Rania Ekaterinari at “Vima”: Setting high standards for the State-Owned Enterprises

The Chief Executive Officer (CEO) of HCAP discusses the profitability bounce of its subsidiaries and the benefits for the Public Sector.
Interview to Kotsis Vassilis

Hellenic Corporation for Assets and Participations (HCAP), which since 2017 supervises the Hellenic Republic Asset Development Fund (HRADF), Public Properties Company (PPCo) and other 13 emblematic State-Owned Enterprises, among which the Athens Water Sewerage and Supply Company (EYDAP), Athens Urban Transport Organisation (OASA), Hellenic Post (ELTA), Railway Property Management and Development (lands and buildings) and Rolling Stock Management company (GAIAOSE) etc, seems to be winning the bet of increasing productivity and lower costs for public companies, so that there is no need for the State to finance them from the limited resources of the Greek taxpayer.

HCAP, also known as the Superfund, prepared a balance sheet consolidating all its current subsidiaries for the first time in 2018 in order to record public property, and proceeded with drastic changes in the boards of the State-Owned Enterprises by appointing professional managers. The financial results for 2019 seem to justify the effort implemented, since HCAP’s consolidated net profit reached 191,7 million euros compared to losses of 132.5 million euros in 2018. A performance which could have been even better, if it were not for the losses of Hellenic Post.

The divided granted to the Greek State is close to 42 million euros while available cash at a company level amounted to 72 million euros, which will finance investments of the subsidiaries. The Chief Executive Officer (CEO) of the Superfund, talks to “Sunday’s Vima” about the profitability bounce for the subsidiaries of HCAP, around the need to establish a body which will supervise the State-Owned Enterprises, such as the Superfund, but also about the digital future of the public enterprises.

In 2019, a bounce was recorded in the profits of the State-Owned Enterprises. From losses of 132 million euro to a positive result of 191.7 million euros. Was just a reasonable management enough to reverse the image?

“This improvement did not occur by accident. It is the result of persistent and systematic work by the management and by the teams of professionals who set high standards. HCAP first operated in 2017 with only two subsidiaries (Hellenic Republic Asset Development Fund and Public Properties Company), while 2018 was the first year during which the shareholding participations of the Greek State in another 13 public companies, as well in their subsidiaries and affiliates, where included in the HCAP portfolio.

It is, thus, important to note that in these two years, the good results did not come by chance. We succeeded because we are trying to include meritocracy, to strengthen the corporate culture and reward efficiency.

If we need to draw a lesson for the profitability of HCAP, it is to comprehend the importance of actively monitoring the companies in the wider public sector, with the aim of boosting public revenues but also developing greater crisis resilience, improving efficiency as well as the services provided. The dividend to be attributed to the Greek State has increased from 7 million to 42 million euros, and has a trifold footprint: it enhances fiscal space creation, supports the economy and is being directed to the public investment program”.

How much will the pandemic affect the magnitude of 2020?

“As you realize, 2020 is a different year, full of big and unexpected challenges. Until the first quarter of 2020, the improvement of the performance for the majority of our companies continued, with even greater rates than in 2019, with increased revenues and profitability. However, since mid-March, with the outbreak of the pandemic, all sectors of economic activity have been significantly affected.

The pandemic has slowed things down significantly and, especially in some sectors, the repercussions have been significant, but the previous improvement of performance allowed most of the subsidiaries to have sufficient cash and earnings from previous periods in order to face the pandemic challenges, such as sales reduction or delays in receivables”.

What is the future of an organization like HCAP? How will the next day look like?

“I have to remind you that HCAP has been functioning now for a little more than three years, as the constitution of its Board of the Directors into a body took place at the beginning of 2017, under great controversy. In the years that followed, and despite the challenges, we managed to enhance the operations, the efficiency, but also the social value for our sole shareholder, the Greek State. The establishment of HCAP should have taken place even if the country had not entered the economic crisis, even if it was not a proposal by the Institutions. We, Greeks, I believe, need a single body to manage public assets, such as HCAP, which in practice is an operational arm of the State, and sets rules of accountability and transparency and which also sets business and operational targets which it then monitors systematically.

After all, HCAP is not the only case. Many counties in Europe and elsewhere in the world have set up similar sovereign wealth funds. Some of them, even though they started with timid and careful steps, achieve impressive results. They do not rely solely on state wealth (most notable the Norwegian Fund), but invest in and promote innovation and extroversion, with the Singapore Fund, established in the mid 1970’s, acting as characteristic success story, having supported its country to cope with four serious crises.

One characteristic of these organizations was the change of mentality regarding the potential utilization of assets of the State, which not only produce economic value, but lay the foundations for protection from unforeseen risks”.

From “paperwork” to the digital age.

In recent months, emphasis has been placed on technology. How easy is it to move from the endless paperwork of the State-Owned Enterprises to the digital age?

“Digital transformation is one of our top priorities. Our subsidiaries are currently working towards this direction, both in terms of their internal functions and in terms of customer service.

In order to further encourage this effort, and to create more rapidly the required culture of innovation, which presupposes the creation of the respective ecosystem, we established the HCAP Innovation Network, in the context of which, executives from our subsidiaries, collaborate, exchange ideas and explore best-practices. But this was only the beginning.

We are planning HCAP’s activity in the framework of a Digital Innovation Hub, where collaboration with academic and research bodies, local government entities and the private sector, including start-ups in the field of cutting-edge technologies (AI, Blockchain, IoT etc.) will allow “test before invest” actions for digital solutions of immediate interest of the HCAP’s subsidiaries, as well as actions to strengthen the digital skills of the executives of its companies.

Another important event, according to a legislation recently passed to the Parliament, is the creation of a new subsidiary of HCAP, which will finance the development of systems and applications that utilize the fast 5G mobile network. Finally, we aim to take advantage of funding opportunities of the European Resilience and Recovery Facility, and in the field of digital investments, having submitted in cooperation with the subsidiaries a list of selected projects which meet the axes of digital reform, green economy and infrastructure upgrade”.