HERAKLIO - - 10,589 117,561 -775,703 51,019 382%KERKYRA - - 216,614 -79,696 -466,840 70,880 -67.3%PATRA - - 2,594,169 942,593 188,534 420,398 -83.8%ELEFSINA - - -626 5,671 5,789 5,011 901%LAVRIO - - -76,180 12,372 275,918 297,030 490%RAFINA - - -189,325 188,013 2,949 271,723 244%



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26

Table 6. Greek Port Market Shares and Ranking2002 2005

PORT market share rank market share rankPIRAEUS 66.47% 1 65.50% 1

THESSALONIKI 19.76% 2 22.21% 2VOLOS 2.34% 4 2.15% 4

KAVALA 0.23% 12 0.55% 11ALEXANDROUPOLI 0.24% 11 0.17% 12IGOUMENITSA 2.27% 5 1.68% 5HERAKLIO 1.00% 7 0.84% 7KERKYRA 0.82% 8 0.73% 10PATRA 4.84% 3 3.67% 3ELEFSINA 1.21% 6 1.02% 6LAVRIO 0.25% 10 0.73% 9RAFINA 0.58% 9 0.74% 8

Note:market shares and ranking based on revenue.

Table 7. Greek Port Financial Ratios: 2005 / 2004PORT Revenue

Growth

Operating

ProfitGrowth

Net

ProfitGrowth

Net

ProfitMargin

Liquidity Capital

Adequacy

ROA ROE

PIRAEUS -5.4% -40.5% -18.3% 12.2% 1.6 1.9 7.3% 11.2%THESSALONIKI 3.7% -17.7% -7.6% 12.0% 3.9 6.7 4.8% 5.6%VOLOS 10.9% -175% -29.6% -11.7% 2.2 10.2 -7.4% -9.6%KAVALA 11.8% 120% 131% -25.7% 17.1 52.6 -4.1% -4.2%

ALEXANDROUPOLI -44.2% -368% -423% -45.0% 4.2 6.9-

11.1%-

12.8%IGOUMENITSA 4.7% -32.4% -60.0% 5.7% 10.5 11.8 1.7% 1.9%

HERAKLIO -8.5% -421%-

106.6% 2.8% 6.6 15.4 0.3% 0.3%

KERKYRA 5.5% 113%-

115.2% 4.6% 2.8 4.4 2.4% 3.3%

PATRA 10.1% 12.9% 123.0% 5.4% 3.4 6.5 1.7% 2.3%ELEFSINA 13.7% -13.4% -13.4% 0.2% 1.3 1.5 0.2% 0.5%LAVRIO 22.1% 19.7% 7.7% 19.0% 0.4 0.9 21.2% 47.3%RAFINA 20.2% 11,718% 9,116% 17.1% 3.5 1.7 16.0% 37.1%Notes:liquidity = (current assets / short-term liabilities); capital adequacy = (own equity / total liabilities);ROA = (net profits / total assets); ROE = (net profits / own equity).Source:: Company Financial Accounts. Piraeus & Thessaloniki port figures are based on the International

Accounting Standards (IAS) approach.

Table 8. Cumulative Financial Impact of Port Devolution: 2000-2005PORT revenue

growthoperating

profit growthnet profit

growthown equity

growthassets

growthliabilities

growthproductivityratio growth

PIRAEUS -21.8% 13.7% 10.0% -36.5% -30.4% 14.0% -42.1%

THESSALONIKI -31.2% -80.8% -73.2% 13.2% 16.7% 81.5% 12.3%VOLOS * 0.1% 170.9% 33.7% -24.3% -24.9% 34.6% 187%KAVALA * 154% -85.8% -113% 45.7% 44.5% -14.4% -29.5%

ALEXANDROUPOLI * -20.8% -47.6% -57.5% -5.3% 8.4% 569.9% -179%IGOUMENITSA * -19.6% -80.7% -88.9% 0.7% -4.4% -42.7% -89.0%HERAKLIO * -8.5% -9,126% 382% 481% 348% 11.2% -534%KERKYRA * -3.4% -69.7% -67.3% -18.1% -9.3% 35.3% 597%PATRA * -17.7% -77.2% -83.8% 6.3% 5.6% 1.6% 4.2%ELEFSINA * -8.9% -267% -901% 14.3% 58.3% 224% 167%LAVRIO * 216% 394% 490% 177% 329% 760% 167%RAFINA * 40.1% 303% 244% 48.9% 131% 116% -10.8%

Notes:liquidity = (current assets / short-term liabilities); capital adequacy = (own equity / totalliabilities);ROA = (net profits / total assets); ROE = (net profits / own equity); productivity ratio =

operating profit / employee; productivity ratio growth refers to period 2003-5.For the ports denoted with (*), financial data cover period 2002-5.; Source:: Company Financial Accounts.Piraeus & Thessaloniki port figures are based on the International Accounting Standards (IAS) approach.


