Gov’t offers, including IPTO sale, not backed by Lafazanis

Greece’s reform proposals forwarded to the country’s lenders in the effort for a last-minute bailout deal include a plan to privatize IPTO, the power grid operator, or, alternatively, free the operator from the full control of its parent company PPC, the main power utility, but maintain state control.

The proposal notes that the government would take “irrevocable steps” for IPTO’s privatization with the announcement of a specific starting date for offers, or prepare an alternate plan of equal effect, in terms of competition in the electricity market, by October.

In effect, the latter proposal does not amount to a privatization procedure as IPTO would, on the one hand, cease being a 100 percent-controlled PPC subsidiary, while, on the other, any new company that may be established to fill the void would remain under state control.

This could lead to the reestablishment of a model adopted in the past for IPTO precursor DESMIE, which permitted minority stakes for private-sector investors. DESMIE was controlled by the state with a 51 percent equity share, while PPC held the other 49 percent. The plan had entailed drawing private investors into the company.

Though all the above scenarios comply with EU law it remains unclear whether the country’s creditor representatives will accept them and whether they can actually be applied to create market competition conditions, as the lenders are demanding.

Besides the IPTO-PPC proposal, the other Greek proposals for the energy sector are identical to plans brought forward by the European Commission during the previous round of negotiations.

These include the adoption of NOME-type auctions for the electricity market; elimination of a 20 percent discount offered by PPC to industrial enterprises; implementation of cost-based tariffs by PPC for all consumer categories; tax revisions for the energy sector; a new operating framework for the renewable energy source (RES) sector; revisions to the CAT (Capacity Availability Tickets) plan; adoption of an overall direction in line with European energy unification, or the Target Model; and increased independence for RAE, the Regulatory Authority for Energy.

Production Reconstruction, Environment and Energy Minister Panagiotis Lafazanis, who heads the radical Left Platform wing within the coalition’s main party, Syriza, has not endorsed the reform proposals. Defense Minister Panos Kammenos, who heads the coalition’s junior partner, Independent Greeks, has not signed either, which has prompted fears of further political turmoil in Greece.

In his latest public remarks delivered yesterday, Lafazanis reiterated that Greece will not submit to the pressure of lenders.