08GreekEconomy&Markets

New paths open in power sector

Reforms lift prospects

OTE deal clinched

Property market promising

12th issue - May 2008

(28,000*)

3

Greece’s April headline consumer inflation rate was steady at 4.4percent on an annual basis. The industrial production index fell 5.4percent , versus a 4.2 percent drop in the previous month. Datapublished by the National Statistics Service, the country’s statisticsoffice, also showed a large turnaround in construction activity. Thebuilding activity index retreated 0.50 percent year-on-year in Februaryfrom a 4.7 rise percent in January.

Period Value

Consumer Price Index (CPI)1 April 08/April 07 4.4

Harmonized Index of Consumer Prices (HICP)1 April 08/April 07 4.4

Producer Price Index in Industry1 March 08/March 07 9.9

Industrial Production Index (excluding construction)3 March 08/March 07 -5.4

Turnover Index in Retail Trade1 February 08/February 07 -0.8

Gross Domestic Product (provisional data)1 Q4 2007 3.6

Unemployment Rate2 Q4 2007 8.1

Population (2001 Census)4 2001 10,964.020

Building Activity)3 February 08/February 07 -0.5

1Annual rate of Change, 2Rate, 3Periodical rate of change, 4Value

Latest Statistical Data

The profile of the Greek economy

Facts & figures

4

Themes

Economic growth resilient but inflation is ‘disturbing’Turmoil in international financial markets has created a number of uncertainties; how-ever, tax reforms, the investment incentives law and public private partnerships areamong the factors helping fuel Greece’s economic growth. (pages 6-7)

ECB calls for reforms, boost to competitivenessThe ECB kept interest rates unchanged at its last Governing Council meeting and point-ed out that growth in the eurozone remains resilient. Regarding the Greek economy,calls were made for measures that will help boost its competitiveness on an interna-tional level. (pages 8-9)

TANEO eyes innovative opportunities abroadFund managers who collaborate with TANEO have already invested in recycling, renew-able energy and promising industrial material producers with strong export potential,its CEO Nikolas Haritakis told Greek Economy and Markets. (pages 10-11)

Greek Economy & Markets 08A publication of the “Agora Ideon” forum.

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Contents

12th issue - May 2008

Cover StoryChristos FoliasGeographical position favors vital energy link (page 14)

Ioannis AgapitidisIs there a real estate bubble? (page 15)

Stelios BourasNew move made on energy chessboard (pages 16-17)

Constantinos FilisLoose ends and solid prospects in South Stream deal (pages 18-19)

Real estate

Real estate market weathers international subprime crisis(pages 20)

Colliers builds new Balkan links(pages 21)

Upside potential of property market remains strong(pages 22)

Foreign investors tune in to local property(pages 23)

5

Themes

The Greek government has agreed to sell

part of its stake in the Hellenic Telecom-

munications Organization (OTE) to

Deutsche Telekom (DT) and will share

management of the former state monopoly

in one of the largest foreign investments to take

place in Greece in recent years.

Finance Minister Giorgos Alogoskoufis said the

Greek state and DT would each control 25 percent

plus one share of OTE while the German compa-

ny could raise its holding.

‘The agreement with one of the largest and

most reliable telecoms organizations in Europe

and the world opens a new chapter not only for

OTE but for the whole of the Greek economy,’ he

said.

‘I believe that this is a groundbreaking agree-

ment not only by Greek standards but on a Euro-

pean level as well.’

The German group agreed to pay 29.75 euros

for each OTE share, about 45 percent above cur-

rent prices, for 3 percent of the government’s

holding in the company.

The minister said each side would control five

seats on OTE’s 10-member board. The day-to-day

management will be the responsibility of the man-

aging director, who will be proposed by Deutsche

Telekom and approved by the Greek side.

In March, DT had agreed to buy a 20 percent

stake in OTE from Marfin Investment Group

(MIG). Deutsche Telekom also said it would round

off its stake by buying an additional 2 percent of

OTE on the market. The two parties had been in

negotiations since March, trying to hammer out

details of the agreement which will see the tele-

com groups jointly covering the Southeast Euro-

pean telecoms market with both fixed and mobile

telephony.

The Greek authorities had for years been seek-

ing a ‘strategic European investor’ for OTE, the

largest telecom operator in the Balkans, with

operations in Albania, Bulgaria, the Former

Yugoslav Republic of Macedonia (FYROM) and

Serbia.

Deutsche Telekom, which generates more than

half of its revenues abroad, has been pursuing

acquisitions in mobile communications to boost

growth and last year acquired France Telecom’s

Dutch unit and US wireless company SunCom.

OTE is one of Greece’s largest companies with

a market capitalization of nearly 9 billion euros.

Its shares are listed on the Athens bourse.

Greece has been struggling to attract foreign

investors since French lender Credit Agricole bought

a majority stake in Emporiki Bank back in 2006.

The OTE deal will also earn the government

442 million euros, which will go toward paying off

the country’s large public debt. The sale will only

come into effect after it is approved by Parliament,

where the conservatives have a slim one-seat

majority in the 300-member house.

‘The Greek government does not currently

intend to further reduce its stake in OTE,’ accord-

ing to the ministry.

Analysts described the news as positive,

adding that time will be needed before the bene-

fits materialize.

‘The agreement is positive given the generous

premium that implies DT’s expectations for value

creation from fat cutting, synergies and a better

utilization of OTE’s assets. Nevertheless, we do

not expect the transaction price to act as a refer-

ence, at least not before the market gets a taste of

the new management’s intentions and how appli-

cable they could be,’ said Proton Bank in a note.

One of the downside risks analysts pointed out

in the deal is the reaction from OTE’s powerful

trade unions. OTE had recently moved ahead with

a large headcount reduction in a bid to cuts costs

but there is still believed to be more room for

downsizing.

Workers have already launched strike action

and threatened to walk off the job again.

The agreement will go into effect after its rati-

fication by the Greek Parliament. Approval by the

European Commission and national regulatory

institutions in both Greece and Germany is also

pending.

Shares in OTE, however, have tumbled since

the deal in what some analysts said was investor

disappointment over the lack of a public offer

being made by Deutsche Telekom.

Stelios Bouras

After months of negotiations, Greece has agreed to sell part of its stake in OTE to DeutscheTelekom. The sale agreement will raise 442 million euros for the government and signal theentry of a major foreign investor into the country.

Gov’t strikes OTE deal with DT

Plutarchos SakellarisChairman of the Council of

Economic Advisers and Professor

at Athens University of Economics

and Businesswww.mnec.gr

6

Economy

The ongoing turmoil in the international finan-

cial system has created serious uncertain-

ties. It is reasonable to wonder what will be

the effect on the world economy, and on the

Greek economy in particular. It is also imper-

ative to look for the appropriate responses at the

economic policy level.

However, in order to keep things in perspective,

one should bear in mind that the current situation

is not unprecedented. There have been numerous

circumstances in economic history where euphoria

and extreme optimism led to excess followed by

uncertainty and fear. There are, however, certain

aspects in the current situation that have made

such reactions sharper.

First and foremost is the critical role of macro-

economic imbalances that have characterized the

world economy for the past few years. The large

current account deficits in the USA, due to excess

consumption not only of households but of the gen-

eral government as well, are an obvious manifesta-

tion of these imbalances. These deficits reflect the

large current account surpluses of China and of oil-

producing countries in the Middle East. These are

caused by excess savings. Specifically in China,

these excess savings are due to an insufficient pro-

vision of social safety net mechanisms and the defi-

ciencies of the domestic financial systems. These

imbalances are further worsened by policies that

artificially maintain the exchange rates of these

countries at low levels. In short, for a number of

years world growth has been heavily based on the

American consumer.

Secondly, the fact that we went through a

decade of high liquidity is also very important. This

was the result of low interest rates set by central

banks and of heavy intervention in exchange rates

by some countries.

The third factor, until recently, was the pro-

longed period of low inflation. This was the result of

the successful implementation of deflationary poli-

cies by the monetary authorities following the

1970s in conjunction with globalization, which ini-

tially had favorable effects.

All these factors are linked to excessive borrow-

ing on the part of US households but, even more

importantly, to the excessive leverage of investors at

the world level. As a result, the financial sector grew

very fast, while supervisory and regulatory regimes

did not adapt to these developments.

The changes in traditional business practices

followed by some banks is a fourth factor. Mainly in

the Anglo-Saxon economies the practice of ‘origi-

nating and holding loans’ has been substituted by

‘originating and distributing loans.’ According to this

model, banks offer loans and afterward, through

‘securitization,’ they distribute the largest part of the

credit risk attributed to these loans to many

investors. This wider risk dispersion contributes to

the more efficient operation of the financial system

as a whole. However, this practice has led to a

relaxation of lending criteria, as banks do not have

a strong incentive to accurately evaluate the lending

ability of the debtor — which in turn has adverse

effects on the quality of the loan portfolio. At the

same time, the incentives for further monitoring

these loans have been dangerously weakened. Fur-

thermore, investors tend to have limited information

on debtors as they rely solely on the assessments of

the international rating agencies. These assess-

ments have proven to be wrong in many cases.

A fifth factor is the cross-border use of com-

posite and complex financial instruments. The

complexity of these new instruments makes their

valuation a very hard task. Thus, the difficulty of

evaluating these products, in conjunction with the

objective to achieve ever higher returns and lower

risk aversion, has led investors to use them exten-

sively without fully grasping the size of the risk

they were undertaking. As a consequence, the

operation of the market for these ‘exotic’ products

was not smooth, especially regarding liquidity.

When the turmoil began in the financial system

and investors started to reassess their exposure in

these markets, existing liquidity dissipated, caus-

ing them even further anxiety. After the summer of

2007, it became evident that nobody was in a

position to know exactly how long the chain of

investors in these complex financial products is,

nor the true magnitude of exposure of different

financial institutions. Therefore, the lack of trans-

parency regarding the distribution of risk led to

loss of trust between financial institutions, thus

causing serious problems in the operation of the

interbank lending market.

A sixth factor is the executive compensation sys-

tem in the financial sector, which encourages exec-

utives to undertake extreme risks. This system is

structured in such a way that high rewards are

obtained in periods of high profits while there is no

‘penalty’ when results are negative.

Finally, it is important to note the role of inade-

quate supervision of the financial system. The

relaxation of supervision or its total absence in

some parts of the financial system has led banks to

a type of ‘supervision arbitrage,’ i.e. to transfer part

Economic growth resilientbut inflation is ‘disturbing’

Turmoil in international financial markets has created a number of uncertainties;however, tax reforms, the investment incentives law and public private partnerships are among the factors helping fuel Greece’s economic growth.

7

of their activities away from the close control of

authorities. As a result, part of their balance sheet

is not regulated. More specifically, in order for

banks to avoid regulations regarding capital ade-

quacy, they used structured investment vehicles or

conduits, which are not supervised and operate as

quasi-banks. These vehicles led banks to under-

take even higher risks, which were then widely dis-

persed around the world.

These developments in the world financial

markets have an impact on the real economy. The

cyclical slowdown is accompanied by the sudden

acceleration of inflation, as a consequence of

steeply rising international prices of food, oil and

other raw materials. It is a fact that the American

economy is going through a difficult period and

short-term prospects are becoming more and more

pessimistic. In the European Union this turmoil is

evident, but the real economy continues to grow,

though at a pace lower than potential. According

to the latest forecasts of the European Commis-

sion, eurozone growth this year will be 1.7 per-

cent, down from 2.6 percent last year. Inflation in

the eurozone is expected to accelerate to 2.6 per-

cent this year from 2.1 percent last year. It is

expected that the pressure on prices will subside

toward the end of 2008.

Eurozone economies are in a better shape com-

pared to the 2001-2003 period when growth rates

were very low. The fundamentals are much better,

as much has been achieved in the implementation

of structural policies enhancing growth, productivi-

ty and competitiveness as well as on fiscal policy.

Therefore the eurozone is on much more solid

ground to face this turmoil. Of course there will be

some effects, but they are expected to be limited.

Before turning to the Greek economy, I would

like to mention the most significant initiatives

undertaken by the European Union in order to tack-

le the problems in the financial system.

Last September, the European Union’s ministers

of economy and finance agreed on a road map to

solve the main weaknesses of the financial system.

These initiatives include:

1. Improving the transparency of markets, specifi-

cally regarding securitization and the out-of-bal-

ance sheet items of financial institutions;

2. Improving the rules and valuation methods of

less liquid bank assets;

3. Strengthening the European Union’s supervisory

framework for banks, and

4. Reviewing some structural issues in these mar-

kets. These include the role of rating agencies

and the tools that facilitate the dispersion of risk

attributed to bank loans.

At the same time, the European Union is mov-

ing toward strengthening the supervisory framework

through the review of the Lamfalussy process.

Some aspects of this review are:

1. Measures for supervisory convergence at a Euro-

pean level, through the introduction in the

statutes of national monitoring authorities of the

obligation to cooperate with agencies in other

European countries;

2. Instructions to strengthen the role of Level 3

supervisory committees of the Lamfalussy

process, and

3. Measures for more efficient supervision of large

cross-border banking groups. Special emphasis

is placed on the need for cooperation between

member states for the management and reso-

lution of potential financial crises at the cross-

border level.

Turning to the Greek economy, I would like to

underline that it has strong dynamism and

resilience. The reforms implemented by the govern-

ment have enhanced its growth potential and

adaptability. The tax reform, the investment incen-

tives law, public-private partnerships and the effi-

cient management of EU funds have already boost-

ed growth. At the same time, our banking sector

seems to be solid, with satisfactory capital adequa-

cy and conservative practices regarding risk man-

agement. Finally, the level of indebtedness of

households and firms remains at comparatively low

levels.

Naturally, our economy is influenced by the tur-

moil. According to the latest forecasts of the Min-

istry of Economy and Finance, GDP growth will

decelerate in 2008 and 2009 to a rate of 3.6 per-

cent, down from 4 percent in 2007, and rebound to

3.8 percent in 2010. Despite this deceleration, the

growth rate of the Greek economy is expected to be

double that of the eurozone average.

