Capacity loss of lenders demand for PPC unit sales being calculated

Though the government is publically claiming it will not bow to pressure by the lenders for the sale of main power utility PPC units, fearing the political cost, it is believed to be searching for a formula that may limit the utility’s degree of contraction without affecting negotiations for an agreement on the bailout’s second review.

Given the seeming inevitability of the sale of PPC units, Greek officials, are attempting to calculate what this would mean in terms of capacity lost if the demand by the lenders for PPC’s sale of 40 percent of its lignite-fired and hydropower stations is accepted.

According to energypress sources, this sale demand by the country’s lenders was calculated based on PPC’s installed capacity in August, 2015, which stood at 12,500 MW.

However, a number of older fuel and and lignite-fired power stations representing a total capacity of 1,000 MW have since been withdrawn by the utility, reducing its capacity to 11,500 MW. More ageing lignite-fired power stations operating at two locations in northern Greece, Amynteo and Kardia, are also set to be withdrawn between 2018 and 2020.

Well-informed local officials contend that the demand by lenders on the government for PPC to sell 40 percent of its units should be applied to the total of PPC’s remaining installed capacity once the aforementioned stations have also been withdrawn, and not on the current capacity of 11,500 MW.

One official argued that the sale of 4,000 MW of PPC units, as would be the case if the demand by the lenders is implemented, is excessive. The official added that the sale of a total capacity representing around 1,200 MW would be more appropriate, while also admitting this is a best-case scenario. Pressure by the lenders on PPC to sell units representing a far greater capacity total would devastate the utility, the official warned.

According to this official, the lenders appear to be losing faith in the recently introduced NOME auctions as an effective tool that may reduce PPC’s dominant market share and, instead, are turning their attention to demands for the sale of utility production units.

Greek officials are pushing for the NOME auctions to be extended until at least December, which would allow extra time for results. Introduced last October with the intention of providing independent traders access to PPC’s low-cost lignite-fired and hydropower sources, the auctions have so far failed to impact PPC’s market dominance.

The Greek government intends to legally challenge claims by the lenders that the country is not honoring a European Court decision making compulsory the access of PPC’s lignite sources to third parties.

The lenders are exploiting the verdict to intensify the pressure being applied on the government to sell PPC units. However, the Greek government, in the challenge it is preparing to mount, is expected to argue that the lenders are generalizing the verdict’s application as it makes compulsory the access to PPC’s lignite sources, not production units, to third parties.

In more recent times, the energy ministry has contemplated proposing to the European Commission a solution that would provide independent players access to unutilized coal deposits in northern Greece’s regions of Elassona, Drama, Vegora and Vevi. This solution, which had also been tabled in 2009, would completely exclude PPC from the sources. It is hoped that such an alternative could ease the pressure for the sale of PPC units. The European Commission’s view of such a prospect remains unclear.