Socar, privatization fund extend their SPA for DESFA

Azeri company Socar and TAIPED, the State Privatization Fund, have extended their sales and purchase agreement (SPA) for the former’s purchase of a 66 percent stake in DESFA, Greece’s power grid operator, by six months, according to energypress sources. The SPA expired on December 21.

It is believed the additional six months will suffice for the completion of the long-running deal, which dates back to 2013, when an international tender for the sale had concluded.

Socar, which needs to give up at least 17 percent of the 66 percent DESFA stake the company had agreed to acquire, preferably to a European gas grid operator, following European Commission intervention, is currently waiting for due diligence procedures to be completed by bidders seeking to gain the surrendered stake. The due diligence process is expected to be completed by the end of January. Negotiations between Socar and parties interested in the 17 percent of DESFA to be surrendered by the Azeri firm will then proceed.

Belgian-Spanish team Fluxys-Enagas and Italy’s Snam are currently conducting due diligence procedures in preparation for their expected offers, which would allow the DESFA privatization to be finalized.

New network usage fees, now severely delayed, also need to be determined before Socar can reach an agreement with the prospective bidders for DESFA’s 17 percent stake. The delay has been attributed to the feared sharp increase in network usage fees, expected to exceed 40 percent.

The prospect has prompted officials at the energy ministry to seek an alternative pricing approach. This is a challenging task. Energy minister Panos Skourletis and his team will need to find a solution that will not alter Socar’s investment expectations. The buyer estimates a return on investment of roughly 11 percent. Socar has offered 400 million euros for a 66 percent equite share of DESFA, based on these figures. The price level to be demanded by Socar for the 17 percent it will surrender will be influenced by the network usage fee revisions.

The interest being displayed by Fluxys-Enagas and Snam for a minority stake in DESFA carries both investment and strategic dimensions. The bidders envision their participation in DEFSA as a gateway for further development in Europe’s southeast.

No investment interest had been expressed in the first half of 2015 for DESFA’s 17 percent, but the third Greek bailout deal, signed in August, drew investors.