However, the developments in inflation are more

disturbing. The price index is expected to rise by

3.5 percent on average in 2008, up from 2.9 per-

cent in 2007, mainly due to the jumps in the inter-

national prices of oil, food and other raw materials.

The budget targets, on the other hand, are not

affected, as nominal GDP rises faster than project-

ed in the budget (by 7.2 percent compared to 7

percent). This is due to the fact that the decelera-

tion of the growth rate is overcompensated by the

acceleration of inflation. The target for a general

government deficit of 1.6 percent of GDP this year

is attainable. In parallel, caution is necessary to

avoid entering a vicious circle of price-wage increas-

es and lower competitiveness, as the impact on the

real Greek economy will then be substantial.

The world economy is in pain. The financial sys-

tem, which is its circulatory system, is experiencing

turmoil. The record high increases in the interna-

tional prices of food, oil and other raw materials

reveal that we have moved to a stage of globaliza-

tion with negative side effects on our economies. In

my view, these side effects are temporary but

nonetheless need to be tackled immediately. In our

case, in Greece, the best way to face the problems

is by continuing to pursue fiscal consolidation and

structural reform. Through these reforms the busi-

ness environment will improve and private invest-

ment will keep on rising. These in turn will boost

productivity, improve competitiveness and maintain

growth, not only in the medium term but in the long

term as well.

“I

think the challenge for Greece is to maximize

the benefits of participation in a monetary

union by making further progress along the

path of reforms. It is for Greece particularly

important to bring down the relatively high

inflation rate in order to improve its competitive

position. We have persistently had an inflation

rate above that of the euro area average since we

adopted the euro. And to achieve this objective it

is particularly important to continue on a sustain-

able and credible path of fiscal consolidation and

to improve further fiscal performance by reducing

further Greece’s high government debt ratio. And

of course, and this is another issue on which my

views are well known, in this country at any rate,

I believe that public finance should have sufficient

room for maneuver in order to better cope with

expected substantial increases in age-related

expenditure, because Greece is faced with one of

the worst problems of an aging population, which

will have serious consequences for both health-

care and pension system expenditure. And it is

Garganas ”8

Economy

The European

Central

Bank’s (ECB)

Governing

Council

meeting was held in

Athens earlier this

month, providing an

opportunity for sen-

ior ECB board

members to offer

their views on the

Greek economy.

Along with ECB

President Jean-

Claude Trichet, ECB

Vice President

Lucas Papademos

and Bank of Greece

Governor Nicholas

Garganas spoke

about how resilient

the economies in

Greece and the

European Union are

to a global econom-

ic slowdown.

Papademos pointed

out that Greece

needs to work on

boosting its com-

petitiveness in a

move that requires

further structural

reforms. Mean-

while, Garganas,

who will be step-

ping from the top

position as the

country’s central

bank soon, said

that labor cost

developments

should take into

account produc-

tivity growth as

Greece struggles

with one of the

eurozone’s highest

inflation rates.

ECB calls for reforms, boost to competitiveness

The ECB kept interest rates unchanged at its last Governing Council meeting and pointedout that growth in the eurozone remains resilient. Regarding the Greek economy, calls weremade for measures that will help boost its competitiveness on an international level.

“T

here have been a number of positive

developments over the past few years.

Greece has experienced robust econom-

ic growth and has made further progress

toward fiscal consolidation and structur-

al adjustment. On the negative side, the weak

feature of the Greek economy has been the low

degree of competitiveness, as measured by a

variety of indicators. And the persistence of sig-

nificant divergences in unit labor cost increases

over a number of years has had adverse impli-

cations for the inflation increase, as well as for

the country’s competitiveness position. The

cumulative loss of competitiveness over several

years is reflected in the widening of the current

account deficit, which has reached very high

levels as a percentage of GDP and may not be

sustainable. So far, the negative impact on eco-

nomic activity from the growing external imbal-

ances has been partly or fully offset by the pos-

itive influence of various domestic factors that

have stimulated economic activity.

But the influence of these factors may

decline over time and, were this to happen, the

adverse effects of the external imbalances on

activity and employment would be felt more. So

what is important – and what I’m saying is very

much in line with what was said earlier on by

President Trichet and Governor Garganas – is

the pursuit of policies that will strengthen com-

petitiveness, which, as you suggested, first of all

involves further structural reforms in order to

foster higher productivity growth and strengthen

competition in markets. Moderate labor cost

increases are also necessary and are particular-

ly important in helping to restore competitive-

ness over time. A combination of policies in

labor and product markets, in order to strength-

en competition, foster productivity growth and

ensure wage moderation, should be pursued so

as to increase competitiveness. I think this is the

path to take in the years to come.

Papademos

Lucas Papademos

””important of course, both in the public and private

sectors, to attain moderate labor cost develop-

ments. I have been criticized for that because peo-

ple believe that we suggest a wage freeze or a cut

in wages – we do not.

We suggest labor moderation; we suggest

that labor cost developments should take into

account productivity growth, labor market con-

ditions and developments in competitor coun-

tries. This is a standard position of the Govern-

ing Council, if I may say so, Mr President, and

of the Bank of Greece all these years. Attention

must also focus on other coming structural con-

straints on economic growth and job creation.

There is an issue of fostering labor force partici-

pation and the strengthening of competition in

product markets. Product markets are not func-

tioning properly in Greece in many sectors, and

this will help keep profit margins consistent with

price stability. And an improvement in the func-

tioning of labor markets is also very important,

particularly in Greece.

“

9

Economic fundamentals of the euro area

are sound, and incoming macroeconomic

data continue to point to moderate but

ongoing real GDP growth. However, the

level of uncertainty resulting from the tur-

moil in financial markets remains unusually high

and tensions still persist. Against this back-

ground, we emphasize that maintaining price

stability in the medium term is our primary

objective in accordance with our mandate. The

firm anchoring of medium- to longer-term infla-

tion expectations is of the highest priority. The

Governing Council remains strongly committed

to preventing second-round effects and the

materialization of upside risks to price stability

over the medium term. We believe that the cur-

rent monetary policy stance will contribute to

achieving our objective.

The latest data and survey information on

economic activity confirm previous expectations

of moderate but ongoing growth in the first half

of 2008. In particular, industrial production

data for the first months of the year showed

resilience, while economic sentiment generally

continued to soften. Overall, the euro area econ-

omy has sound fundamentals and does not suf-

fer from major imbalances.

In line with available forecasts, both domes-

tic and foreign demand are expected to support

ongoing real GDP growth in the euro area in

2008, albeit to a lesser extent than during

2007. While moderating, growth in the world

economy is expected to remain resilient, bene-

fiting in particular from strong growth in emerg-

ing economies. This should continue to support

euro area external demand. Meanwhile, invest-

ment growth in the euro area should provide

ongoing support to economic activity, as capac-

ity utilization remains solid and profitability in

the non-financial corporate sector has been sus-

tained. At the same time, employment and labor

force participation have increased significantly

and unemployment rates have fallen to levels

not seen for 25 years. This supports real dispos-

able income and thus consumption growth,

although purchasing power is being dampened

by the impact of higher energy and food prices.

The uncertainty surrounding this outlook for

economic growth remains high, and downside

risks prevail. In particular, risks relate to the

potential for the financial market turbulence to

have a more negative impact on the real econo-

my than previously anticipated. Moreover,

downside risks stem from the dampening impact

on consumption and investment of further unan-

ticipated increases in energy and food prices.

Risks also arise from protectionist pressures and

the possibility of disorderly developments owing

to global imbalances.

With regard to price developments, annual

HICP inflation has remained above 3 percent for

the past six months. According to Eurostat’s

flash estimate, it was 3.3 percent in April 2008.

This outturn confirms the ongoing strong short-

term upward pressure on inflation, resulting

largely from sharp increases in energy and food

prices at the global level in recent months.

Looking ahead, on the basis of current

futures prices for these commodities, the annu-

al HICP inflation rate is likely to remain signifi-

cantly above 2 percent in the coming months,

moderating only gradually over the course of

2008. Accordingly, we are currently experienc-

ing a rather protracted period of high annual

rates of inflation. In order to ensure that current

high inflation rates remain temporary, it is

imperative that they do not become entrenched

in longer-term expectations or lead to broadly

based second-round effects in wage and price-

setting.

For the time being, there is little evidence

that the financial market turbulence seen since

early August 2007 has strongly influenced the

development of broad money and loans. Contin-

ued strong loan growth to non-financial corpora-

tions suggests that the availability of bank cred-

it to euro area firms has not been significantly

impaired by the financial turmoil thus far. Fur-

ther data and analysis will be required in order

to obtain a more complete picture of the impact

of the financial market developments on banks’

balance sheets, financing conditions and money

and credit growth.

Trichet

Claude Trichet

Nicholas Garganas

10

Economy

After enlarging its investment spectrum

and complying with EU regulations

regarding risk capital, the TANEO fund

is ready to co-finance more than 260

million euros worth of small and medi-

um-sized businesses, says Haritakis. The CEO

also said that he sees potential both for compa-

nies as well as for financial institutions like ven-

ture capital funds.

➦ Just before the end of last year, youannounced and the media reported that theNew Economy Development Fund SA (TANEO)was back in business. Have you progressedsince then?NH: We can confidently say that we suc-

cessfully managed to tackle all the obstacles we

were facing at the beginning of 2007. We man-

aged to extend our investment period up to the

end of 2008, we enlarged the investment spec-

trum and we complied with the most recent EU

regulation regarding risk capital. In addition to

that, we collaborated with institutional and pri-

vate investors in order to fully utilize our invest-

ment capacity. We are very proud to say that,

currently, TANEO is ready to co-finance, along

with other investors, the small and medium-

sized enterprises (SMEs) market in Greece with

more than 260 million euros. In addition to the

three aggressive management teams already

operating, seven new ones are in place to com-

pete and collaborate in a promising venture

capital market. We managed to accomplish all

the tasks assigned by our shareholders and note

holders long before the expiration of their

approved time frame.

➦ What prompts an institutional or individ-ual investor to invest in Greece’s venture capi-tal market?NH: I will answer the question drawing on

information from my experience in TANEO.

When trying to attract co-financing for venture

capital in Greece, we focus on certain issues

that have proved quite persuasive and attractive

for all the investors: first, our sovereign funding

structure; second, our past experience with

industrial market in Greece that allows us to

call ourselves ‘efficiency experts’ — we know

where to find opportunities and promising

investments; third, our experience in working

under the legal and tax structure framework

existing in Greece (AKES). We have successful-

ly explained to both international or domestic

investors that the above legal structure, intro-

duced by TANEO, is a financial vehicle that

stands in a competitive position relative to all

other similar schemes (SICAR, LPAs etc).

➦ As you mentioned earlier, close on 300 mil-lion euros have been channeled through TANEOinto the Greek SMEs market. Is this marketmature enough to absorb those resources?NH: Given the recent response of the mar-

ket, I can safely say that it can absorb even

more. For those who know or may foresee the

potential of the Greek economic perspective, my

previous statement is realistic. After the crisis in

Silicon Valley, venture capitalists all around the

world narrowed their perspective by competing

on returns with financial wizards. Equity financ-

ing, even for high-growth companies, is com-

pletely different to stock exchange dealing or

financial engineering. Our position strongly sup-

ports the idea that the abundance of real values

in the Greek SMEs market is unexploited. Mar-

kets and companies with great potential are

financially restricted and therefore bound to

operate inefficiently. An efficiency expert may

easily identify all those opportunities and pro-

vide cooperative leverage rather than a further

squeeze for profits.

➦ You often refer to promising sectors thatare not yet earmarked by the venture capital-ists. How do you plan on exploiting theseopportunities?

NH: The fund managers who collaborate

with us have already invested, for example, in

recycling, renewable energy, promising industri-

al material producers with strong export poten-

tial, boutique competitors for consumer prod-

ucts and brand names in upscale land property

uses. Currently, some of them are scouting all

the major academic institutions in the USA to

evaluate innovative ventures capable of being

realized in Greece. One of our new funds is

expected to soon introduce an innovative finan-

cial instrument utilizing the recent legal frame-

work on ‘societes anonymes’ that will highly

benefit SMEs. Furthermore, and following our

guidance, the fund managers are now investi-

gating opportunities in agriculture, logistics,

ceramics, small energy distribution networks,

education, and are even investing in special

purpose vehicles (SPVs) for legal as well as

advisory companies. This is a non-exhaustive

list and we remain open to ideas.

➦ How has the recent financial crisis affect-ed venture capital activity?Following recent developments, we believe

that the financial instability mainly benefits

those quick-footed financial institutions that are

highly involved in the ‘musical chairs’ environ-

ment that exists in the financial sector. Real

values are always a safe harbor and secure

investment choice. A reliable venture capitalist

is constrained to invest in real values. In an

environment such as the current one, his port-

folio is strengthened rather than destabilized.

➦ How is TANEO structured? What are themilestones and the obligations of the manage-ment in terms of private investors and the Hel-lenic Republic?TANEO was established as a purely sover-

eign fund. In the process it managed to become

a prototype structure by building a company

creatively joining competitive and collaborative

elements from the private and public sectors.

Around 105 million euros out of the 150 million

TANEO has under management come from pri-

vate institutional investors. Taking into consid-

eration that TANEO is a fund of funds, partici-

pating in up to 50 percent of new venture cap-

ital schemes, our structure successfully gener-

ated more than 300 million euros in investment

resources for the Greek SMEs market, with only

45 million euros in initial public investment.

TANEO eyes innovativeopportunities abroad

Fund managers who collaborate with TANEO have already invested in recycling,renewable energy and promising industrial material producers with strong exportpotential, its CEO Nikolas Haritakis told Greek Economy and Markets.

