Ministry dismisses SGCC hiring, pay relaxation request for IPTO

Energy ministry officials have reacted negatively to a request from State Grid International Development, a member of the corporate group State Grid Corporation of China (SGCC), for a relaxation of bailout-related recruitment and remuneration terms at power grid operator IPTO, in which the Chinese company is a strategic partner with a 24 percent stake.

An energy-sector draft bill delivered by the ministry includes a plan to relax hiring and remuneration restrictions at power utility PPC and distribution network operator DEDDIE/HEDNO, a subsidiary.

These restrictions, resulting from a bailout term imposed on Greek public utilities, increase the Chinese investor’s risk and affect IPTO’s growth prospects, State Grid International Development has complained in a letter received this week by energy minister Costis Hatzidakis and other government officials.

The IPTO investment will be bleak if the Chinese company cannot select and remunerate staff under its own terms, in accordance with its interests, the letter noted.

The Chinese request will not be met, energy ministry officials told energypress, clarifying that a recent decision enabling a relaxation of hiring and payment terms concerns PPC as this utility faces treacherous financial conditions and needs to overcome competitive issues for survival.

 

SGCC wants relaxation of bailout hiring limits at IPTO

State Grid International Development, a member of the corporate group State Grid Corporation of China (SGCC), has sent a clear message to the Greek government calling for a relaxation of recruitment terms at power grid operator IPTO, in which the Chinese company is a strategic partner with a 24 percent stake, noting current hiring restrictions, resulting from a related bailout term imposed on public utilities, increase this investment’s risk and affect its growth prospects.

The Chinese investor wants IPTO included in a draft bill relaxing recruitment terms for the power utility PPC and distribution network operator DEDDIE/HEDNO.

The request was expressed through a letter signed by State Grid International Development chief official Hu Yuhai and received by Energy Minister Costis Hatzidakis, his deputy Gerassimos Thomas, as well as Interior Minister Takis Theodorikakos, according to energypress sources.

The issue had been brought to the attention of the previous Greek government several months before its legislative election defeat in July, the Chinese investor reiterated.

“We consider the situation incomprehensible and somewhat unreasonable when a company the size of IPTO, with support from the strategic investor, is not given the opportunity to select and remunerate its staff in accordance with its rules, serving its interests,” the Chinese firm noted in its letter.

SGCC’s investment and IPTO’s growth prospects will be placed under a state of uncertainty if the Greek power grid operator is not included in the revisions planned for PPC and DEDDIE/HEDNO, the Chinese investor warned, promising fair and transparent recruitment procedures if the restrictions are lifted.

 

Draft bill loosening PPC ties to state expected this week

A draft bill to revise power utility PPC’s operating terms by loosening bailout-related public sector restrictions on the state-controlled utility is expected to be delivered this week.

The draft bill will also facilitate a transfer of fixed assets to distribution network operator DEDDIE, a PPC subsidiary, ahead of a partial sale of the operator.

Final touches are now being added to the draft bill, almost ready, according to sources.

Both the government and PPC officials have stressed the power utility is currently disadvantaged in many circumstances, including at RES auctions, where participating rivals are operating more efficiently amid private-sector market terms.

Under current conditions, which include monitoring of PPC’s procurement procedures,  rival bidders participating at RES auctions end up knowing in advance the level of the power utility’s offers.

PPC’s new administration also wants a relaxation of its existing hiring and remuneration policies, limited by bailout terms imposed on public sector enterprises. PPC is looking for greater freedom to lure high-profile executives from the marketplace.

Revisions concerning gas utility DEPA’s privatization, to offer investors stakes in two new divisions, DEPA Trade and DEPA Infrastructure, as had been planned by the previous government, will also be incorporated into the draft bill.

However, unlike the previous plan, the revisions are expected to offer investors majority stakes in both DEPA entities. The gas utility’s international projects are seen remaining under the control of the Greek State.

DG Comp summons ministry officials over PPC dominance

A team of energy ministry officials has been summoned by the DG Comp for a meeting in Brussels this week to be dominated by power utility PPC’s ongoing electricity market dominance as well as the state-controlled corporation’s intended position in the new-look electricity market being shaped as part of the target model.

PPC’s role remains a concern in Brussels following last July’s collapse of a sale effort that had been intended to offer investors lignite-fired power stations belonging to the utility.

Greece’s next Enhanced Surveillance Report is expected late in November.

In Brussels, the energy ministry officials will be looking to ease a PPC retail electricity market share contraction target of 50 percent, included in the country’s third bailout agreement, to 65 percent, seen as feasible.

The DG Comp is expected to remain firm on the original target unless the Greek officials table an offsetting measure of equivalent worth.

