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Newsletter October 2011


RES: Attractive and Lucrative

George Kofinakos, Country Advisor to Stormharbour and CEO & Executive Director, Enolia Premium Capital S.I.F. (SCA), discusses the advantages of investing in Greece now.

You have recently stated that investing in Greece now provides opportunities. Please elaborate on why you think Greece today is a good investment destination.

These days, Greece can provide an investment framework which brings high returns in a friendly environment. The main poles of this framework are:
• The lowest labour cost in the Eurozone: Following the current crisis and the reformation of the labour law towards liberalisation along with the lower salary adjustments throughout the whole spectrum of the Economy, one will now clearly be able to find and engage staff with strong backgrounds in engineering, medicine, economics and sciences in general, but also in secondary, technical or vocational education at very competitive cost.
• Appealing Assets at very reasonable values: In every sector of the Economy, from Financials to Industry and from Real Estate to Retail, after many years of growth, the Greek Assets have now undergone vast adjustments in their values, making them the most attractive in the developed world.
• Quick Licence Process: The recent Fast Track law has put large investments of over Euro 200 million in a quick approval process, enabling them to deal through a one stop shop. Project returns (15% to 20%) are the highest in the Eurozone these days and one of the highest in the Globe.

How do you view the long-term horizon for investors who need to think about returns over time?

A short-term investor is looking mainly for quick opportunistic returns, whereas a long-term investor is usually an organised entrepreneur aiming at a steady cash-flow yield.

The framework described just previously is exactly suited to the needs of the latter—a medium to long term investor can only expect high returns in a number of Greek investments.

Greece has a highly favourable wind and solar profile. As an investor in RES, please describe some of the attractive opportunities in the Greek RES sector.

It all starts with what Greece is generally first and foremost associated with—sunshine and wind. The trick lies in converting sunlight and wind into energy. More specifically, these days electricity produced from sunlight/wind can be sold to the Greek electricity authority at fixed purchase prices agreed in advance. A number of sites in the mainland as well as the islands have constant high wind levels. Sunshine in Greece has also been evidenced through multiple researches to output high levels of radiation and is constant. These are guarantees that investment in both areas will be a success and the process makes it easy to have high returns.

Photovoltaics and Wind Energy investments in Greece are now among the most attractive and lucrative investments. This investment opportunity is accessible to anyone in Greece and, more importantly, for all other than just Greek citizens. Everyone can enjoy all the advantages and dividends achievable from this investment in Greece to the same extent.

An investor is therefore able to secure a long-term, regular, monthly source of income, because this venture:
• is financed by the one-off expense of all the investment costs at the start of the project, and in return guarantees stable earnings for at least 20 years on a continuous monthly basis
• is associated with relatively low maintenance costs over the entire life span of the project
• neither demands that one deploy one's own workforce in order to operate the enterprise, nor requires the appointment of personnel
• does not require the entrepreneur's permanent presence or on-site management

A great advantage which naturally makes investment in a photovoltaic/wind project in Greece particularly attractive is the grants available under the Investment Incentives Law. Up to 40% of the investment can be covered by government subsidies. In this context, the possibility of the investor obtaining exemption from value added tax for all module and material costs should not be overlooked either. Overall it is therefore worth operating photovoltaics/wind in Greece.

Although Greece has experienced its share of economic and fiscal difficulties, how do you see the development of the Greek economic environment in a post-reform era?

The current debt crisis is rather due to weak political decisions than real economic issues. Unfortunately, politicians are considering the political cost of their decisions more than the long-term benefits to the society. In addition, they seem to be followers of market expectations instead of actually shaping these expectations. The crisis is an opportunity for Greece to reform its economy, liberalise its structure and minimise the State participation in the entrepreneur world.  I am sure that the politicians have now taken the message and will grasp this opportunity to drive Greece out of the current narrow strait. In this sense, and although it will take a couple of years to streamline the above process, the medium to long term prospects are in no doubt on the upside.

What other areas and sectors do you see as attractive for investors from around the world?

The Greek Financial Sector is currently also amongst the most appetising in Europe.

It has been said that navigating Greece’s banks through the shoals of economic crisis is a labour worthy of Hercules. With merely mortal powers, the executives running the country’s biggest banks have not done too bad a job. They entered the crisis with relatively prudent balance-sheets and several raised capital earlier this year, when markets were more forgiving. They are also starting to band together to cut costs and plump up their capital cushions. Taking into consideration all the upcoming parameters, a medium- to long-term investment in the Greek banking sector is considered to have limited downside and unlimited upside.