The Greek government, Azerbaijani energy firm Socar and Italy’s Snam appear to have reached an agreement in principle for the sale of a 66 percent of DESFA, Greece’s gas grid operator, developments at a meeting today in Athens between the Prime Minister’s adviser Dimitris Liakos, a Snam official, as well as Socar official Anar Mammamdov, who took part in the session through a video link, strongly indicate.
Energypress sources went as far as to say that a final agreement for DESFA’s sale can be considered certain following the Greek government’s revisions that make the operator a more attractive prospect for investors, as well as a pledge for further constructive revisions.
Socar is also believed to have made compromises too, such as acceptance of a reduced WACC (Weighted Average Cost of Capital) level of 9.22 percent.
A final agreement is expected to be achieved within the next meeting or two, possibly during the week to come, when final technical details are settled, sources said.
The negotiating sides have until the end of October to strike a deal. Socar recently extended its letter of guarantee by a month, which kept alive negotiations for this long-running sale attempt.
Socar emerged as the winning bidder of an international tender in 2013 for 66 percent of DESFA at a price of 400 million euros. The European Commission intervened last year, demanding that the Azerbaijani firm surrender at least 17 percent of DESFA to a certified European operator, which would limit Socar’s share in the Greek operator to no more than 49 percent.
Italy’s Snam is believed to be moving in on a DESFA stake of well over 17 percent, possibly even greater than 30 percent, according to energypress sources.
Earlier in the day, energypress reported:
Currently in Athens for a series of meetings with leading local officials on the long-running DESFA (Greece’s natural gas grid operator) sale, officials of Snam – the Italian operator seeking to acquire a stake in the operator which Azerbaijani energy company Socar is required to surrender following European Commission intervention on the unfinalized sale – are suddenly seeing fast progress being made.
Though the prospect of an agreement between the Greek government and Socar appeared doomed following an extended stand-off that was prompted by a revenue-limiting measure imposed on the operator by Greece’s energy ministry, it now appears that a deal could be reached by the end of this month, when a Socar letter of gurantee expires after Azerbaijani officials decided to renew it for an additional month.
Socar emerged as the winning bidder in 2013 for a 66 percent stake of DESFA at a price of 400 million euros. Last year, Brussels intervened by ordering Socar to surrender at least 17 percent, limiting the Azerbaijani company’s involvement to no more than 49 percent. The recent ratification of revenue-limiting measures prepared by the Greek energy ministry for DESFA, designed to protect consumers, prompted Socar to take big step back.
Snam officials yesterday met with the DESFA issue’s Greek working group, led by the Prime Minister’s adviser Dimitris Liakos. The Italian officials are expected to follow up today with meetings at the environment and energy ministry as well as the Prime Minister’s office.
Sources close to the negotiations informed energypress that the majority of the sale’s technical issues are now down to fine details and close to settlement.
“Barring unexpected developments, I see an agreement on the DESFA sale, key aspects being a tariff increase to a reasonable level, an increase in the operator’s recoverable amount for past revenues over a shorter time period and a satisfactory dividend yield,” noted one well-informed source.
Though Socar officials also feel that an agreement is now within reach, the company’s deputy president Vitaly Baylarbayov was more subdued in recent remarks offered to the Euractive news portal, noting “we cannot guarantee that our objective will be achieved, but we can hope.”
The negotiating sides are working on increasing DESFA’s network usage fees by 35 percent, rather than 68 percent, as was stipulated in an earlier plan.
An improved WACC (Weighted Average Cost of Capital) figure is also being looked at for a 10.99 percent performance instead of 10.06 percent. Officials are also looking to shorten the time period over which the operator will recover revenues concerning 2006 to 2015. The energy ministry’s recent DESFA measures drastically reduced the recoverable amount to 285 million euros from 829 million euros. The current year is now also being added to the time period, bringing the total to about 326 million euros.
Greek officials had originally engineered a 40-year recovery period for the aforementioned recoverable amount but this could now be halved.
Some officials closely linked to the negotiatons believe an agreement could be reached ahead of the October 31 deadline.