Brussels officials also want further information on the forward market, including the duration and technical details of contracts, planned to be launched in February, 2020.

The energy ministry is seeking to convince concerned independent electricity suppliers that the forward market will compensate for a planned termination of NOME auctions.

The DG Comp’s position on the country’s hydropower market is also eagerly anticipated. Early in 2017, Brussels officials had raided the headquarters of PPC and power grid operator IPTO as part of an alleged market-abuse investigation. Findings have yet to be reported.

 

 

PPC planning to lure new managers, cut labor costs

Power utility PPC, preparing an entirely new remuneration policy for its workforce, intends to recruit managerial professionals from the employment market as part of its effort to modernize operations.

The corporation’s new pay policy promises to end distorted arrangements through which salaries of long-serving technical staff members and thousands of workers stationed at mines and power stations have reached or exceeded earnings of high-ranking managers.

Long-serving employees receive gross salaries of up to 4,600 euros per month, the upper-limit imposed on state-controlled PPC as part of the country’s bailout terms for public sector firms. The government plans to exempt PPC from this restriction.

Income levels of PPC managers are between 30 and 50 percent below current market rates.

For many years, successive Greek governments have not permitted administrations at PPC, seen as part of the public sector, to implement mass voluntary exit or recruitment programs.

Subsequently, the average age of the company’s employees now exceeds 50, meaning that thousands of workers have reached salary upper limits while earnings of managers have remained stagnant as a result of bailout-related restrictions.

Besides wanting to recruit professional managers, PPC is also planning voluntary exit packages for long-serving workers, to be replaced by lower-cost recruits.

All these changes, part of PPC’s restructuring plan, are being incorporated into a draft bill to be announced within October.

Energy deputy in Brussels electricity market talks, NOME auctions end near

Deputy energy minister Gerassimos Thomas, representing Greece at tomorrow’s council of EU energy ministers in Brussels, where climate change targets between 2030 and 2050 will be discussed, intends to combine the visit with a series of meetings with European Commission energy and competition officials for talks on latest government plans striving for greater competition in Greece’s electricity market.

Talks concerning the Greek government’s plans to intensify electricity market competition have yet to officially commence, as was noted just days ago by recently appointed energy minister Costis Hatzidakis. He is preparing for his first meeting with the country’s lender representatives in Athens this Wednesday.

The government’s electricity market agenda is comprised of five key measures – swifter decarbonization; partial privatization of distribution network operator DEDDIE/HEDNO; power utility PPC’s detachment from Greek State bailout-related procedures; greater emphasis on renewable energy; and termination of NOME auctions.

The measure abolishing NOME auctions will be submitted to Greek Parliament within the next few days, Hatzidakis, the energy minister, told local media yesterday. The plan will be attached to a multi-bill for development, now undergoing public consultation, sources informed.

NOME auctions were introduced in Greece about three years ago to offer PPC rivals lower-cost wholesale electricity. Hatzidakis argues the auctions ended up forcing the power utility to offer below-cost electricity, inflicting an accumulation of financial damage worth approximately 600 million euros.

At the council of EU energy ministers in Brussels tomorrow, his deputy, Thomas, will present the Greek government’s ambitious agenda for cleaner energy.

He also plans to hold talks with Finnish minister of economic affairs Katri Kulumni, Spain’s energy minister José Dominguez Abascal, and Italy’s economic development minister Stefano Patuanelli, amongst others, sources informed.

PPC to delay gas, electric car plans for after auditor report

Though the newly appointed administration at struggling power utility PPC agrees on the previous leadership’s plan for market diversification into the retail natural gas market as a revenue-boosting measure through combined power-and-gas packages, it has decided to delay this effort’s launch, preferring instead to currently focus on passing a crucial report to be delivered by certified auditor Ernst & Young on September 24.

PPC’s previous administration had planned to launch its gas market campaign at the Thessaloniki International Fair, beginning tomorrow.

In view of the auditor’s report, PPC’s new board, led by chief executive Giorgos Stassis, has also decided to delay its preparations for an entry into the electric vehicles market.

Stassis and his associates intend to look at PPC’s forays into the gas and electric vehicle markets as part of a new business plan following the Ernst & Young report and the establishment of agreements with the country’s lenders and the European Commission on electricity market reforms.

PPC believes its prospective gas market revenues have the potential to offset part or all of the utility’s bailout-required market share contractions in the electricity market.

In a study for PPC, consulting firm McKinsey noted the power utility’s gas market activities could end up representing 70 percent of business.

As for the electric vehicles market, PPC signed a Memorandum of Cooperation with Polish company Solaris in 2017. An older PPC business plan also includes partnerships with regional authorities around the country.  

