DESFA solution favorable for Socar, Greek State worked on

RAE, the Regulatory Authority for Energy, is examining the prospect of a compromise solution for the network usage fees to apply for DESFA, the natural gas grid operator, in an effort to satisfy the Greek State, the Azeri energy company Socar, a potential buyer of a 49 percent stake in the operator, and the potential buyer of a 17 percent which Socar must surrender – as a result of European Commission intervention – from a 66 percent share the Azeri firm had originally agreed to acquire as the winning bidder of an international tender.

An ideal balance is being sought which would increase the network usage fees so that DESFA’s revenue potential could stand as a feasible prospect for investors without prompting a major cost increase for consumers, such as a 60 percent hike envisaged in a previous plan.

RAE, responding to an energy ministry request, is now looking at revising a tariff-setting regulation for the operator, which Socar officials appear to have accepted.

According to energypress sources, the energy ministry is interested in either reducing DESFA’s weighted average cost of capital (WACC) from a level of 11 percent that had been agreed to with Socar in 2012, lowering interest rates for irrecoverable capital, or proceeding with both.

Earlier this week, Stergios Pitsiorlas, president at TAIPED, the State Privatization Fund, contended that DESFA’s long-running sale procedure is expected to soon be completed. Pitsiorlas informed that Snam, the operator of Italy’s natural gas network, has agreed to acquire the 17 percent stake of DESFA surrendered by Socar. The TAIPED chief said that Socar officials appear to have accepted the prospect of lower WACC and irrecoverable capital interest rate levels.

RAE sources have said a WACC level of 11 percent is too high, as it reflects the country risk factor. The equivalent rate in other countries usually ranges between 5 and 6 percent.

Although DESFA has yet to forward an official request to RAE for tariff increases, the operator’s privatization can be expected to be completed within the next one or two months, RAE sources have informed. However, it should be noted that RAE is not renowned for functioning in a swift and decisive manner.

In a Reuters interview just days ago, Greece’s energy minister Panos Skourletis said Socar was having trouble finding an investor to take on the surrendered 17 percent of DESFA. He did not make any comments on the network usage fee revision plan.

Snam as well as Belgium’s Fluxys and Spain’s Enagas – the two had joined forces for DESFA’s 17 percent – had all expressed early interest before retreating. Judging by the TAIPED head’s comments this week, Snam’s interest has been revitalized.