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Table 9.Port Devolution in Greece: Summary of Financial Performance

Liquidity= current assets / short-term liabilitiesCapital adequacy = own equity / total liabilitiesROA = net profits / total assetsROE = net profits / own equityProductivity ratio = operating profit / employeeGrowth = [ (xt xt-1) / xt-1]; xrefers to the variable of interest= increasing / decreasing / volatile trend.

Financial Ratio

PIRAEU

S

THESSA-

LONIK

I

VOLOS

KAVAL

A

ALEXA

-

NDROU

PO

LI

IGOUME

NI

TSA

HERAKL

IO

KERKYRA

Revenue growth - - - + - - - - trend EBITDA growth + - + - - - - - trend Net profit growth - - - - - - + - trend Net profit margin + + - - - + + + trend

Total assets - + - + + - + - trend

Total liabilities + + + - + - + +

trend Own equity - + - + - + + - trend Liquidity + + + + + + + + trend Capital adequacy + + + + + + + + trend ROA + + - - - + + + trend ROE + + - - - + + + trend Productivity ratio + + + - - - + + trend


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PLEASESCROLLDOWNFORMANUSCRIPT

Table 10. Port Devolution in Greece: Financial Performance Comparison vs. Benchmark

PORT REVENUEGROWTH

NETPROFIT

GROWTH

LIQUIDITY**

CAPITALADEQUACY

**

ROA**

ROE**

Benchmark 4% 4% 2x 2x 7% 12%

PIRAEUS - - - -

THESSALONIKI - - - -

VOLOS * - - -

KAVALA * - - -

ALEXANDROUPOLI * - - - -

IGOUMENITSA * - - - -

HERAKLIO * - - -

KERKYRA * - - - -

PATRA * - - - -ELEFSINA * - - - - - -

LAVRIO * - - RAFINA * -

Notes:See explanation of ratios at the end of Table 6.* For the ports denoted with (*), financial data cover period 2002-5.** Financial ratios denoted with (**), refer to 2004-5, in order to have a meaningful interpretation.Source:: Company Financial Accounts. Piraeus & Thessaloniki port figures are based on the InternationalAccounting Standards (IAS) approach.

Table 11. Greek Port Stock Market Performance

Piraeus PortAuthority

Thessaloniki PortAuthority

ASEGeneral Index

FTSE/ASE-20Index

Date of listing 8/8/2003 27/8/2001 - -No of shares 25,000,000 10,080,000 - -Price of IPO (euro) 8.80 6.74 - -Price on 22/2/07 (euro) 16.80 17.96 - -p / e 38.03 39.58 - -p / bv 2.83 1.35 - -p / sales 3.07 2.89 - -eps 0.48 0.34 - -dividend yield 0.87 1.47 - -coefficient 1.47 1.55 - -Market value (mln. euro) 420.0 181.0 - -Returns since year-start * 4.87% 72.03% 30.02% 27.98%Cumulative returns ** 90.90% 166.47% 70.87% 66.54%

Note: *It refers to period 1/1/2006-22/2/2007. **It refers to period from IPO date to 22/2/2007.Source:: Athens Stock Exchange.


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Figure 1. Port Stock Prices vs. ASE Indices

0,00

5,00

10,00

15,00

20,00

25,00

27/8/2001

26/11/2001

1/3/2002

12/6/2002

13/9/2002

16/12/2002

24/3/2003

2/7/2003

2/10/2003

8/1/2004

14/4/2004

15/7/2004

15/10/2004

18/1/2005

22/4/2005

27/7/2005

27/10/2005

31/1/2006

11/5/2006

11/8/2006

13/11/2006

15/2/2007

Date

StockPrice(euro)

0,00

1.000,00

2.000,00

3.000,00

4.000,00

5.000,00

6.000,00

StockIndexUnits

Piraeus Port Thessaloniki Port ASE-General Index FTSE-20

Download - 2007 TP Pallis & Syriopoulos

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