Conditions ripening for PPC breakaway from state restraints

Power utility PPC’s ability to operate amid a fully competitive market without Greek State dependencies will be a crucial factor in its plan to restructure and restart.

The utility’s transformation has been on the cards for quite some time but conditions now seem ripe for all the talk to be put to action.

PPC’s exemption from slow-moving public contract procedures when needing to conduct business practices such as ordering new mechanical equipment appears to be one of the simpler tasks among the various tasks ahead.

Energy minister Costis Hatzidakis appears to agree on the need for a change in this domain.

It has become blatantly clear that state-controlled PPC cannot keep functioning in a competitive market when it takes the company months to complete orders and purchases of needed equipment when rivals are acquiring whatever they need in far less time.

Making matters worse, some PPC officials are hesitating to put their signatures to orders fearing public money mismanagement charges.

PPC would also like to be exempted from employee salary and recruitment limits imposed on all state-controlled companies as part of the bailout. Such issues, however, are politically sensitive.

These restrictions do not permit pay rises for personnel promoted to positions of greater authority and responsibility. The bailout pay-freeze regulation is prompting some employees to be on the lookout for opportunities elsewhere and also deterring qualified persons from seeking jobs at PPC.

 

 

 

Targeted PPC staff exit plan a must to avoid functional issues

A voluntary exit plan envisioned by the new energy minister Costis Hatzidakis for power utility PPC should carefully target a pool of around 2,000 workers primarily maintained as back-up staff rather than specialized, experienced personnel working at the utility’s technical and commercial divisions, so as to avoid any operating issues, company sources have informed.

A plan prepared by consulting giant McKinsey for PPC proposes the reduction of a similar number of staff.

The voluntary exit plan, whose details will need to be honed by PPC’s next chief executive, will cost no less than 30 million euros as each outgoing employee stands to receive severance pay of 15,000 euros.

Precision will be needed when selecting staff for the voluntary exit plan to avoid any operational disruptions at the already-troubled power utility, sources highlighted.

PPC currently employs a total of 9,500 staff members, 65 to 70 percent of these, or 3,000 to 3,500, holding technical positions. A further 800 to 900 are employed in the commercial division, while the back-up staff numbers roughly 2,000 persons.

At present, many PPC units do not possess younger staff possessing sufficient technical skills to replace experienced older personnel. Bailout restrictions have prevented state-controlled PPC from hiring new personnel, which has created a shortage of younger employees ready to take on responsibilities.

“This means that if, for example, five staff members stationed at a island power unit employing ten persons were to leave after reaching retirement age, then this unit would definitely not be able to continue operating,” one highly ranked PPC official warned.

PPC’s payroll cost totaled 790 million euros last year, which works out to an average of 49,000 euros per employee, a costly figure prompted by a high average age of over 50 and correspondingly elevated pay packages.

 

 

 

New minister set to present PPC recovery plan details

Hydropower units belonging to the power utility PPC will not be sold; NOME auctions will be abandoned; and electricity costs for consumers will not rise, the newly appointed energy minister Costis Hatzidakis is expected to announce later today when the New Democracy party presents its wider  policy program.

The minister is also expected to present details of a plan to seek strategic investment into distribution network DEDDIE once control of the network is transferred from PPC to the subsidiary with the permission of creditor banks.

Prime Minister-elect Kyriakos Mitsotakis is expected to make a general announcement on this network sale plan before his energy minister follows up with further details. The procedure will offer full protection for PPC’s interests, including compensation for the sale, the government officials are expected to stress.

The minister’s plan for an end of NOME auctions, launched about three years ago to offer independent parties access to the power utility’s lower-priced lignite and hydropower sources, was approved by the country’s lenders last week at a meeting between the two sides in Athens.

A transition plan leading to the launch of the target model, to offer market coupling, or harmonization of EU wholesale markets, is expected to be reached between the minister and the lenders when they next return to Athens for official talks in September. The transition plan will be designed to ensure that supply markets remain fully operational ahead of the target model’s launch.

The energy minister’s promise of no electricity cost increases for consumers will be accompanied by details of the state-controlled power utility’s more ruthless handling of unpaid receivables owed by consumers believed to be able, even affluent, but unwilling to cover their power bill debts. PPC is under financial pressure.

The government intends to reshape PPC along the lines of the transformation of telecommunications company OTE, a corporation in which the Greek State now holds just 5 percent, Deutsche Telekom being the main shareholder with a 45 percent stake.

Besides preventing a systemic crisis posed by PPC’s current financial woes, a rebound by the power utility would also send out a positive message for the Greek market to domestic and foreign institutional investors.

