Lenders, Greek officials at opposite ends on energy issues

The country’s lenders have asked for “irrevocable steps” towards the privatization of IPTO, the power grid operator, while also requesting the part-privatization of PPC, the main power utility, for the establishment of a “fully functional” new privatized business unit, confirming preceding energypress reports on the energy-sector developments at the bailout negotiations.

At the other end, the list of proposals forwarded by Greek officials does not include a single reference to these requests, as had been anticipated. The majority of proposals made by the lenders, including on the energy front, as terms for a new bailout agreement, stand no chance of being accepted by the leftist Syriza-led coalition, at least not by its current line-up.

On their request for PPC’s part-privatization, a plan that had been set in motion by the country’s previous administration before it was ousted from power in the January 25 snap elections, the lenders noted it needs to serve as a key revision for reforms in Greece’s electricity market.

The move had been expected following remarks made a fortnight ago by the EU’s competition commissioner Margrethe Vestager, who, while noting the Greek energy market is plagued by a lack of competition, stressed “PPC’s monopoly must come to an end.”

As for the request by lenders concerning IPTO, it is clear they want the power grid operator’s privatization process to resume. Despite strong interest expressed just months ago by Italy’s Terna and the State Grid Corporation of China (SGCC), the procedure was interrupted following January’s elections.

Besides the PPC and IPTO requests, other lender proposals include natural gas market reforms; tariff revisions at PPC, based on production costs, meaning both price increases and decreases, depending on category; adoption of the French NOME model for lower-priced electricity; CAT mechanism reforms; reinforcement of RAE’s (Regulatory Authority for Energy) independence and financial standing; energy-sector tax revisions; and preparation of a legal framework supporting renewable energy sources (RES).

The Greek side’s only privatization reference for the energy sector concerns the sale of a stake in DESFA, the natural gas grid operator, to Azeri company Socar, estimated to provide 188 million euros. But, at this stage Socar appears set to abandon the process following EU investigations into an agreement reached by the Azeri company with the previous Greek government.

The list of energy-related proposals by Greek officials also includes a plan for the natural gas market’s liberalization, based on new legislation by October this year. A measure for the state’s payment of 200 million euros owed to the power utility PPC by the end of 2015 has also been included.

On the RES front, the government has proposed a new way of calculating Emission Reduction Tariff (ETMEAR) surcharges added to electricity bills, within three months of a bailout agreement, as well as new development plan for the RES sector, in cooperation with German consulting firm GIZ.