RAE follow-up action to bolster ministry’s DESFA revisions

RAE, the Regulatory Authority for Energy, is preparing to implement measures intended to further consolidate a recently ratified energy ministry bill that severely limits the extent of natural gas network usage hikes at DESFA, the natural gas operator, limiting its revenue potential. The DESFA amendment has annoyed and distanced Socar, the operator’s potential buyer – as the winning bidder of an international tender – of a stake.

The authority’s imminent follow-up measures clearly indicate that the energy ministry will not only refuse to soften its stance amid fears that Socar is set to withdraw from the long-running and unfinalized DESFA deal but, instead, become even more resolute. A letter of guarantee provided by Socar, the winning bidder of a DESFA international tender in 2013, expires at the end of September. A seemingly unbridgeable gap separates the two sides at present as a result of the energy ministry’s DEFSA revisions.

The sale procedure was also delayed by European Commission intervention last year demanding that a 66 percent DESFA stake to be acquired by Socar be reduced to 49 percent.

According to energypress sources, RAE will soon take follow-up steps that will complete a procedure deemed necessary by the government to ensure that network usage fee hikes made by DESFA do not exceed 30 percent – as a means of protecting the industrial sector, primarily, as well as households.

RAE’s follow-up steps will include an interest rate reduction for outstanding “recoverable” amounts. This concerns past investments made by DESFA that have not yet been fully recovered as returns on investment and need to be recovered through annual revenues over a twenty-year period. Unrecovered amounts are increased through the addition of a 10 percent interest rate each year.

Secondly, RAE is planning to revise the operator’s pricing policy terms so as to reduce the Weighted Average Cost of Capital (WACC) yield, which, at a current level of 11 percent, has been acknowleged as being favorable for DESFA. This level had been agreed to in 2012 with Socar as part of the international tender offering a 66 percent of the operator.

Sources said Prime Minister Alexis Tsipras has been fully informed on energy minister Panos Skourletis’s DESFA-related initiatives, which are considered official government policy.