Possible PPC unit buyers still need to be convinced of market conditions

Now that the market test for the bailout-required sale of main power utility PPC lignite units has been completed, it remains to be seen how many of fifteen prospective buyers who have expressed a preliminary interest will follow through with binding offers in the procedure’s next stage. This will not be known any sooner than June, when the sale’s tender is scheduled to be launched.

Concerns over technical and licensing issues expressed by possible buyers are expected to be overcome. Two other factors underlined by market test participants – profit margins of lignite units and market risk – will prove crucial for the disinvestment’s success.

On a positive note, units at two of the lignite-fired power facilities up for sale, Megalopoli and Meliti, appear to possess comparative advantages. Despite market fluctuations and seasonal costs, especially at Meliti during the winter, the average variable production costs at these two facilities has ranged between 37 and 39 euros per MWh compared to levels of between 52 and 58 euros per MWh at other PPC lignite-fired power plants.

It should be pointed out, however, that these cost-related figures may not be entirely accurate.

Besides the production costs and profit margins, positive respondents in the market test, staged by the European Directorate for Competition as an attempt to get a rough idea of the current level of investor interest, highlighted that the market risk factor, including wholesale price levels and possible market distortions, will be even more crucial when the time comes for them to submit binding offers.

Untul then, much work is still needed to convince prospective buyers that current problems being encountered, including market distortions, will not persist following the sale.