Even though our seed capital was contributed in

the form of equity capital by the Greek govern-

ment, we introduced the private characteristics

and objectives upon cleverly signing a very crit-

ical management contract. In order to secure

the non-public objectives, our private strategic

investors asked Deutsche Bank (trustee) to con-

trol the common shares, while the Greek gov-

ernment agreed to participate as the preferred

shareholder. Our trustee, as 100 percent rights

controller, appoints the board, the executives

and the management team and is responsible

for monitoring our investment decisions in col-

laboration with one of the world’s leading

investment advisers, Capital Dynamics.

With the above-described structure, TANEO is

bound to meet all milestones set and to operate

in a highly competitive manner, with clear finan-

cial and investment objectives, under absolute

transparency and complete independence. This

prototype has succeeded, easily enough, in tack-

ling all the critical issues that are under consid-

eration for all sovereign funds today.

➦ Has the Alternative Market of the AthensExchange (ATHEX) helped the venture capitalindustry or is it too soon to judge?NH: I'm glad you asked this question,

because it gives me a good opportunity to

express my opinion on this new market. First of

all, it is important to say that the responsible

authorities, i.e. the board of ATHEX, as well as

the Hellenic Capital Markets Commission

(HCMC), managed the implementation of this

delicate market in the most efficient way. It is

indeed premature to judge the effectiveness of

this market. As an optimist, I can claim that

there is great potential both for companies as

well as for financial institutions like venture

capital funds. However, it is prudent to say

that, first, although it is premature to evaluate

the performance of this market, we should eval-

uate its benefits to the economy, not only as an

alternative source of fund-raising, but mainly as

an institution for the promotion of fast-moving

companies.

➦ How do you monitor your funds’ progress?Do you participate in their management?NH: Internally, we use a sophisticated finan-

cial model to closely control our financial per-

formance and cash flows. This model is based

on the most recent reporting guidelines of the

European Association of Venture Capital

(EVCA). Regarding actual investment opportuni-

ties, we identify prospective ventures in order to

enhance our funds’ pipeline; at the same time,

we freely allow the investment managers to

decide on their own, according to their stan-

dards and criteria. Like any strategic investor

with the largest participation, in most cases, we

are members of the funds’ investment commit-

tees and our investment managers closely mon-

itor and evaluate the realizations of our invest-

ments. However, and above all, the most impor-

tant criterion in order to monitor the perform-

ance of the funds remains the contractually

imposed returns-related management remuner-

ation for the fund managers who collaborate

with us.

➦ What’s next for TANEO?NH: In the very short term we need to final-

ize the remaining legal documents in relation to

the establishment of the new venture capital

funds, to organize the upcoming event of the

9th International Venture Capital Forum, which

is now the largest venture capital event in the

SE Europe, and to redesign our Web presence in

order to reflect our mission statement, as a hub

for entrepreneurs, financiers and innovators.

Planning for the future, i.e. next year and for-

ward, TANEO has proved that is always full of

surprises.

11

Public Power Corporation (PPC) said its renewable energy subsidiary is moving ahead with the

permits required to build a photovoltaic plant at Megalopolis in the Peloponnese. Its

subsidiary PPC Renewables (PPCR) plans to build a 50-meagwatt solar power plant, the second

largest in Europe, in a 250-million-euro project expected to be completed in 2009. ‘The park

will produce clean electrical energy from the sun covering the energy consumption of around

households (or 42 percent of the total) of the Arcadia prefecture,’ the company

said. It is expected to operate for 25 years and will contribute to job growth in the area.

During the construction phase 150 people will be employed, while PPCR will then hire 30 staff

members to operate the plant. Priority will be given to members of the local community.

Public Power Corporation (PPC) said its renewable energy subsidiary is moving ahead with the

permits required to build a photovoltaic plant at Megalopolis in the Peloponnese. Its

subsidiary PPC Renewables (PPCR) plans to build a 50-meagwatt solar power plant, the second

largest in Europe, in a 250-million-euro project expected to be completed in 2009. ‘The park

will produce clean electrical energy from the sun covering the energy consumption of around

households (or 42 percent of the total) of the Arcadia prefecture,’ the company

said. It is expected to operate for 25 years and will contribute to job growth in the area.

During the construction phase 150 people will be employed, while PPCR will then hire 30 staff

members to operate the plant. Priority will be given to members of the local community.

28,00028,000

12

Facts & figures

PPC Renewables plans to build newphotovoltaic park

13

Cover

In a fast changing international environment, Greece is taking its place on the European

energy map by hooking up with international pipelines transporting natural gas and

petrol. The latest deal signed with Russia will ensure that the South Stream gas

pipeline will cross through Greek territory, boosting the country’s role as an energy hub.

Apart from playing a role on the country’s strategic position, senior government officials

point out that these developments will help feed Greece’s own growing energy appetite.

Experts, on the other hand, agree on the importance of the projects but also make men-

tion of the fact that Greece is not alone in making these steps. Other countries in the

region are making similar moves as energy issues become more pressing world wide.

Soaring petrol prices and the need to increase the protection of the environment have

become every day conversation topics which governments are well aware of.

News that Public Power Corporation (PPC) is gradually moving ahead with a photo-

voltaic park in the Peloponnese is a positive step as it is estimated to cover the energy

needs of 28,000 households. The project is considered to be Europe’s second largest

solar energy plant.

New paths for growing power sector

Christos FoliasMinister of Developmentwww.ypan.gr

14

Cover

Currently much is being written about Greece's emerg-

ing role as a major transit state for energy networks.

The answer to the often asked question as to why

Greece is developing into an energy hub lies in the

country's response to the major challenge of energy

security. Defining a sustainable and competitive energy

security policy is a key priority of both the European Union

and the Greek government.

Greece's geographical position on the crossroads of East

and West means that — with the correct strategic decisions

and the appropriate political will — the country is well

placed to contribute toward the strengthening of Europe’s

energy security.

This policy is characterized by diversity, in energy

sources (renewable and clean fossil fuel), in energy trans-

port, distribution and supply routes (new pipelines) and liq-

uefied natural gas (LNG). While the Turkey-Greece-Italy

Interconnector illustrates Greece's contribution in the pro-

motion of new sources of gas supply, the involvement of

Greece in the Russian Gazprom and Italian ENI project con-

cerns the country's efforts to secure supplies of more tradi-

tional sources. It is envisaged that the 900-kilometer off-

shore section, which is planned to carry 31 billion cubic

meters (bcm) of Russian gas annually, will start from Bere-

govaya on Russia’s Black Sea coast, from where it will run

to Bulgaria. From there it expected to follow both a north-

west route and a southwest route. The details of the exact

routing will be clarified by studies to be carried out by ENI.

However, agreements have already been completed by Rus-

sia with Serbia and Hungary. For the southwest route, plans

are for the pipeline to cross through Greece via the Ionian

Sea to southern Italy. An agreement between Greece and

Russia for this, the South Stream Project, was signed in the

presence of Prime Minister Costas Karamanlis and President

Vladimir Putin in Moscow on March 29. This is a project

which will secure supplies for European markets and is an

example of Greece's role in energy security.

Demand for gas is rising by around 3 percent a year

against a backdrop of falling domestic production. Greece is

taking a leading role in promoting the policy of diversifica-

tion. In the context of Inogate, which is the international

energy cooperation program between the European Union,

the littoral states of the Black Sea and the Caspian and their

neighboring countries, Greece developed the Turkey-Greece-

Italy Interconnector that will supply the European markets

with gas from Azerbaijan through Turkey and Greece and

undersea to Italy. It is an extremely ambitious project which

has been supported by the Trans-European Network pro-

gram and has been categorized as an EU priority project.

The Turkey-Greece section is already complete, with its

operation successfully inaugurated by the prime ministers of

the two countries at the end of 2007. Progress is being

made on the Greece-Italy sections. It is an exciting project

which will be transporting gas — about 11 bcm — and

which should be complete by the first quarter of 2013.

Greece also has one of the most important terminal sta-

tions in Europe for liquefied natural gas, in Revethousa

near Athens. Works to upgrade and increase the capacity

of this terminal were completed last year. Currently Greece

imports LNG from Algeria but there is scope for imports

from other countries.

In March 2007, Greece, Bugaria and Russia signed the

agreement for the Burgas-Alexandroupolis oil pipeline. The

establishment of the International company was secured

with the signing of the shareholders agreement in January

2008 in Sofia, with Development Minister Christos Folias

signing on behalf of the Greek state, together with represen-

tatives from the companies concerned from the participating

states. The realization and operation of the pipeline will

ensure the flow of increasing amounts of oil to international

markets, while significantly relieving the congestion of the

Bosporus Strait and reducing the likelihood of any shipping

accidents. Through the 279-kilometer-long oil pipeline with

a total budget of 900-1,000 million euros and initial annual

throughput of 35 million tons (with the potential extension to

50 million tons per annum), Greece has positioned itself

firmly on the oil map. It should be noted that all the pipelines

to run through Greece will be built according to the highest

environmental standards, with the aim of constructing

‘green’ pipelines. Moreover, with these projects, Greece is

establishing links in the region and is ascertaining its stand-

ing as a major energy player in the 21st century. With its

participation in these ventures, Greece is clearly contributing

toward Europe’s energy security. Cooperation between

Turkey and countries in Southeast Europe is being strength-

ened and can only serve to consolidate ties which promote

peace and economic and political stability. Developing ener-

gy security with its component of diversity also means

exploiting the vast economic potential of new sources of

energy. Energy security will be considerably enhanced when

the EU meets its target, whereby 20 percent of its electrici-

ty consumption should be produced by renewables by 2020.

The Greek government is confident that it can meet this tar-

get on schedule and is taking action aimed at creating the

required prerequisites for this. These include simplifying the

administrative procedures concerning licensing, further

development and use of new technologies and promoting

stability in the market for sustaining RES investment inter-

est. Today, the world’s leading RES companies are develop-

ing RES projects in Greece and are expected to continue

investing over the next decade more intensively, because the

Greek government provides and will continue to provide sta-

ble and transparent market conditions, securing internation-

al and domestic investment in RES. Indeed the government

is expected to draw investments worth 10 billion euros by

2020. We are blessed in Greece with year-round sunshine

that facilitates the promotion of solar energy, windy Mediter-

ranean conditions which are conducive to the construction of

wind and energy parks, and of course seawater and wave

energy initiatives.

Geographical positionfavors vital energy link

Greece is hooking up with a growing number of international energy pipeline projects as it strengthens its position on the regional power map. At the same time, investments in renewable energy sources are expected to reach 10 billion euros by 2020.

15

Ioannis AgapitidisPresident of the Center for

Renewable Energy Sources

(CRES)www.cres.gr

Cover

Developments are needed in the energy sector, par-

ticularly in the oil industry — where skyrocketing

prices are having a drastic effect on the economies

of most countries — and the continually growing

threat of climate change has now made it obvious

that a transition to new, less polluting and more secure

energy sources is vital. The most promising proposal for

this transition is the use of renewable energy sources

(RES), which can reduce greenhouse gas emissions and

pollution using local and decentralized sources. At the

same time, we now realize that we cannot keep increasing

energy production to cover our needs, but that we must

manage energy in a rational way and improve our energy

efficiency. Investments in these sectors contribute to the

protection of the environment, the security of energy sup-

ply and long-term development while functioning simulta-

neously as a magnet for innovation, providing export

opportunities.

The main strategic energy target for the European

Union is the reduction of greenhouse gases by 20 percent

by 2020, compared to 1990 levels. In order to achieve

this goal, the European Commission is proposing three

individual targets for 2020: a 20 percent improvement in

the efficiency of energy systems, an increase of 20 percent

in the contribution of RES to final consumption and an

increase of 10 percent in the amount of biofuels used for

transportation.

For Greece, the initial target for RES by the year 2010,

including large hydroelectric plants, was equal to 20.1 per-

cent of the electricity produced. In the energy efficiency

sector, which the minister of development, Christos Folias,

has set as a priority of the national energy strategy, by

2016 — according to the relevant European directive —

we must reduce final energy consumption by 9 percent

compared to the five-year period 2001-2005.

In recent years, Greece has been moving steadily in

this direction. The contribution of RES to the national

energy balance was 6 percent of the total available pri-

mary energy in 2006 and 16 percent of the domestic pro-

duction of primary energy. Electricity production from RES

in Greece (excluding large hydro) has increased signifi-

cantly in the last few years and is approaching 4 percent

of gross domestic electricity consumption. It concerns

mainly wind and small hydro and to a lesser extent, bio-

mass. Recently, photovoltaics has begun to make a

noticeable contribution. If large hydro plants are included

(excluding production from pumped storage), electricity

production from RES is around 10-12 percent of gross

domestic electricity consumption. The installed capacity

of electricity production from RES at the end of 2006 was

3,900 megawatts and the steadily increasing develop-

ment in wind, small hydro and biogas was the result of

the financial support measures mainly from the opera-

tional programs ‘Energy and Competitiveness’ of the 2nd

and 3rd Community Support Framework Programs and

the Development Law.

In Greece, at present, there are approximately 1,200

wind turbines installed with a total capacity exceeding 800

MW. Most of the wind turbines are installed in central and

southern Evia, followed by Thrace, Crete, the Peloponnese

and the islands of the northern and southern Aegean. The

power of the wind turbines installed in Greece ranges from

engines with a low output of about 100 kW, using mainly

older technology, to modern engines with an output of 3

MW.

The Regulatory Authority for Energy has set up a devel-

opment program for photovoltaic plants and the national

target for the penetration of photovoltaics in the energy

system has been set at about 800 MW for the next three

years. The response by investors was extremely high, to

the point that applications began to backlog. It is expected

that by fall this year the first production permits will be

issued.

The great expansion in the solar thermal collector

industry (water heaters) has put Greece in second place on

a European level regarding installed surface of collectors.

The implementation of the directive on buildings with

‘increased energy efficiency’ into national legislation will

create even more favorable conditions for the above renew-

able energy technologies.

