Friday, June 17, 2011

Greece's privatization plans

I doubt that anyone among the EU-elites has even put a thought to the question of what privatizations to the tune of 50 billion EUR mean (some papers even mentioned amounts up to 300 billion EUR!!!). Is there a list of state-owned companies which would be worth so much money?

Assuming an asset valuation of 5-times cash flow, one would be talking about companies which generate 10 billion EUR cash flow annually. Does that cash flow exist? If so, why would the state have liquidity problems?

Mind you, a 5-times cash flow valuation assumes a well-performing company in a stable business environment. A fire sale in a country which now has the lowest credit ratings of all countries world-wide, might not achieve those optimistic forecasts.

Deutsche Telekom bought 30% of OTE for 3,8 billion EUR a few years ago and since then they had to write down 800 million EUR on that investment. Greece had the option to put to Deutsche Telekom another 10% for 400 million EUR and Greece used that option recently. Deutsche Telekom is undoubtedly very happy to have acquired new potential for write-down's...

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