The Projects World Developing Opportunities in 2022

Date: 18th April 2022

Despite a number of ongoing global challenges Greece has facilitated infrastructure projects in the past year and seems to continue to do so during the first few months of 2022. Partner Yannis Kourniotis provides some insight on growth opportunities within 2022.

The LLF Projects practice is one of the very few in Greece that advises the full range of project parties (sponsors, lenders, government, investors and multilateral), and this has helped earn key appointments on the country’s privatisation programme. To what extent will this programme continue to be the driving force behind projects in Greece in 2022?

YK: Absolutely. It’s phenomenal. The market is receiving multiple RFPs as the Greek government is tendering out numerous PPPs simultaneously and there are something like six or seven consortia comprised of several companies. And sometimes international investors do not want the lawyers of the consortium, they want to have their lawyers. So, can you imagine that this means the practice keeps growing as a limited number of firms can do this work?

So, the trend is that there is a lot of work on financing and the development of wind assets. The second thing is offshore wind, and we are heavily involved in that. All of the big offshore investors are currently in Greece scrutinising opportunities, and we will have a new legal regime very soon. They’re forming JVs with large Greek corporate players like Hellenic Petroleum, Motoroil, Copelouzos Mytilineos, GEK Terna, etc. It’s the next big thing in Greece, although we do of course expect some kind of environmental hindrance from the locals there.

Despite the uncertain market conditions resulting from the pandemic, last year was a hugely successful one for the firm’s Projects practice. Assuming the worst is now behind us, what in your view have been the long-term repercussions of the pandemic on Projects activity in Greece?

YK: The pandemic may have actually facilitated the development of projects because the EU is assisting local economies by providing them with financial assistance. And most of this financial assistance has gone towards infrastructure projects, which have been welcomed by local construction companies.

For example, I advised a Greek construction company last year on the upgrading of 14 regional airports alongside an international airport operator and manager. To facilitate Greek construction companies, the EU will provide €120 million simply to have the airports recertified in accordance with European criteria. Would that happen without the pandemic … of course not. So, the pandemic has somehow speeded up the tendering of projects that were in the pipeline, or it has helped other projects that were just at the conceptual stage to become a reality.

Were some projects delayed? It was not construction that was affected by Covid but consumption. Honest businesses are suffering or have suffered.

What is the status of one of the firm’s key mandates in 2020 – the Floating Storage Regasification Unit (FSRU) in the northern port of Alexandroupolis (The port is being developed into an energy hub through a €500 million project that will connect with several pipelines that supply liquefied natural gas to Europe)?

YK: This is progressing well. We’re about to finish all the contractual documents and as soon as everything is signed off by the regulator, this project will proceed in a timely fashion. This is because the Greek government wants Greece to have access to re-gasified natural gas on the grounds of energy security. There will be one FSRU in Alexandroupolis and there will be a couple of others elsewhere.

In March, the firm hired banking finance specialist Konstantina Siozou to boost your practice. Where do you see the growth opportunities in 2022? For example, substantial investment is needed in interconnections and grids as Greece closes its lignite-fired coal generation hubs in the north of the country (with the government declaring it a priority as part of its €30.5 billion Covid-19 recovery plan). Meanwhile, the Hellenic Wind Energy Association has predicted that 1GW of wind capacity could be deployed offshore by the end of this decade.

YK: For offshore wind development, there shouldn’t be any international relations difficulties with Turkey as our proposed floating wind farms are geographically away from them. However, as mentioned before, stakeholders in the fishing, tourism and maritime sectors will challenge the permitting and licensing.

The new regulatory framework was expected in October, and we submitted our comments on the draft bill. Then it moved to the end of November, and we have still not seen it. This means that significant entities are lobbying on the content of the proposed framework. I can reasonably infer that because it was almost ready. But this will happen soon because they want to launch tenders by the end of the first half of 2022 and they need to upload a first draft of the bill for consultation before they can do that.

Re. grid upgrades – this is currently challenging as the largest shareholder of the grid operator Chinese State Grid will need to heavily invest. The Chinese wanted Greece to be its entry into Europe, which is why it bought the Port of Piraeus – the busiest port in the Mediterranean (Cosco bought 51% in August 2016 and this stake was increased to 67% in October 2021). All Chinese goods are transported through Piraeus, and they also wanted to acquire our national rail to transport further afield.

The financing element of projects is often the difference between success and failure, and the firm’s close ties to Greece’s big four systemic banks have proven hugely beneficial to other stakeholders in projects. Although local lenders dominated sectors such as renewables financing during the country’s debt crisis, as international banks left Greece, to what extent do you expect international banks to become more active again as the Greek economy improves?

YK: They will become active. At the moment, there is still a lot of activity by local lenders. The systemic banks will continue to enjoy a monopoly until they exhaust their resources which will not happen soon.

In 2022, some major US banks will establish a presence in Athens following Brexit i.e. relocating from London. So, they will be active on the lending side of things.

The firm’s project practice also covers the full spectrum of non-financing work relating to energy and infrastructure projects. Although utilities and power retailers dominate power purchase agreements (PPAs) in the renewables market in Greece, there is speculation that industrial corporates are showing a growing interest (from energy-intensive industries such as metal and building materials, communication and data centre companies, agriculture, and consumer products). Are you seeing this?

YK: Yes. We have been approached on corporate PPAs multiple times in the past 6 months. We believe we will have changes in 2022 because this is something that is much needed by the local energy market in Greece.

The firm’s projects practice is particularly active in the Energy and Real Estate sectors, which are increasingly attracting interest from international investors. To what extent will this continue in 2022 and which other industry sectors are likely to be on the radar of investors in the next 12 months?

YK: As far as Greece is concerned infrastructure and energy will go sky high this year, unless we have a major international problem. These will be followed by real estate. Greece has so many needs in terms of infrastructure and energy that they can drive the whole market for years to come, and I expect them to do so.

There are not many Western countries that are members of the EU and have the Euro as their currency that are in for these types of projects. This makes it easier to develop these projects in Greece and showcase them around the world. That’s why international companies are very much after infrastructure and energy projects in Greece.

The devastating wildfires last year ravaged Greece’s second-largest island, Evia, brought into sharp focus the growing need for political resolve toward decarbonisation and climate action (which is thankfully happening). How are developers benefitting from this shift in mindset – for example, via high power prices and generous government subsidies?

YK: There’s a lot of renewables projects in the pipeline and Greece was affected by the financial crisis, so they continued with the subsidies. But this will stop at some point. There are many people involved in the development of renewables in Greece and they promote this type of activity. People are happy now but, when it comes to paying the bill (after the subsidies end), they may start to think again, and this could affect their sentiment towards the shift from fossil to green energy. Oil and gas will remain as the transit fuel for at least another 10 years.