Socar silent on DESFA deal, expiring in just over a month

Azeri energy company Socar has just over one month to decide whether to keep alive its long-running agreement for the acquisition of a 66 percent stake in DESFA, Greece’s natural gas grid operator, before it surrenders 17 percent to a certified European operator, as was demanded at a latter stage of the sale’s procedure by the European Commission.

A letter of guarantee submitted by Socar for the agreement is set to expire at the end of September following three extensions.

The agreement, reached when Socar emerged as the winning bidder of an international tender in 2013, is now under serious doubt following the recent ratification in Greek Parliament of an amendment that revised DESFA’s asset base and limits the operator’s earning potential. Socar officials have complained this move was unilateral.

If Socar does not extend the deal’s current letter of guarantee, the procedure will have essentially sunk, while reports of a looming departure by Azeri officials from Greece would most likely be confirmed. This could also entail the closure of an office maintained by Socar in the Greek capital.

Socar officials made clear their disapproval of the DESFA amendment, which was submitted to Greek Parliament by energy minister Panos Skourletis in mid-July and drastically limits the operator’s leeway for network usage hikes. But the Azeri officials have since remained completely silent about their intentions.

Socar has been legally entitled to a repercussion-free withdrawal from the DESFA deal since last year, when 24 months were clocked up following the tender’s completion.

Skourletis, the energy minister, has, in past official comments, admitted that the current DESFA tender’s debacle would provide Greece with an opportunity to renegotiate new terms based on a current privatization plan for IPTO, the power grid operator.

A tender offering 24 percent of IPTO to a strategic investor is now in progress. The plan also entails transferring 51 perent of IPTO from power utility PPC, the parent company, to the Greek State, and offering the remaining 25 percent to investors through the bourse.

The ruling Syriza-led coalition inherited the DESFA sale and its terms from the country’s previous administration.