Minister, lenders to focus on DEPA, PPC, DESFA today

Talks scheduled for today between the country’s recently appointed energy minister Giorgos Stathakis and lenders, as part of the bailout’s second review, are expected to primarily focus on three issues – DEPA, the Public Gas Corporation, which the lenders want out of the retail market; the main power utility PPC and a demand by lenders for a 17 percent sale; as well as DESFA, the natural gas grid operator, whose long-running sale attempt by the government, offering a 66 percent stake, remains unfinished with a fortnight to go before the latest deadline extension expires.

DEPA, whose market conditions are rapidly changing, has already had its wholesale market monopoly broken while, as of next year, the corporation’s gas release – the proportion of low-priced gas supply offered through its annual auctions as a means of generating market competition – will begin increasing. Adding to the corporation’s strain, lenders now want the gas company to exit the retail market.

Though pundits believe the lenders will maintain an adamant stance on the effort to further liberalize Greece’s natural gas market because DEPA continues to hold a dominant position at all market levels, they also acknowledge it is legally unfeasible to force the corporation out of the retail market without any compensation, as was recently revealed. As the main shareholder of the country’s three EPA gas supply companies covering the wider Athens area, Thessaloniki and Thessalia, DEPA, which holds 51 percent stakes in all three ventures, has invested hundreds and millions of euros in infrastructure development over the past 15 years.

Shell holds a 49% stake in the EPA supply company serving the wider Athens region, while the Italian multinational Eni holds 49% stakes in the Thessaloniki and Thessalia operations.

DEPA must double its gas release from 10 percent this year to 20 percent by 2020, which would offer greater gas amounts to energy-intensive industries and traders.

Chipping away at DEPA’s dominance, Gazprom recently began selling to Greek enterprises directly through Promitheas Gas, a 50-50 joint venture established with the Copelouzos group, and not via DEPA, with which the Russian giant has signed an agreement for the supply of specific gas quantities. A take-or-pay clause, activated if DEPA’s annual orders fail to reach levels agreed to, remains valid until 2026.

Last summer, M&M, a wholesale trading venture involving the Mytilineos Group and Motor Oil Hellas, took the initiative to break DEPA’s hold on the market by importing gas loads via the Greek-Bulgarian border.

As for the demand by lenders concerning the sale of PPC’s 17 percent, Stathakis, the new energy minister, has yet to adopt an official position.

The DESFA sale will most probably be included on today’s agenda. A second deadline extension to a letter of guarantee provided by prospective buyer Socar expires on November 30. It remains unknown whether the Azerbaijani energy firm would be willing to offer a third extension if a deal is not reached by that date. The negotiating sides are at odds over the sale price. Socar officials contend DESFA’s market value has been reduced as a result of recent revenue-limiting measures imposed on the gas grid operator by Greece’s previous energy minister Panos Skourletis.

Socar, which emerged as the winning bidder of an international tender offering 66 percent of the Greek operator, is expected to transfer 30 percent to Italy’s Snam, should the deal go ahead. The European Commission eventually intervened demanding that the Azerbaijani company surrender at least 17 percent of DESFA to a certified European operator.