In the area of biofuels, the biodiesel market is seeing

rapid development. While only one unit was operating in

Greece in 2005, at present, according to the latest avail-

able data, 10 biodiesel production companies are already

in operation with a total maximum yearly capacity of

575,000 tons. In contrast to biodiesel, the bioethanol mar-

ket is at an early stage and bioethanol production in Greece

is not expected to start before 2009.

We face two energy challenges: on the one hand, to

ensure secure and sufficient energy and, on the other, the

sustainable management of the environmental impacts of

the production, conversion and use of energy. These chal-

lenges are not insurmountable. If we all take greater

responsibility for our actions, basing our energy decisions

on best practice, we can ensure a clean, intelligent and

competitive energy future.

Green power high on priority list

Electricity production from RES in Greece, mainly in the form of wind power and smallhydroelectric projects, has increased significantly in the last few years and is approaching 4 percent of gross domestic electricity consumption.

16

Cover

As global oil prices continue to climb to

record highs, Greece’s decision to join the

Kremlin-backed South Stream natural gas

pipeline will boost the country’s role as a

transit hub while also feeding its own

growing energy appetite.

Greece has also announced that it plans to

take new steps on the energy front in an attempt

to further diversify its sources and building on its

position on the global energy map without being

a producer.

The deal was recently signed at a ceremony at

the Kremlin attended by Greek Prime Minister

Costas Karamanlis and Russian President

Vladimir Putin, shortly before being replaced by

Dmitry Medvedev.

The proposed Russian-Italian South Stream

pipeline will pump Russian gas under the Black

Sea to Bulgaria before splitting into two branches.

One branch will take gas northwest to Austria,

while the other will head southwest to Italy, going

through Greek territory.

‘Our country is securing a key position on the

world energy map even though we are not a pro-

ducer and this is very important in terms of

national, economic and development reasons as

energy moves the global economy,’ said Develop-

ment Minister Christos Folias.

The pipeline, which will be jointly built by

Russian gas export monopoly Gazprom and Italy’s

energy group ENI, will eventually transport 30 bil-

lion cubic meters (bcm) of Russian gas a year to

Europe.

It is not yet clear how much of the natural gas

will be absorbed by Greece before the remainder

is transported off to Italy.

The project, which aims to link Gazprom’s

Siberian gas fields with Europe and is seen as a

competitor to the EU- and US-backed Nabucco

pipeline, will cost around 10 billion euros.

Critics of the deal, however, place the figure

well over the 20-billion-euro mark.

Fellow Balkan nations Serbia and Bulgaria, as

well as Hungary, recently joined South Stream.

‘Based on these facts, Greece sees the con-

struction (of the pipeline) based on the condi-

tions of growing demand as being particularly

positive,’ said Karamanlis at the signing cere-

mony in Russia.

According to experts, consumption of natural

gas is expected to double in Greece over the next

few years.

Greece’s consumption of natural gas is expect-

ed to reach 4.7 billion cubic meters by the end of

2008, with this figure exceeding 7 billion cubic

meters in 2010, according to Development Min-

istry data.

‘We are planning to move ahead with other

steps that will allow us to increase the number of

energy suppliers, so that we can guarantee the

existence of energy needed and so that we can act

as a transit hub for natural gas moving from the

east to the west toward our European Union part-

ners,’ said Folias, without giving further details.

Greece now gets almost 80 percent of its nat-

ural gas from Russia’s state-controlled OAO

Gazprom, the world’s largest producer of natural

gas, through a pipeline from Bulgaria. The rest is

LNG from Algeria.

Energy chessboardChanges on the world energy map are taking

place at a fast pace as countries adjust to an envi-

ronment of high oil prices and the need to boost

power from environmentally friendly sources.

Greece’s entry into the South Stream deal

places the country on an energy chessboard where

each move has an impact on broader internation-

al political and economic ties.

Analysts see the South Stream project as pos-

ing a major challenge to the rival US- and EU-

backed Nabucco pipeline scheme.

Under Nabucco, gas would come from ex-Sovi-

New move made on energy chessboard

Prime Minister Costas Karamanlis recently signed a deal in Russia putting the country in the Kremlin-backed South Stream natural gas pipeline project expected to start operating in 2015.

17

et Azerbaijan to Southern Europe via Turkey in an

EU effort to diversify energy sources away from

reliance on Russia, though experts say the

pipeline’s fruition is becoming increasingly more

difficult as Azeri reserves are in doubt.

Days after the South Stream agreement was

signed, the US government said it did not oppose

the deal but believed it would harm the interests

of consumers.

Matthew Bryza, US deputy assistant secretary

of state for European and Eurasian affairs, indi-

cated that Greece needs to pick up the pace on

the Turkey-Greece-Italy (TGI) natural gas pipeline,

currently under construction.

‘You can have both, TGI and South Stream, if

you build TGI first. If you build South Stream first,

then I am afraid that you will have just that,’ he

told reporters.

Washington, fearful of Russia’s tightening grip

on the European energy market, has urged coun-

tries, including Greece, to diversify their energy

providers.

According to Bryza, Greek consumers will be at

the mercy of Russian gas company Gazprom,

which will be supplying the country with the

majority of its gas after the South Stream pipeline

starts operating.

On the other hand, Putin has said both the

South Stream project and a proposed Russian-

backed oil pipeline through Greece could only ben-

efit Europe.

‘The aim is to significantly increase the energy

security, not only of the Balkans but of the entire

European continent,’ stressed the outgoing Russ-

ian president.

‘The countries that are capable of supplying

raw fuels in the necessary volumes at competitive

prices for Europe can be counted on the fingers of

one hand,’ he added.

In Moscow last month Putin and Karamanlis

also discussed the 280-kilometer (175-mile) Bur-

gas-Alexandroupolis oil pipeline that will connect

the Black Sea to the Aegean as a vital alternative

route, bypassing the tanker-congested Bosporus

Strait.

The 950-million-euro Russian-Bulgarian-Greek

oil pipeline, agreed upon last year after 14 years

of negotiations, is expected to enter its construc-

tion phase soon.

Senior government officials say that by the end

of the year, the studies, the planned route and the

tender for the construction of the oil pipeline will

be completed.

Joint steps in Europe’s energy map have also

resulted in frequent reciprocal visits by Karaman-

lis and Putin.

Karamanlis's recent visit to Moscow was his

third trip to Russia, while Putin has also visited

Greece three times.

The Greek prime minister is additionally thought

to have discussed the possibility of buying Russian

aircraft or weaponry during his Moscow visit.

Other sources said that Russian businesses are

eyeing investments in Greece in a range of differ-

ent fields.

The South Stream project is not expected to

start operating until 2015, well after the TGI start

date set for 2012.

After moving ahead with the establishment of

the company that will build and manage the South

Stream project, Greece and Russia will proceed

with putting together a study on the pipeline that

will take about 18 months.

Once this stage is completed, a two-year

assessment and approval period will follow before

any further decisions are made.

Greece and Turkey last year inaugurated the

local branch of the the TGI pipeline, linking the

two neighbors in the Evros region, in the country’s

northeast.

The 300-kilometer pipeline will provide the

European Union with its first supply of gas from

the Caspian region, bypassing Russia and the

volatile Middle East.

It will link the Greek and Turkish networks,

and eventually carry gas from Azerbaijan to Italy.

The project is also seen as a deterrent for any

future political or military crises with Turkey.

‘It is a great step forward for relations between

the two countries and for stability in the region. By

cooperating we can build a better future for all,’

according to Karamanlis.

The EU is backing the Greek-Turkish project as

it seeks to diversify its energy suppliers and reduce

its natural gas dependence on Russia, from where

it buys about a quarter of its gas.

The United States also welcomed the project,

describing it as a ‘critical new energy bridge’

between East and West but said the European

Union ought to open its energy market to more

Central Asian states.

Folias rejected talk that the two projects will be

competing against each other, highlighting that it

will help diversify the country’s energy suppliers.

‘These two pipelines are complimentary. They

will be parallel with each other. One does not

depend on the other. One pipeline will bring gas

from Turkey while the other will bring gas from

Russia,’ said the minister.

In July last year, Greece and Azerbaijan signed

a protocol of cooperation to strengthen the broad-

er economic and trade relations between the two

countries, making special reference to the TGI

pipeline that will transmit Azeri natural gas to

Western Europe.

Industry experts, however, have questioned

Azerbaijan’s ability to supply the gas quantities

needed for the pipeline, saying that additional

suppliers will need to be found.

Stelios Bouras

Dr Constantinos FilisHead of Russia & Eurasia Center,

Institute of International Relations

and Senior Member of St Antony’s

College, Oxford Universitywww.cere.gr

18

Cover

The recent Greek-Russian handshake on the

South Stream project, in combination with

the Burgas-Alexandroupolis pipeline and

the Interconnector Turkey-Greece-Italy

(ITGI) natural gas pipeline, will, if brought

to fruition, establish Greece as an important link

in the West’s supply chain to Caspian hydrocar-

bons. Now firmly established on the energy map,

Athens is enhancing its geopolitical standing and

its voice and role in energy affairs, while also

guaranteeing to a significant degree its own ener-

gy security and that of the wider region (in the

sense that any crisis allowed to bear on energy

delivery would be felt by European consumers,

who will be the end users of the oil and natural

gas transiting Greece). However, a quick glance at

a map of the region showing the various pipelines

carrying energy from East to West is enough to set

matters within a realistic framework: Greece will

evolve not into a global energy hub, but into an

important regional transit hub.

The ITGI, Nabucco and South Stream natural

gas projects — as well as the existing Blue Stream

— impact broader developments in the Balkans,

but are categorized by many as supplementary,

given that beyond carrying gas from different

sources, the quantities of gas have been secured

by different companies (e.g. ITGI and South

Stream by the Italian Edison and ENI respective-

ly). However, given the political support and con-

sequent involvement of the US and Russia, as

well as the fact that their target markets and the

quantities they will be moving are more or less the

same, they will be for the most part competitive.

The scolding the Greek government came in for

from Bryza was no mere coincidence, and neither

are the efforts to accelerate construction of the

projects in question so as to beat the competition

into Western markets.

In this escalating energy crisis, Russia has

clear comparative advantages, while the US has

serious strategic problems, including:

■ Overestimation of Azerbaijan’s potential;

■ The international isolation — for which the US

is responsible in the main — of an energy-rich

Iran that could, under the right circumstances,

compete with Russia;

■ Iraq’s inability — due to the geopolitical fluidi-

ty brought on by the US invasion — to deliver

its vast energy reserves to Western markets;

■ The agreements signed recently by Moscow

with Kazakhstan and Turkmenistan, which will

increase Russian control over the natural gas

exports of these two Central Asian states.

Keeping Greece’s options openGreece — irrespective of its contractual obli-

gations — thus has no choice but to bear in mind

the objective energy realities that make Russia,

rather than Azerbaijan, the more pragmatic

choice, at least for the time being. At the same

time, Athens has to avoid becoming dependent on

Moscow in terms of absolute numbers. Any reck-

oning by which Greece might reduce its depend-

ence on Russia in the coming years presumes the

ITGI’s operation at full capacity — an eventuality

by no means certain given the current state of

affairs and the need to secure quantities of ener-

gy to cover the increasing needs of the domestic

market.

So there is also a need to seek other supply

sources in order to distance ourselves from any

fallout from the ongoing US-Russian energy tug-

of-war, which may result in lines being redrawn in

Europe, with perhaps unforeseeable conse-

quences for the cohesion of the EU.

Greece, like other transit states, obviously

doesn’t want to identify with one or the other of

the power poles (US, Russia). And this is because

it wants to keep its options open, securing sup-

plies from various sources. Whatever the case, the

energy plans we are referring to (apart from Blue

Stream, which is already operating, if not at full

capacity) won’t go into operation before 2012 in

some cases, and 2014-2016 in others — and

these are best-case scenarios.

Regarding the broader alliances taking shape

as a result of the energy agreements, it would be

premature to pigeonhole Greece or any other

country in any one of these. With the exception of

Albania and Serbia, the countries of the region

(Bulgaria, Romania, Turkey, Italy, Hungary and

Greece) are participating in projects that — while

serving the geopolitical interests of both the US

and Russia — first and foremost serve their own

interests. It is no exaggeration to claim that for

transit countries, given the relatively limited eco-

nomic gains for conduit states (these rise only in

the case of resale or the securing of special

accommodations — low prices — for domestic

markets), the basic objective is to upgrade their

geopolitical role and strengthen their negotiating

clout on broader issues beyond energy (e.g. the

Greek government sends a message of insubordi-

nation to the US, which in recent years has not

supported Athens on any major national issue).

Loose ends and solid prospects in South Stream deal

A quick glance at the region’s map showing the various pipelines carrying energy from East to West is enough to set matters within a realistic framework: Greece will evolvenot into a global energy hub, but into an important regional transit hub.

19

So it is easy to see why vigilance is impera-

tive on the part of the Greek government, with

the salient areas of interest being problems with

the projects and potential economic gains.

Specifically, while Burgas-Alexandroupolis

seems to be moving toward implementation,

despite delays, the other two projects have some

structural problems that have to be resolved.

Given that the ITGI is slated to carry Azeri natu-

ral gas, the potential for which has been overes-

timated, it is unlikely that it will operate at full

capacity even when the Greek-Italian section

has been completed.

This means that it will carry smaller quanti-

ties and be less competitive than other projects.

South Stream is a high-cost, high-risk project.

Regardless of Russia’s intention to move ahead

with it in order to gain a negotiating advantage

over other transit states, such as Ukraine, it is

by no means certain that — following financial

and technical studies — this project will prove

viable from end to end, much less commercially

alluring.

Although Moscow has the quantities neces-

sary to supply the global market, in this particu-

lar case it seems to be moving in the direction of

making geopolitical gains without taking into

account the economic cost. And this is why it is

vacillating even now concerning the participa-

tion of certain states (e.g. Serbia). The fact that

the Kremlin decided — in a reversal of initial

plans — to incorporate Belgrade into the north-

ern branch, rerouting the pipeline, points to the

vastness of the political dimension of the South

Stream project. Moreover, the involvement of a

number of states in this project will probably

bring about delays if and when details and

requirements concerning their participation

need to be hammered out. Strong political will

from governments speeds things up, but when

the negotiations pass on to the companies

involved, the process takes on another dynamic.

