Portugal to hold fire-sale of state assets

State broadcaster could be privatised in move seen as attempt by Lisbon government to impress lenders

The Guardian, Giles Tremlett, Tuesday 25 December 2012

A girl receives a Christmas present during a charity toy distribution
 in one of the poorest neighbourhoods in Lisbon. Photograph: Rafael
Marchante/Reuters

Portugal is to embark on a sweeping fire-sale of state companies over the coming months, possibly even privatising state broadcaster RTP, as it bends to the will of the troika of lenders that bailed it out 20 months ago.

With the government of prime minister Pedro Passos Coelho hoping to persuade the troika of the European commission, the European Central Bank and the International Monetary Fund to treat it more leniently in 2013 by lowering interest rates on loans, the sell-off of national companies is seen as one way of winning support.

Airports operator ANA is expected to be sold this week, with French construction group Vinci reported to have bid €3bn (£2.4bn). A consortium led by the Zurich airport operator Flughafen Zurich and Germany's Fraport is thought to be the other leading bidder.

But finding suitable buyers for Portuguese state companies is not always easy. Brazilian businessman Germán Efromovich tried to buy ailing national airline TAP for €36m last week, but his offer, which reportedly included a further €315m in capital for the airline, was turned down after the government said his financing was not solid enough.

The opposition socialist party, which had accused Passos Coelho's centre-right government of organising a secret, semi-private sale, welcomed the decision to postpone the sell-off.

But Efromovich was expected to bid again for the airline, which is saddled with €1.2bn of debt.

The troika has told Portugal to sell €5bn of state companies as part of the deal which saw it receive a €78bn bailout in May 2011. But it looks set to beat that target thanks mainly to sell-offs in the electricity sector and in airports.

Successful sales completed so far include the 21% of utility company Energias de Portugal taken by China Three Gorges for €2.7bn, and a quarter share in electricity grid operator REN bought by China State Grid for €387m.

Oil-rich former colony Angola is one of the countries that Portugal has tried to tap for investors as it aims to sell off everything from public broadcaster RTP to parts of the postal service, water utilities, state banks, the rail service and oil firm Galp.

Angola's Newshold, owner of Portugal's Sol weekly newspaper, has said it is interested in bidding for RTP in what would be the most controversial privatisation of all.

Under the bailout plans, Portugal is due to return to bond markets in 2013. Its borrowing costs have tumbled in recent months, with 10-year bond yields finally falling back to pre-bailout levels of below 7% shortly before Christmas. A successful return to the markets would be seen as a sign that the euro crisis was finally being solved.

Passos Coelho's government hopes that the troika, which recently eased lending conditions to Greece, might do the same with Portugal – lowering interest payments and making it easier to cut the budget deficit. Portugal's debt is expected to reach 120% of GDP this year and it currently pays 3.6% interest on troika loans.

Germany has already said it opposes a softening of the bailout loan terms, with its finance minister, Wolfgang Schäuble, saying that would look as though Portugal was unable to meet targets. "It would be a devastating signal and I would really advise them not to pursue this point any further," he said.

Portugal's economy shrank by 3% this year and the country has lost almost 6% of GDP since the credit crunch of 2007.

Large demonstrations in September forced the government into a U-turn over plans to raise social security contributions. The government withdrew the measures, but instead introduced huge income tax hikes, adding 3% to average tax rates.