Progress made on DESFA sale, gas market’s liberalization

The local gas market’s liberalization, and the sale of a 49 percent stake in DESFA, Greece’s natural gas grid operator, have been included on the list of issues for which consensus is being reached between Greek officials and the country’s creditor representatives, latest information emerging from ongoing talks at the Brussels Group suggests, confirming preceding energypress reports.

Despite the reports, Production Reconstruction, Environment and Energy Minister Panagiotis Lafazanis, who has openly declared his opposition to energy-sector privatizations, has refused to recognize signs of any progress on the two gas sector issues.

Energy ministry officials, in comments offered late yesterday, went no further than to say that the ministry is not taking part in the Brussels Group discussions.

The Brussels Group, a working group reviewing the progress of Greek reforms ahead of a needed new bailout agreement, was introduced to replace the troika following last January’s election victory by the leftist Syriza-led coalition. The new working group spares the Prime Minister and his ministers of engaging in direct talks with creditor representatives.

Sources insist the negotiating sides are coming closer together on the gas market’s liberalization as well as other EU-related energy obligations faced by Greece.

It remains unknown whether these include a pending issue concerning the private-sector’s access to lignite sources and hydropower energy. However, it can be considered certain that privatization issues concerning PPC, the power utility, IPTO, the power grid operator, DEPA, the Public Gas Corporation, ELPE (Hellenic Petroleum), and other energy companies in which the state maintains interests, have not been raised.

Progress, however, is being made for the sale of a 49 percent stake in DESFA, instead of a 66 percent stake, as had been planned by the previous administration.

The gas market’s liberalization would bring back to the fore, in one way or another, a draft bill on the matter prepared by Greece’s previous government, which failed to have the bill ratified in Parliament as a result of the January 25 snap elections.

EU law requires competition in the retail gas market, meaning that current regional monopolies maintained by three gas supply (EPA) companies in the wider Athens area, Thessaloniki, and Thessalia, in the mid-northeast, will need to be broken up. Compensation claims made by the EPA shareholders, which include Shell and ENI, in exchange for the premature end of their respective monopolies that were agreed to in 2000, is an issue that will need to be dealt with by the government.

As for the DESFA sale, a long-running ordeal involving an agreement with the Azeri energy firm Socar, Prime Minister Alexis Tsipras recently noted that a proposal has been made – presumably to the Azeri company and the European Commission, which is investigating the agreement – for the Greek state to hold on to 17 percent of the 66 percent equite share originally offered to Socar. Such an outcome would secure a 51 percent stake in DESFA for the Greek state, and not just 34 percent, as had been agreed to by Socar with Greece’s previous administration.

This would also satisfy a European Commission demand for the Azeri company’s involvement in DESFA to not offer it majority control. Also, it would bring into practice a government aspiration to utilize public wealth through state participation, instead of conventional privatization deals.

Socar CEO Rovnag Ibrahim Abdullayev recently disclosed that the European Commission intends to extend its deadline for a decision on the DESFA deal to the end of the year.