Economic gains It is difficult to forecast the direct or indirect

economic gains Greece can make through par-

ticipation in the three energy projects. I think

that the general framework set out below

deserves the attention of the Greek government:

■ Transit duties. Judging from the figure set for

the Burgas-Alexandroupolis pipeline ($1 per

ton), no significant economic gain can be

expected.

■ New jobs during the construction and operation

phases. Needs — and, consequently, exact

numbers — are hard to predict. A significant

role will be played by whether the pipelines

are accompanied by infrastructure projects,

the construction of storage facilities etc.

■ Attracting foreign investment (e.g. energy,

real estate, tourism, new technologies). Used

effectively — and in adequate quantities —

foreign investment will bolster the develop-

ment prospects of areas of northern Greece,

most of which are more or less depressed.

■ Securing adequate quantities of energy for the

country while avoiding dependence on a sin-

gle supplier. The argument that we get (liq-

uefied) natural gas from Algeria or other

countries so we are not dependent on Russia

is specious, given that 82 percent of the nat-

ural gas we consume is Russian. This is all

the more pressing a problem because natural

gas will be consumed by more and more

households in the coming years, increasing

the country’s dependence. This dependence

could be halved in coming years if we double

or triple our imports from other sources, such

as — but not exclusively — Azerbaijan. No

one questions the undesirability of depend-

ence; thus we need to seek other supply

sources in the near future, at least to cover

the needs of the domestic market. As for the

Russian factor, we can all see that with few

exceptions (Hungary, Belarus), Moscow isn’t

big on subsidies or write-offs and operates

based on prices on the open market. It would

be a major success — and quite a feat — if

we could secure Russian natural gas for

Greece at a cut rate.

■ The potential for resale of oil and/or natural

gas by Greece. Our economic and geopoliti-

cal gains would multiply if — following the

required agreements — we secured a portion

of the reserves transiting our country for

resale to other countries (in the Balkans, for

instance). This would require tough negotiat-

ing because it would mean losses for the sup-

plier state.

Summing upWielding oil and natural gas pipelines, Rus-

sia is clearly attempting a comeback in South-

east Europe. But it is equally clear that beyond

doing this and backing a few hostile buyouts,

Moscow has to use its petrodollars to expand its

activities into other sectors in order to go some

way toward consolidating its influence. This is

even more starkly the case given that the US has

established strong political, military and eco-

nomic footholds in the region in question, while

also trying to create smaller state entities (e.g.

Kosovo) that are under its full control.

Finally, the current clash between Washing-

ton and Moscow, which is taking place against

an energy backdrop, is not cold war in nature.

Nevertheless, the two sides do have conflicting

interests; interests that they promote and, in

some cases, impose, rather indelicately at

times. Let’s hope that the conflict between these

two poles of power (one, the strongest pole, the

other, up and coming) in the international sys-

tem won’t have collateral casualties.

Panagiotis Tziogkidis Real Estate Analyst

Nikolaos VlachakisSupervisor of Research Department

Real Estate Advisory Services Division

EFG Eurobankwww.eurobank.gr

20

Real estate

The yields of the Greek real estate market have

been descending over the past five years,

although a trend toward stabilization has been

observed during the last two years. The same

behavior has been displayed by average rental

rates, which reflects the intensification of competition

in the market and the increase in the stock supply.

However, recent economic developments in the Greek

and international markets have forced a small increase

in the required yields during the first quarter of 2008.

The effects of the international crisis are not evident in

Greece to the extent that they are elsewhere, especial-

ly other Balkan countries. This can be explained by the

successful path of the Greek real estate sector during

the last decade.

Since entering the European Monetary Union, the

Greek real estate market has demonstrated stabiliza-

tion and maturity, which is supported by the improve-

ment of domestic macroeconomic figures. In particu-

lar, interest rates fell, which led to increased liquidity,

high construction rates and a steady decrease in the

required entry yields and rental rates for real estate

assets. This, combined with the entrance of multina-

tional companies and greenfield investments in

Greece, established solid foundations for the increased

future growth of its real estate market. In addition, the

government contributed positively to the development

of the real estate sector with the relaxation of urban

planning regulations and the introduction of the Land

Registry system, the reduction of corporate income tax

rates and the issuance of favorable tax regulations

regarding real estate investments. Indeed, the first per-

mit for the operation of a real estate investment trust

(REIT) was acquired in 2003, the first listing on the

Athens Stock Exchange occurred in 2005, and two law

amendments were made, in 2002 and 2007, opening

up and increasing the potential of the Greek real estate

market, which has attracted and continues to attract

the interest of foreign investors.

The question raised here is: How has Greece suc-

cessfully survived the international crisis to date? The

answer lies in the fact that since the introduction of

the euro and ECB regulations, the real estate market

has experienced abrupt globalization initiated by the

slow growth of EU markets, particularly Germany.

Thus, investments were focused on the US real estate

market and experienced through 1995 to mid-2007

an average annual increase in prices of 4 percent over

CPI. In the meantime, Greece did not present signifi-

cant global investment activity, trailing behind its EU

peers; however it initiated an expansion path toward

the Balkans, supported by the advancements

described above. The interesting point here is that

Greek financial and real estate markets had signifi-

cantly lower risk exposure to the international volatili-

ty of real estate markets, in contrast to several Euro-

pean banks which had placed their investments in the

US market, considering them safe and profitable

placements.

The subprime crisis started to be felt in the US after

mid-2007 and was experienced in the EU by way of

the increase in interest and inflation rates, leading to

higher required entry yields for real estate investments

and higher asset prices. The crisis has hurt the Euro-

pean market, and especially countries outside EMU

which have their currency pegged to the US dollar

(e.g. Ukraine), due to its negative rally against the

euro. By contrast, EMU countries did not experience

the crisis to the same extent, due to the balancing of

their macroeconomic figures deterioration with the

upswing of the dollar/euro exchange rate (with the

exception of countries involved in large overseas

investments). The fact that during this period Greece

had a continuously growing real estate market

(expanding mainly in the Balkans), combined with its

macroeconomic stability and the certainty of the euro,

made its real estate market a center of interest for

international investors. Furthermore, geographically,

Greece is at the center of one of the fastest-developing

real estate markets — the Eastern Mediterranean —

implying rosy future prospects for real estate develop-

ments.

Greece has survived the challenge of the subprime

crisis with minor damage compared to other European

countries, namely a small slowdown due to the unfa-

vorable global climate in international markets and a

small increase in entry yields. The conservative atti-

tude of investors toward the circumstances has set as

a prerequisite that transactions are thoroughly exam-

ined and filtered, while deals are structured on the

basis of attractive terms over qualitative and secure

asset classes. From the viewpoint of foreign investors,

they would rather enter the Greek real estate market

than those of other European countries, due to the

higher yields offered for lower risk, its continuous

enhancement of the property and corporate tax sys-

tems and the development opportunities available,

which offer considerable increments. The future

prospects of Greece are very promising as there is still

room for development in smaller cities as well as in the

capital. Recent activity has been driven by the devel-

opment of a new office market in southern Athens, the

increased demand for qualitative storage spaces, along

with third-party logistic services (3PL), as well as to

the development of large shopping centers and small

retail parks in the suburbs.

Real estate market weathersinternational subprime crisis

The real estate market demonstrates stabilization and maturity, which is supported by the enhancement of the domestic macroeconomic figures. Prospects are seen as beingpromising with more room for development.

21

Real estateAs it eyes growth opportunities in the Balkans, Colliers has announced two new dealsin Albania and Montenegro.

The retail market in Albania is

in the midst of expansion,

giving developers, retailers,

and shoppers alike a great

deal to look forward to.

CityPark occupies a central role in

this development and will be the

largest shopping mall in Albania.

AM Group, owner of CityPark, was

founded by Artan Mene in 1991

and its brands Deka and Olim are

market leaders. Colliers was

brought on board by AM Group as

real estate consultant, exclusive

leasing agent, and property man-

agement service provider.

CityPark, with an aggregate

gross leasable area of 40,000

square meters, provides enough

space for over 150 retailers. The

main anchors will include a super-

market and an electronics center,

while the mall will also feature

leisure facilities and a kids’ center.

As CityPark is located along the

Tirana-Durres national road, a main

transportation artery in Albania, and

is only 15 kilometers from Tirana, it

enjoys excellent visibility and acces-

sibility with ample parking to

accommodate over 3,000 vehicles.

Its catchment area includes

Tirana, Durres, and the surround-

ing suburban communities, with a

combined total population of

approximately 1.5 million. CityPark

is expected to open to the public in

early 2010. Colliers International

Southeast Europe has been chosen

as the exclusive leasing agent for

the biggest shopping center in

Albania, CityPark Tirana.

Dimitris Voutsas, director of

Retail Services for Colliers Interna-

tional Hellas, said, ‘The Albanian

market has acquired the institu-

tional and financial standards of a

modern economy and we are of the

opinion that the first international

companies to establish their pres-

ence in the Tirana retail market will

have immense benefits.’

Philip Bay, regional director of

Colliers International Southeast

Europe, added, ‘We are delighted

to be working with market leaders

AM Group on this fantastic shop-

ping center which will set new

standards for excellence in retail in

Albania.’

Atlas invests in Montenegro

Colliers has announced that it will be the exclu-

sive agent for the Atlas Capital Center, the

biggest mixed-use project in Montenegro. The

joint venture in the capital, Podgorica, is

owned by the Atlas Group and Capital Invest-

ment of the United Arab Emirates, and will feature

residential, retail and office units. The total built-up

area of the project will be 85,000 square meters in a

land area of 13,850 sq.m. It will feature 28,550

sq.m. of office space, 13,750 sq.m. of residential

space and 13,900 sq.m. of retail space. There will

also be 31,529 sq.m. of garage space, with 1,112

parking spaces.

The Atlas Capital Center will be located in the cen-

tral business district (CBD) of Podgorica, on Cetinjski

Road. The area is considered the most prestigious and

desirable business and residential area in the capital

due to its close proximity to downtown Podgorica and

its great accessibility. The center is due to open in

2010. Colliers International Montenegro and Colliers

International Greece are undertaking the project.

CityPark, Albania’s largest shopping center, prepares to debut

Ioannis PanagiotidisVice President of PANHOL

Developments - Sokratis

Panagiotidis SAwww.panagiotidis.gr

22

Real estate

The Greek economic environment is nowa-

days very encouraging for the companies

active in the real estate market. The reasons

for the optimistic environment are many and

diverse. First of all, the need for property

ownership is strongly rooted in the Greek mentali-

ty. Moreover, stability in the political and econom-

ic environment constitutes a very serious prerequi-

site for domestic and foreign investments in the

real estate sector.

For the last two years, the Greek real estate

market has been experiencing a period of stagna-

tion, but we expect the situation to improve in

2008 due to a number of factors. First of all, the

implementation of the pending urban planning

frame, with all its specific details, especially con-

cerning tourism, will provide more opportunities for

quality and environmentally friendly developments.

Moreover, the finalization and use of the national

cadastre will speed up the processes for land owner-

ship and greatly benefit development in the process.

Another important factor affecting the market is

the continuing exploitation of the Olympic proper-

ties, which has already started and will continue to

provide new development opportunities in the

future as well.

Furthermore, the Greek government’s determi-

nation to succeed in the utilization of state proper-

ties through public-private partnerships or the sale-

and-leaseback method is also expected to have

positive effects in the market. The government is

displaying its willingness to aid land development

also through its upcoming tax relief policies and its

eagerness to equalize the objective and commer-

cial values of properties.

Nonetheless, new infrastructure developments

such as the expansion of the Athens metro, the

suburban railway and the Attiki Odos highway

and the construction of the Thessaloniki metro

will strengthen the development potential in

many adjacent regions, with a positive effect on

price levels as well.

Another factor that we believe will be a mar-

ket driver for the coming years is the new opera-

tional framework for real estate investment trust

(REIT) investments, which has already started to

show its potential.

As for the financial aspect of the real estate

market, we can say that Greece has much lower

levels of mortgage loans compared to other Euro-

pean countries, which leads to the conclusion that

the margins are still high. Also, the fact that banks

in Greece have been only marginally affected by

the subprime crisis and collateralized debt obliga-

tions (CDOs) gives the market credibility and

boosts development in all sectors.

In terms of supply and demand, there is still

inadequate supply for high-quality offices and

warehouses. The positive results of Greek banks

and other companies in Greece and the Balkans

are driving the demand for office spaces upward.

Another source of hope for the real estate mar-

ket is immigrants’ housing needs. Immigrants in

Greece now number some 2 million people (most-

ly Albanians) and those who have been here

upward of 10 years or so are now looking to buy

homes.

At this point, we would like to highlight some

figures for the most promising sectors in the Greek

real estate market at the present time.

Regarding the progress of the commercial sec-

tor in our country, we would like to mention the

development of several shopping centers, totaling

a built area of 600,000 square meters and locat-

ed all around the country (Athens, Thessaloniki,

Ioannina, Larissa, Iraklion). These developments

are planned to be delivered within the next two to

three years by both local and international players

in this sector.

We would also like to draw attention to the pre-

diction of a radical increase in the shopping

mall/inhabitant ratios in the following years. In the

European Union list of countries, Greece is one

place above the country with the lowest ratio in the

EU, Romania. The figure for Greece currently

stands at 38.4 sq.m./1,000 inhabitants, but by

2010 this ratio should increase to 95 sq.m.,

according to the announced projects and the opin-

ions of many real estate specialists.

The fact that many significant players in the

global retail market (including Tesco, Aldi, Fnac,

H&M, Douglas, Parfois, Leroy Merlin, IKEA,

Dixons, Media Markt, Tengelmann and Praktiker)

are looking for spaces in big Greek cities, togeth-

er with the fact that large commercial areas can

be pre-leased (97 percent of Golden Hall, a for-

mer Olympic property of 40,000 sq.m. built by

Lamda Development, has already been leased)

constitutes a serious reason for believing in the

potential of this specific sector.

Last but not least in our argument for the great

potential of the commercial real estate market in

Greece is the quite attractive return on investment

(ROIs) that commercial properties in Greece offer

(9 percent pre-taxation for logistic centers and 6-8

percent for offices and leased shops).

Upside potential of propertymarket remains strong

Continuing exploitation of Olympic facilities, the utilization of state properties through the public private partnerships or sale-and-leaseback method and developing infrastructureare seen having a large effect on the market.

23

Nicky SimbourasManaging Director of

Cushman & Wakefield Hellaswww.cushwake.com

Real estate

The year 2007 was a relatively good one for proper-

ty investment in Greece, with the total volume of

transactions reaching approximately 650 million

euros. Compared to the majority of other European

markets, Greece remains small, although year-on-

year rises in investment volumes is indicative of the

increasing level of interest that the market is attracting,

coupled with the rising amount of available investment

grade stock.

The retail sector retains its position in the market,

accounting for nearly 68.0 percent of transactions, with

retail parks and shopping centers proving popular. Howev-

er, there has been an improvement in the office market,

which demonstrated better performance in 2007 than in

2006, now accounting for 23.0 percent, up from 15 per-

cent. The same trend is expected to continue in 2008.

Historically speaking, private individuals and domestic

institutions have been the main investors in commercial

property, although the market has become steadily more

international. This is demonstrated by the fact that foreign

players accounted for over 75 percent of total investment

activity in 2007, a figure that has been increasing steadily

over recent years. However, international interest in the

Greek market has been somewhat slow as concerns over

lease structures (which are viewed as too ‘tenant-friendly’),

a complicated tax regime and the bureaucratic planning

process have all made the market difficult to maneuver in.

This is compounded by the high proportion of owner-occu-

pation across all sectors, which has exacerbated the diffi-

culties in sourcing stock, leaving the direct property market

highly competitive, especially as many developers also act

as investors. This is changing as the market opens up and

foreign developer interest emerges. The overall level of liq-

uidity is low but increasing as the level of interest from for-

eign buyers and developers increases, although the local

funding and development market remains important. The

majority of transactions are single-asset ones, often involv-

ing private, domestic investors. Institutional interest

remains limited, as the larger funds tend to focus more on

more sizable portfolio opportunities.

Both the office and retail sectors have seen a sharpen-

ing of yields since the beginning of 2007, while industrial

figures have held firm. The relatively weak leasing markets

and lack of stock have however held back the overall

investment market. Despite these falls, yields remain high,

although recent shopping center and retail park deals show

yields to be more in line with the more mature European

retail markets.

Toward the end of 2007 high-street prime yields saw

an outward shift and are now expected to stabilize. This

year is expected to be quieter in terms of investment trans-

actions. Activity in the first half of 2008 was lower in rela-

tion to the same period of 2007 mainly due to the credit

crunch, with banks more hesitant to provide financing than

in previous years and requiring reduced loan to values and

higher margins. Office and industrial yields should hold at

their current values over 2008, although secondary values

may see an early outward shift. In all sectors price levels

for prime properties should prove sustainable while sec-

ondary properties and secondary locations are most likely

to be affected as it becomes more difficult to obtain financ-

ing for the acquisition of secondary products. As the mar-

ket has become more difficult for investors who are inter-

ested only in existing and income-generating stock, we

have witnessed an increasing number of joint venture ini-

tiatives. Investors are looking at development projects as

well as value-added opportunities, especially within the

retail and office sectors.

While economic growth is expected to ease somewhat

in 2008, it is expected to remain robust and outperform the

EU in the short term. Athens and Thessaloniki will remain

the two key target cities, although more regional locations

should also be given some consideration, in particular in

the retail sector which has the most growth potential. Well-

located retail parks and shopping centers are expected to

continue to trade well with strong demand from both

domestic and international brands. The office market is

reaching a significant turning point as vacancy rates fall

and performance in the near term will be driven by rental

growth rather than yield compression.

Infrastructure developments including the Athens metro

and city ring road will help to spur interest in the industri-

al market, although sourcing investment stock that is of

good quality and adequate lot sizes remains an issue across

all sectors.

Foreign investors tune in to local property

International investors accounted for over 75 percent of investment activity in 2007, a figure which has been increasing steadily over recent years. However, concerns overlease structures, a complicated tax regime and red tape hamper growth.

24

Themes

On February 21, 2008, the Athens

Exchange’s Alternative Market went into

operation. Currently, there are five compa-

nies trading on the Alternative Market,

and soon they will be joined by one more.

The Alternative Market represents a multilat-

eral negotiation mechanism and is characterized

as ‘non-organized.’ It is targeted at small and

medium-sized modern developing companies in

search of financing in the secondary market

(stock market).

In addition, it is aimed at investors who are

looking for alternative forms of potential invest-

ment, in order to achieve high output, as well as

at companies that intend to prepare themselves

for transition to the organized market through

the gradual augmentation of the spread and liq-

uidity of their shares.

The Alternative Market is designed to consti-

tute a flexible market, which, through different

entry criteria and lower costs, will boost small

and medium-sized companies searching for

alternative capital in order to finance projects

and to accomplish their business plans.

The Alternative Market is more flexible than

the Athens Exchange with regards to the

requirements a company has to fulfill in order to

subscribe. The companies that subscribe

acquire experience in the environment of the

Greek capital market, which will enhance their

potential transition to the main market.

The Alternative Market is under the supervi-

sion of the Capital Market Commission, partic-

ularly for those issues that concern the mar-

ket’s transparency, public offerings and the

information bulletin. It doesn’t fall under the

decrees that obligatorily apply to the organized

markets, which impose strict subscription

requirements.

Companies interested in listing on the Alter-

native Market have to submit listing documenta-

tion via a consultancy agency that advises it

during the two-year period. In parallel, the

Athens stock market has created a commission

which checks the potential subscription

requests.

Epsilon NetEpsilon Net, which is based in Thessaloniki,

was the first company to see its shares traded

on the Alternative Market. It operates in the

informatics sector, developing standardized soft-

ware solutions for accounting offices and small

or medium-sized companies.

The company’s sales during 2006 reached

6.26 million euros and profit accounted for

1,096 million euros.

Its stable augmentative tendency continued

during 2007. Its sales increase is estimated at

over 20 percent. The company has been includ-

ed, for the fourth successive year, within the

500 most dynamic European companies

(Europe’s Growth Plus Top 500).

Epsilon Net shares were listed on the Alter-

native Market on February 21, 2008.

MediterraBased on the island of Chios, the company

was created in 2002 by the Mastic Producers’

Union in order to develop the Mastihashop net-

work and production of mastic products.

It is the distributor of Chios mastic in Greece

and operates 10 Mastihashops in the domestic

market and two abroad.

During its short history, the company has

managed to increase the credibility and recogni-

tion of mastic and to establish the Mastihashop

brand as one of the most promising Greek busi-

ness projects. The implementation of the 2008-

11 business plan involves the introduction of

200 new products in order to cover the needs of

all the business units (Mastihashop, Masti-

hatherapy, Cultura Mediterra), with the objec-

tive of their distribution to both the local and

international markets.

In addition, the company intends to increase

its production infrastructure and activities, as

well as open new shops.

Mediterra shares were listed on the Alterna-

tive Market on February 28, 2008.

EnvitecEnvitec specializes in the research, construc-

tion and management of environmental protection

projects (civic waste, biological cleaning) as well

as in the renewable energy sources sector (wind,

solar and biomass).

The company offers knowledge and experience

and carries out projects concerning energy pro-

duction for the public and private sectors.

Envitec shares were listed on the Alternative

Market on March 3, 2008.

DoplerDopler designs, produces, installs and

repairs elevators. In addition, the company

develops different mechanical accessories and

constructions.

The import, export and marketing of these

products and services as well as its agency

abroad, are included in the company’s business

plans.

Dopler shares were listed on the Alternative

Market on May 7, 2008.

Euroxx Euroxx offers investing services to institu-

tional and private investors who operate in the

Greek and international capital markets. It

offers a great range of investment products and

services.

The company is a member of the Athens

Exchange, the Cyprus Stock Exchange and Eurex

Frankfurt. Euroxx shares were listed on the

Alternative Market on May 12, 2008.

The next company to trade on the Alternative

Market is Entersoft.

John Dionatos

Alternative Market

The Alternative Market represents a multilateral negotiation mechanism and is characterizedas ‘non-organized.’ It is targeted at small and medium-sized modern developing companiesin search of financing in the secondary market (stock market).

25

Companies

According to Michalis Sallas, chairman of the

Piraeus Group’s Board of Directors: ‘The Piraeus

Group continued its dynamic course in Q1 2008

as well, despite the volatile international envi-

ronment. The growth rate of deposits accelerat-

ed to 39 percent, of loans remained 48 percent

and of profitability reached 46 percent*. At the

end of March 2008, the Group’s total assets

reached 48.5 billion euros, the branch network

exceeded 780 units, while net profit amounted

to 138.5 million euros. Interest income and

commissions, comprising 80 percent of total net

revenues and constituting a dynamic source of

recurring profitability, were enhanced signifi-

cantly. These developments are aligned with the

Group’s business plan targets through to 2010,

which remain intact.’

Key performance highlights of the first quar-

ter of 2008

■ Increase of Group net profit after tax and minori-

ties by 46 percent up to 138.5 million euros

versus 94.9 million euros(*) in Q1 2007

(248.2 million euros, including the one-off

trading gain).

■ Profit before tax excluding trading gains reached

153.0 million euros compared to 103.2 mil-

lion euros, increased by 48 percent.

■ Significant enhancement of profitability, +24

percent from Greece and +217 percent from

international operations.

■ Retention of net interest margin (NIM) on aver-

age interest earning assets at 3 percent.

■ Increase of net interest income by 38 per-

cent and net commission income by 18 per-

cent y-o-y.

■ Improvement of cost-to-income ratio to 47 per-

cent compared to 52 percent(*) in Q1 2007.

■ Acceleration of deposits growth rate to 39 per-

cent y-o-y, while loan growth remained at 48

percent. The quarterly incremental change of

deposits in absolute figures exceeded the

respective loan increase (+3.3 billion euros

deposits, +3.0 billion euros loans).

■ Further improvement of loans-to-deposits ratio to

122 percent at the end of March 2008, com-

pared to 127 percent in December and 130

percent in September 2007. Excluding securi-

tized loans, which are funded by respective

bonds issues, the ratio evolved to 117 percent

compared to 121 percent at the end of 2007.

■ Improvement of loan portfolio quality, with the

relative ratio of loans in arrears more than 90

days over total loans at 3.3 percent in March

2008 against 3.4 percent in December 2007.

■ Retention of high capital adequacy ratio at 10.8

percent (e) with Core Tier I at 8.8 percent (e),

according to the new supervisory framework of

Basel II.

■ Significant expansion of international activities

volumes: loan portfolio up by 106 percent

and deposits accelerated as well, up by 71

percent y-o-y.

■ Expansion of the branch network from 545

units in March 2007 to 782 at end-March 08

(+43 percent), out of which 322 units are in

Greece and 460 abroad. In Q1 2008 alone,

38 new branches were established.

■ The Group’s human resources reached 13,115

(+34 percent), growing by 3,312 new

employees from March 2007, 834 in Greece

and 2,478 abroad.

(*) Net profit in Q1 2007 excluding the one-off

trading gain from the disposal of the Bank of

Cyprus stake.

Piraeus Group balance sheetAt the end of March 2008, the Group’s total

assets reached 48,547 million euros against

34,486 million euros in March 2007, increased by

41 percent. Deposits & retail bonds issued to cus-

tomers through the branch network reached

27,231 million euros, posting a rise of 39 percent

y-o-y, with further acceleration compared to the

annual growth rate recorded in December 2007

(33 percent). Savings and sight deposits had an

annual increase of 13 percent, while time deposits,

repos and retail bonds issued grew by 56 percent.

On a quarterly basis, incremental deposits in Q1

2008 exceeded the incremental loans for the first

time: +3.3 billion euros deposits against +3.0 bil-

lion euros loans respectively. It is worth noting that

the Group’s deposits in Greece posted an increase

of 34 percent on an annual basis (*), compared to

31 percent in December 2007. The Piraeus Group

has emphasized acquiring customer deposits in

Greece during recent years by targeted new branch

openings (+20 in the last year, over 110 in the

last five years), launching of new products, as well

as marketing activities, which all resulted in a sig-

nificantly accelerating deposits growth rate. At the

same time, the Group’s effort for acquiring deposits

intensifies also in its international operations by

new products promotion, expansion of the branch

network and vitalization of the Group’s operations

in Cyprus that commenced in 2008, already con-

tributing by 361 million euros to the Group’s

deposits.

Securities issued by the Bank (through ECP,

EMTN, residential mortgage backed securities and

hybrid bonds) to institutional investors reached

7,578 million euros at the end of March 2008

from 6,487 million euros a year ago, up by 17

percent. It is worth mentioning that at the end of

March 2008 the amount raised through the ECP

program increased to 3.3 billion euros from 2.9

million euros in December 2007, reflecting the

Bank’s seamless access and the acceptance of its

brand name to this specific market, in spite of the

international market turmoil.

Loan portfolio kept the same annual growth

(+48 percent y-o-y) for second consecutive quar-

ter, reaching a balance of 33,736 million euros at

the end of March 2008. It is noted that the

Group’s loans in Greece in March 2008 advanced

by 37 percent y-o-y, just like December 2007 (*).

The growth rate of mortgage lending was set at 28

percent y-o-y, with balances up to 6,076 million

euros in March 2008 against 4,742 million euros

a year ago. Consumer loan portfolio rose by 50

percent y-o-y, reaching 4,659 million euros at the

end of March 2008 versus 3,116 million euros a

year ago. Loans to individuals’ contribution repre-

sented a 32 percent of the total loan portfolio at

the end of March 2008.

* Estimate for growth rate of the Greek bank-

ing market in March 2008 +21 percent for loans,

+11 percent for deposits.

Loans to small and medium-sized enterprises

in Greece and abroad grew by 55 percent,

amounting to 15,566 million euros at the end of

March 2008, compared to 10,056 million euros

a year ago. Hence, as a result of the special

importance given in this market, this particular

segment represents the main loan category

accounting for 46 percent of the Group’s total loan

portfolio. Loans to large corporates, including

shipping and project finance, represented 22 per-

cent of the total loan portfolio and amounted to

7,436 million euros at the end of March 2008

versus 4,910 million euros a year ago, up by 51

percent, reinforcing the Group’s presence in these

business segments as well.

With regards to loan portfolio quality, the

Group’s non-performing loans (NPLs) ratio was

recorded at 2.0 percent at the end of March 2008

compared to 2.1 percent in December 2007. The

coverage ratio of non-performing loans by cumu-

lative provisions stood at 69 percent, while the

ratio exceeds significantly 100 percent when col-

laterals are taken into account. The ratio of loans

in arrears more than 90 days over total loans

stood at 3.3 percent in March 2008 against 3.4

percent in December 2007, also revealing a trend

of improvement. The Group’s target is to further

improve this ratio below 2.5 percent by 2010.

The loans-to-customer-deposits ratio at the

end of March 2008 improved substantially by 5

percentage points setting at 122 percent from

127 percent at the end of 2007, due to the sig-

nificant increase of deposits also during the first

quarter of 2008. Excluding securitized loans,

which are funded by respective bonds issues, the

ratio evolves to 117 percent (121 percent in

December 2007). It is also pointed out that the

Piraeus Group continues to possess high liquidity

level of the level of 2 billion euros.

Total equity of the Group at the end of March

2008 amounted to 3,314 million euros versus

3,310 million euros at the end of December

2007. Shareholders’ funds rose respectively to

3,084 million euros, up by 82 percent against

March 2007, due to the share capital increase in

September 2007. Capital adequacy ratio was

10.8 percent (e) with Core Tier I at 8.8 percent

(e), according to the new supervisory framework

of Basel II.

Piraeus Group

Annual Results

26

Companies

Emporiki Bank‘Emporiki is accelerating its market turn-

around according to the strategic priorities

of 2008, in spite of the adverse conditions

prevailing in the financial markets, which

had a negative impact on the first-quarter

results of the Bank. We fully maintain our

focus on achieving the goals set for the cur-

rent year, which are the unimpeded imple-

mentation of the Transformation Program,

the completion of Emporiki’s turnaround in

the local market and the acceleration of our

further business growth in the Balkans.’ said

Mr Anthony Crontiras, vice president of the

BoD and CEO of Emporiki Bank.

Smooth and rapid implementation of the

Transformation Program continues including

the reorganisation of the retail banking net-

work with a new organizational structure in

force as of March 3, 2008. Emporiki

launched its new type of retail branches: 23

branches commenced pilot operation, based

on a new model with clear sales staff roles

tailored to the needs of each different mar-

ket and customer segment. The new model

will gradually expand throughout the coun-

try; by the end of 2009 the entire network

will have been renewed.

At the end of May 2008 the Bank’s net-

work for the exclusive service of small and

medium-sized enterprises (SMEs) will be

fully developed, with the launch of six more

business centers in Athens (Athinon

Avenue), Koropi, Thessaloniki (outer ring

road), Argos, Rhodes and Volos. In total, the

network will consist of 21 business centers.

With the launch of centralized units for

housing loans, pledged checks and payrolls

(already in pilot operation) as well as the

gradual automation of accounting processes,

the retail branches will eventually be

relieved of back office and administrative

tasks and will become fully dedicated to

customer service.

The Bank’s growth momentum is being

strengthened as a result of the rapid trans-

formation progress.

The credit expansion rate has been accel-

erated: The overall loan portfolio of the Bank

increased by 6.8 percent in the first quarter,

equivalent to an annualized growth rate of

27 percent, versus growth of 13.7 percent

for the fiscal year 2007.

The new business center network keeps

delivering positive results: Loans to SMEs

and professionals increased by ¤273 million

euros in Q1.

Corporate and investment banking also

benefited from the Bank’s transformation,

with the large corporate customers loan

portfolio growing impressively by 17.9 per-

cent in Q1.

Development of the Group’s international

activities continues. During the first quarter

the total loan portfolio in the three Balkan

countries (Albania, Bulgaria, Romania) and

Cyprus increased by 7.1 percent, while total

deposits increased by 4.5 percent. Empha-

sis has been placed on the Romanian mar-

ket, where 20 new branches will commence

operation in the coming months and the

loan portfolio is expected to double upon

disbursement of the new loans already

approved.

Adverse market conditions had a nega-

tive impact on Q1 results. Portfolio losses of

24 million euros, the majority of which

reflect unrealized losses due to mark-to-

market revaluations related to the adverse

developments in the bond markets. Interest

margins have been under pressure, mainly

due to the intensified competition for

deposits.

Effective risk management is maintained

and operating expenses remain well con-

trolled. Regular provisions reduced by 15.2

percent versus Q1 2007. Operating expens-

es remain practically unchanged vs Q1

2007, despite the expansion of the network

related to the dedicated coverage of SMEs

through the business centers.

Hellenic PetroleumFirst-quarter results are up for Hellenic Petroleum

(HELPE) as the weak refining environment is compensated

by the impact of crude oil price increases, improved per-

formance on the remaining portfolio (non-refining) of the

Group and one-off items.

Net Income was up 77 percent to 97 million euros

(earnings per share, or EPS, 0.32 euros), while earnings

before interest, tax, depreciation and amortization (EBITDA)

increased 39 percent to 141 million euros. Reported results

were influenced by the record-breaking crude oil price

increases and euro/dollar exchange rate levels; adjusting for

these and other one-off items, comparable EBITDA is at

similar to last year’s levels.

Commenting on the results, HELPE CEO John Costopou-

los mentioned:

‘This last quarter has been a challenging one, with rap-

idly rising crude oil prices reaching all-time highs, a contin-

uous weakening of the US dollar, low gasoline and fuel oil

cracks and unprecedented volatility. The impact on refiner-

ies has been severe, with euro-denominated benchmark

Q1 08 performance highlights:

a) Refining, supply & trading

■ Refining, supply & trading Q1 08 reported EBITDA were up 34 per-

cent to 99 million euros.

■ Crude oil prices continued to rise during the quarter, moving 67 per-

cent year-on-year with a positive inventory effect. Q1 08 average

benchmark cracking margins were down 29 percent year-on-year,

while simpler refinery margins declined even more. The euro

strengthened considerably against the US$, with an adverse transla-

tion effect on refining margins.

■ Total sales volume in Greece reached 4.2 million tons, in line with last

year, with increases in premium automotive fuels and bunker fuels,

but lower heating gasoil sales due to warmer weather.

■ The OKTA refinery reported increased volumes (293 kMT) and

EBITDA of 35 million euros, which includes a 26-million-euro gain.

This is a result of a settlement with the Former Yugoslav Republic of

Macedonia (FYROM) in relation to the long-outstanding issues in

OKTA’s initial share purchase agreement.

b) Retail marketing

■ Q1 08 EBITDA grew 42 percent year-on-year to 17 million euros,

accounting for 12 percent of Group EBITDA.

■ EKO continued the rationalization of its network and the strengthen-

EFG EurobankThe EFG Eurobank Group sustained strong financial performance in

Greece and New Europe and continued its rapid organic growth based on

solid foundations in the first quarter of 2008. Total assets reached 72.2

billion euros, Regulatory capital stood at 5.4 billion euros and the net-

work of branches, points of sale and business centers exceeded 1,570

units at the end of the first quarter of the current year. The adverse con-

ditions that prevailed in the capital and money markets in the first three

months of 2008 and the increased cost of funding partly affected the

profitability of the Group. However, the robust organic business expan-

sion in Greece and New Europe led recurring profit before tax to grow by

24.2 percent to 234 million euros. Group net profit increased by 5.7 per-

cent to 215.3 million euros in the first quarter of 2008. Results outside

of Greece were particularly strong, as New Europe net income climbed

to 36 million euros, from 7 million in the respective quarter of 2007.

The continued brisk credit demand in Greece and New Europe led

Group total loans 34.2 percent up to 50.1 billion euros at the end of

March 2008. Loan balances in Greece grew by 20.8 percent and

reached 39.2 billion euros, while the loan portfolio in New Europe more

than doubled and escalated to 10.9 billion euros, from 4.9 billion in the

first quarter of 2007. Net loan additions in New Europe equaled addi-

tions in Greece and amounted to 1.7 billion euros in the first quarter of

the current year. It is pointed that 48 percent of net loan additions out-

side of Greece come from Poland and Cyprus. Group corporate lending

enjoyed buoyant growth, supported by the strengthening of EFG

Eurobank ties with the corporate clients in Greece and New Europe.

Business lending expanded by 35.2 percent and reached 26.7 billion

euros, with loans to large and medium-size corporates rising by 34.6 per-

cent to 18.6 billion euros and loans to small businesses advancing by

36.5 percent to 8.1 billion. Robust growth rates were also recorded in

Group household lending. Loans to households advanced by 33.1 per-

cent and amounted to 23.4 billion euros at a group level, with consumer

credit increasing by 29.2 percent to 11.1 billion euros and mortgages ris-

ing by 36.8 percent to 12.3 billion.

The increase in the client base and the establishment of new

branches in Greece and New Europe pushed Group customer deposits

31 percent up to 39.1 billion euros in the first quarter of the current

year. Outstanding balances rose by 24.9 percent in Greece and by

75.9 percent in New Europe. It is pointed that the difference between

new loans and new deposits at a Group level was only 250 million

euros in the last six months; a fact which verifies EFG Eurobank’s abil-

ity to rely on own sources in order to fund its business expansion. The

loans to deposits ratio over the same period fell to 125.5 percent, from

130.1 percent. In addition, it is worth noting that the EFG Eurobank

Group has established contingent liquidity that exceeds 3.5 billion

euros. Within a volatile and unfavorable environment for asset man-

agement, private banking funds under management (FUM) rose by 5

percent to 7.8 billion euros on the back of the Group’s long-term

expertise in this field. In addition, life insurance FUM posted a signifi-

cant increase of 21.3 percent and stood at 1.2 billion euros. Overall,

Group customer FUM expanded by 13.5 percent and amounted to

52.9 billion euros, with New Europe FUM growing by 55.5 percent to

7.8 billion euros, from 5 billion last year.

■ Group net profit has risen by 5.7 percent to 215 million euros.

■ Recurring profit before tax has increased by 24.2 percent to 234 million

euros.

■ New Europe net income has multiplied by five times to 36 million euros,

with first-time positive contribution from Poland.

■ The robust increase in Group deposits by 31 percent and 25 percent in

Greece has led to further market share gains.

■ The strong expansion of Group loans by 34 percent.

■ Credit quality remains resilient — NPLs at 2.45 percent of total loans.

■ The cost to income ratio in Greece stands at very low levels (40.2 percent)

— New Europe has seen a substantial improvement to 66.2 percent.

■ Strong capital position — 11.3 percent risk asset ratio.

27

C o m p a n i e s

refining margins reaching some of the lowest levels seen

in recent years.

‘However, given the diversity of our portfolio, it is

important to highlight that our results benefited from the

improved performance of our non-refining businesses,

with international marketing companies, power genera-

tion and our investment in the Public Gas Corporation of

Greece (DEPA) all reporting increased results. Our chem-

icals business also managed to maintain close to record-

high results. These, as well as foreign exchange gains on

our US$-denominated loans and a one-off item, lead to a

77 percent increase in our net income and EPS.

‘Looking ahead and given the continuation of

volatile market conditions, it is difficult to project the

full-year outlook. We remain however committed to

accelerating our operational efficiency improvements,

progressing with the refinery upgrades in Elefsina and

Thessaloniki, and continuing to build our presence in

international markets and in power, in line with our

strategy for profitable growth.’

ing of its brand image and marketing position. Our domestic market-

ing subsidiary managed to gain market share in premium products

(gasolines and auto diesel). Total sales volume was up 7 percent year-

on-year and EBITDA increased by 43 percent to 8 million euros.

■ International Marketing posted an EBITDA of 9 million euros, up 41

percent, as network expansion continues and margins in key markets

improve. Total sales volume was up 32 percent year-on-year.

c) Petrochemicals

■ Polypropylene retained last year’s strength, while the prolonged work

stoppages at Greece’s main ports did not significantly disrupt our

exports supply chain. EBITDA came in at 13 million euros, down 9

percent.

d) Power generation, trading & gas

■ Within a positive environment of increased power demand, our sub-

sidiary T-Power increased utilization benefiting from higher load fac-

tors and spark spreads. Revenue was up 49 percent and Q1 08

EBITDA was up 80 percent year-on-year to 18 million euros.

■ Our discussions with Edison for the formation of a joint venture to

expend our power generation business are close to completion.

■ Income from associates (DEPA natural gas business) grew by 80 per-

cent to 18 million euros as the company benefited from increased

sales of gas for power generation as well as industrial, commercial and

domestic use.

FRIGOGLASSFrigoglass, the world’s leading manufacturer and solutions

provider of ice-cold merchandisers (ICMs), with operations in 18

countries across four continents, has announced its first-quarter

2008 results (IFRS). Frigoglass reports continued growth and fully

consolidates SFA.

First quarter reported sales rose 21.2 percent to 162.3 million

euros while net profit reached 20.8 million euros, up 11 percent.

The managing director of Frigoglass, Mr Petros Diamantides,

said

‘Following the exciting start-up of our greenfield development in

China last year, we are delighted to have further expanded our glob-

al footprint in the first quarter of this year through our acquisition

of SFA3 of Turkey, in line with our long-term growth strategy.

‘In terms of our existing regions, we are pleased with the con-

tinued growth in Cool Operations and Glass in Nigeria, particularly

set against challenging trading conditions and the strong compara-

ble period last year. Astute pre-buying of raw material requirements

enabled us to cushion the effects of rising commodity and energy

costs and allowed us to achieve a 8.7 percent increase in net prof-

it, despite further investment in our sales capability in Cool and an

increase in financing costs.

‘This solid start ensures that we remain confident in our ability

to achieve our previously stated guidance for the full year, on an

underlying basis, despite the continued raw material cost pressures

and the uncertain global economic backdrop. This confidence is

driven by our widening portfolio of geographies and diversification

of our customer base.’

Proton BankInterest income for the period January-March 2008 grew by 45

percent. Given the negative financial markets conjecture, this growth

in interest income did not boost the net interest income result, which

remained broadly stable for the period (-1.8 percent). Net commis-

sion income increased by 61.63 percent, with all commission cate-

gories contributing to this growth, especially commercial banking

(+93 percent). Operating expenses on a consolidated basis

decreased by 2 percent. The decline in the results for the period is

largely attributable to the result of the trading portfolio, which

declined to 1.3 million euros, as compared to 10.7 million euros in

Q1 2007. Consequently, consolidated net profit before tax amount-

ed to 7.1 million euros, corresponding to a y-o-y decrease of 43.5

percent, while the respective after-tax figure for the first quarter

reached 5.04 million euros, decreasing by 55.6 percent on an annu-

al basis.

The figures at a glance

1. Consolidated net revenues reached 21.4 million euros (Q1 07:

27.5 million euros), whereas at a Bank level the respective figure

amounted to 21.0 million euros (Q1 07: 26.8 million euros).

2. Consolidated interest income amounted to 31.9 million euros (Q1

07: 22 million euros), while net interest income reached 10 mil-

lion euros (Q1 07: 10.2 million euros). At a Bank level interest

income amounted to 32 million euros (Q1 07: 22 million euros),

whereas net interest income reached 9.9 million euros (Q1 07:

10 million euros).

3. Consolidated net fee and commission income amounted to 9.6

million euros (Q1 07: 5.9 million euros), while the respective

non-consolidated figure amounted to 9.6 million euros (Q1 07:

5.8 million euros).

4. Consolidated operating expenses reached 13.7 million euros (Q1

07: 14.9 million euros). At a Bank level, operating expenses

amounted to 13.2 million euros (Q1 07: 14.3 million euros).

5. Loans to customers reached 1.3 billion euros while total assets

amounted to 2.3 billion euros. Deposits from customers amount-

ed to 1.4 bilion euros.

6. Consolidated profit before tax amounted to 7.1 million euros (Q1

07: 12.6 million euros), while consolidated profit after tax

reached 5 million euros (Q1 07: 11.3 million euros).

7. Profit before tax for the Bank amounted to 7.8 million euros (Q1

07: 12.5 million euros), while profit after tax reached 5.7 million

euros (Q1 07: 10.8 million euros).

The Bank continues to expand its operations, strengthening its

market share in all core activities, with an emphasis on increasing

recurring income, expansion of the branch network and the restruc-

turing of its loan portfolio.

28

Companies

First-quarter 2008 operating results of the

Hygeia SA Diagnostic and Therapeutic Center of

Athens are characterized by significant growth.

The improvement of financial fundamentals is

illustrated in all company and group accounts.

Consolidated revenues reached 66.2 million

euros, increasing by 138.1 percent, versus 27.8

million euros in the same period last year. Parent

revenues increased by 18.6 percent y-o-y, reach-

ing 33.2 million euros, versus 28 million euros in

the same period last year. Consolidated EBITDA

increased by 109.8 percent y-o-y to 15.8 million

euros. The consolidated EBITDA margin stood at

23.9 percent. Parent company EBITDA reached

7.9 million euros, increasing by 6.4 percent y-o-

y, while the EBITDA margin reached 23.7 per-

cent.

Consolidated earnings before taxes (EBT)

increased by 31.9 percent to 8.4 million euros,

although Q1 2008 results were burden by inter-

est expenses of circa 5 million euros

that occurred from the 300 million

euros convertible bond loan (CBL).

Recall that Q1 2007 results were

inflated from circa 1.1 million euros

as a result of the consolidation of the

Mitera-Leto Group 24.8 percent stake

through the equity method, inflating

the comparison base.

Group net income increased by

1.4 percent y-o-y to 5.7 million euros.

The parent company’s earnings after

tax (EAT) exceeded 1.6 million euros,

versus EAT of 6.02 million euros in

the same period last year, mainly due

to the burden of Q1 2008 results with

interest expenses of circa 5 million euros that

occurred from the 300-million-euro convertible

bond loan (CBL). Moreover, in Q1 2007 results,

Hygeia booked fiscal year 2006’s dividend of 1.6

million euros from its 24.8 percent stake in the

Mitera-Leto Group. Note that the dividend of

circa 11.4 million euros from Mitera-Leto Group

for the fiscal year 2007 will be booked in

Hygeia’s H1 2008 income statement.

Hygeia Commenting on the results of the first quarter, the vicechairman of Hygeia’s Board of Directors, Mr AndreasVgenopoulos, made the following statement:

‘I am particularly satisfied as the strategic choice of Marfin

Investment Group (MIG) for significant investments in the

health sector is bearing fruit. With the conclusion of the acqui-

sitions of Safak Group in Turkey and Evangelismos in Paphos,

Cyprus, the Hygeia Group will control in total nine hospitals in

Greece, Turkey and Cyprus, with 1,547 total beds capacity in

its effort to accomplish its strategic target to develop the

largest private sector provider of integrated healthcare services

in Southeastern Europe. I believe that the accomplishment of

our initial plan that is implemented by the Board of Directors

and Management of Hygeia will increase the value for the com-

pany’s shareholders.’

29

Jumbo Group, the biggest retail company of toys, baby products,

stationary products and other related products in Greece, has

announced its nine-month results for the period 01/07/2007-

31/03/2008:

Sales growth reached 14.22 percent y-o-y from 17.39 percent y-

o-y in the six-month period of the current financial year. The reason

for the slowdown of the sales growth is that the third quarter doesn't

include sales from the Greek Orthodox Easter period at the end of April

this year. The management has already announced that for the peri-

od including Easter (10 months), sales grew by 18.32 percent y-o-y.

For the nine months, gross margin reached 52.64 percent from

51.14 percent in the nine-month period of 2006/2007. At the end of

the current financial year a deterioration of the gross margin is expect-

ed but it will be still slightly improved against the six-month level.

The Group's net profits reached 58.7 million euros, improved by

18.04 percent y-o-y. Nine-month results were negatively affected by

the continuing disruption at Greek ports. As a consequence, general

expenses such as advertising, internal transport costs, overtime etc

were increased. Cyprus was particularly affected by the interruption in

the supply of the Jumbo stores on the island. As a result, the third-

quarter results were mainly supported by stores in Greece and in Bul-

garia. For the end of the current financial year, an improvement of

expenses as a percentage of sales is expected from the nine months

levels, if the situation settles.

Sales performance for the 10-month period led the management

to positively revise the guidance for the current financial year of 15

percent growth of sales and profit at the six-month levels. Specifical-

ly, the company's management estimates that for the full financial

year the Group's sales growth will reach the six-month growth of

17.39 percent or will be improved. Regarding net profit, the manage-

ment estimates that the six-month growth rate of 21.42 percent is

feasible with a probability to exceed it if there is a last-minute positive

development regarding the situation at Greek ports and road transport

with the continuing strikes.

The Group currently operates 41 stores in Greece, Cyprus and Bul-

garia while the investment program is accelerated for the operation of

new stores. In the first half of the coming financial year (July 2008 -

June 2009) the company is expected to open three new hyperstores

in Greece

Mytilineos’s consolidated turnover for Q1

2008 stood at 227.4 million euros, from 225.4

million euros for the same quarter in 2007. This

increase in sales is particularly significant con-

sidering that it was achieved in the midst of the

negative movement of the US dollar against the

euro, a development which had a negative

impact of 27 million euros on Group turnover.

The above, combined with the consistently

high level of oil prices to an all-time record high

of over US$125 per barrel, and coupled with the

fact that the capital gains from the agreement

with Endesa Hellas have not been incorporated

into the results for the first quarter (the signifi-

cant contribution of the energy sector is expect-

ed to be reflected in the results for the quarters

to follow), drove net profit after tax to 6.9 million

euros against 32.3 million euros for the same

quarter in 2007, while net profit after tax and

minorities stood at 4.3 million euros against

30.2 million euros for the same quarter in 2007

which also included around 10 million euros of

extraordinary income for the Group. Finally,

earnings before tax, interest, depreciation and

amortization (EBITDA) stood at 25.7 million

euros, down from 41 million euros for the same

period in 2007, a decrease attributed to the neg-

ative impact on the Group of the movement of

the US dollar against the euro (13 million euros)

and to the high oil prices during the period

reported (11 million euros).

The Group’s total assets for the period report-

ed amount to 1.64 billion euros. On March 31

2008, the Group’s equity stood at 706 million

euros, whereas if the mark-to-market value of

the subsidiaries capitalization is taken into

account, then the Group’s adjusted equity is

close to 940 million euros. Finally, the Group’s

net debt (loan liabilities less cash on hand and

equivalent items) is maintained at the low level

of 246 million euros.

The significant progress and successful

strategic planning of METKA continues to be

reflected in the Company’s results for Q1 2008,

confirming its establishment as one of the major

players in the sector of EPC projects abroad. The

Company’s turnover for Q1 2008 reached 87.9

million euros, up by 28.8 percent from 68.2 mil-

lion euros for the same period in 2007, with

earnings before interest, tax, depreciation and

amortization (EBITDA) standing at 16.5 million

euros, up from 14.1 million euros for the same

quarter in 2007. The EBITDA margin remains

very high (18.8 percent), both as an absolute

value and in comparison with international com-

petition. Finally, net profit after tax and minority

rights stood at 10 million euros versus 9 million

euros for Q1 2007.

Having established itself as the principal spe-

cialist contractor for energy projects in Greece,

METKA is now expanding dynamically to com-

petitive markets abroad, with a new agreement

concluded with Romania’s Petrom for construc-

tion of a 860-megawatt energy center in the

country. METKA’s signed backlog today stands

at 775 million euros, and is expected to grow

further during 2008. The company's successful

progress is expected to be reflected in its results

for 2008 as well as for the coming years.

In the energy sector, Endesa Hellas now

holds a prominent position as one of the key

players driving market trends and developments

(market liberalization). The progress made by

the new company so far proves that it satisfies

all requirements that will allow it to evolve into

the largest independent energy producer in

Greece and will spearhead its expansion in the

wider region of Southeastern Europe through a

broad power-generation base utilizing thermal

and renewable energy sources. The recently

launched integration into the system of the

Cogeneration plant (COGEN) and the rapid

development of the two gas-driven combined

cycle power plants in Volos and Aghios Nikolaos

will enable Endesa Hellas to supply the Greek

market with more than 1,300 MW of electrical

power by the year 2010, thus making a signifi-

cant contribution toward a solution to the serious

social issue of deficits in the power supply sys-

tem, while at the same time helping reduce

power imports that are expensive for Greece.

According to Endesa’s business plan for

2008-2012, recently announced at the Madrid

Stock Exchange, Endesa Hellas is expected to

invest in Greece a total of 2.8 billion euros sole-

ly in thermal power plants (excluding invest-

ments in renewable energy sources). The imple-

mentation of this plan is expected to act as a cat-

alyst for the substantial liberalization of the

Greek energy market, and to improve further the

revenue and profitability structure of the Group.

The results for the first quarter of 2008 were to

be presented in further detail in a conference call

with market analysts and institutional investors

on May 21, 2008.

Mytilineos

Jumbo

C o m p a n i e s

30

Themes

Regency Real Estate has announced that its

residential real estate services division will

henceforth trade as Greece Sotheby’s Inter-

national Realty following its negotiation of

exclusive rights to become the Sotheby’s

International Realty affiliate throughout Greece.

Regency Real Estate is a subsidiary of First Mediter-

ranean Investments (FMI), a holding company with

commercial interests in Southeastern Europe span-

ning real estate, hospitality and energy.

The new company hopes to bring the Greek real

estate market a combination of intimate local knowl-

edge and expertise with a renowned global sales and

marketing network capable of connecting sellers of

high-end residential real estate with an international

community of potential buyers. The Athens-based

team of real estate professionals is led by Constanti-

nos Kaliakatsos, chief executive officer of Greece

Sotheby’s International Realty, and Aggeliki Liakos is

the firm’s chief operating officer. George Koukouzelis

is chief executive officer of FMI.

Founded in 1976, the Sotheby’s International

Realty network has more than 9,000 sales associ-

ates located in more than 470 offices in the US and

29 other countries and territories.

Michael R. Good, president and chief executive

officer of Sotheby’s International Realty Affiliates

LLC, said: ‘Greece has always been an important tar-

get market for us. Through its rich cultural and his-

toric value, great climate and a unique geography on

the threshold of Europe, North Africa and West Asia,

Greece offers great investment opportunities for buy-

ers across the world. We are delighted that FMI,

which has had commercial interests in this region for

over 30 years, has joined our network of affiliates.’

According to George Koukouzelis, CEO of FMI:

‘The Greek market has been supported by very limit-

ed international quality real estate services that prop-

erly address the needs of clients who are seeking

buyers of the finest real estate available either for

owner-occupancy or secure investment.

‘The Sotheby’s International Realty brand will

provide Greece’s upper residential market sector with

undisputed prestige, market presence and service

excellence. We commence our work with a wide

range of mainland and island properties for sale and

will be actively marketing these to both local and

overseas buyers.’

Sotheby’s International Realty and Regency Real Estate will team up in a deal that willhelp increase the exposure of the local property market to foreign buyers.

Sotheby’s enters Greek market