 

 

 

No new NOME surprises seen Wednesday, supply ample

Participants at this coming Wednesday’s NOME auction, the third session for the year, do not expect any new surprises in terms of price levels and bidding competition following a considerable starting-price increase to 58.12 euros per MWh, taking effect as of this week’s auction, and ample supply.

The revised starting-price level is just under the highest price of 58.74 euros per MWh reached at the previous auction in April.

Market officials have already factored these latest levels into their calculations as a result of higher wholesale electricity prices.

Intensified bidding competition, which would drive prices higher, is not expected as the electricity quantity to be supplied this Wednesday exceeds demand, a study conducted by industry expert E-intelligence has shown.

A total of 763 MW will be offered to NOME auction participants on Wednesday, comprised of a predetermined 500-MW amount plus a 263-MW penalty triggered by power utility PPC’s failure to reach a first-half retail electricity market share contraction target included in the country’s bailout terms.

A further penalty amount will be added down the road, at an ensuing October 10 NOME auction, which will increase the total offer on offer to a mammoth 1,029 MW.

 

PPC lignite sale is over, overall market solution to be sought

The newly elected center-right New Democracy government, appearing determined for major energy sector changes, will begin new negotiations with the European Commission in search of an overall solution for the country’s electricity market and the role and place in it for the power utility PPC, currently struggling.

The long-running disinvestment effort offering investors PPC lignite units has just about collapsed. A binding-offers deadline for a package that includes PPC’s Megalopoli and Meliti units expires on July 15, following an extension. Investors have not shown any interest, while, given the flatness, an additional extension could not reinvigorate the sale.

The next NOME auction, the year’s third, scheduled for July 17 and planned to offer independent energy firms 500 MW/h of PPC’s lower-cost lignite and hydropower production, appears likely to be the last under existing terms agreed to by Greece and the country’s lenders. Changes are also expected along this front as part of the intention for an overall electricity market solution.

Initial contact between Brussels and officials of Greece’s new administration has already been made. Meetings are soon expected to become more regular once the government has set out the specifics of its rescue plan for PPC.

Any resulting solution will need to satisfy Greek bailout terms including the need for PPC to have reduced its retail electricity market share to less than 50 percent by the end of this year. The power utility’s share is currently at 73.5 percent, meaning PPC will need to surrender even greater low-cost electricity amounts to competitors through the NOME auctions.

Fair competition in the electricity market also needs to be assured. Hydropower sources, currently exclusively controlled by PPC, may be brought into the negotiating picture. The European Commission is currently conducting a related study on PPC’s management of hydropower generation. Findings have yet to be released.

 

 

Energy deputy: ‘OTE should serve as an example for PPC’

The electricity market’s liberalization will help the power utility PPC restructure, as was the case with the Hellenic Telecommunications Organization OTE, the newly elected centre-right New Democracy government’s deputy energy minister Gerassimos Thomas supports.

The official, backed by experience as a deputy at the European Commission’s Directorate-General for Energy, has not specified what action should be taken if PPC’s current bailout-required disinvestment of lignite units fails to deliver.

But he is in favor of a national policy for the energy system’s decarbonization that would take initiatives and move a step ahead of bailout requirements rather than simply observe them.

It remains to be seen if further measures – beyond PPC’s lignite units disinvestment and the NOME auctions – will be needed for the electricity market’s liberalization, Thomas had commented late last year, adding, at the time, that the country has spent the last 8 years relying on the bailout program as its guide. Irrespective of this, the country needs to look at where it is heading and take initiatives as the market is changing completely, he added.

Thomas is a firm supporter of renewable energy and is expected to give priority to this sector.

On the NOME auctions, the official believes that their failure, so far, to break PPC’s market dominance must first be analyzed before any further action is taken.

 

 

Heavy 1Q losses at Meliti, Megalopoli bad news for sale

The main power utility PPC’s Meliti and Megalopoli power stations, both included in the corporation’s bailout-required disinvestment of lignite units, incurred heavy losses totaling more than 30 million euros in the first quarter, according to results uploaded into a VDR for investors considering the sale.

These losses, attributed to a sharp increase in CO2 emission right costs to levels of more than 25 euros per ton, make PPC’s disinvestment effort an even tougher mission. They also underlining the difficulties faced by the utility’s lignite-fired production facilities.

The 1Q net losses at Megalopoli, registered at 23.02 million euros, include a 4.2 million-euro cost concerning a voluntary exit plan for employees.

The losses at Meliti for the same period were 7.95 million euros, whose voluntary exit plan was valued at 0.5 million euros.

According to PPC, the company’s results could have benefited by 2.4 million euros as a result of an improved lignite supply agreement reached by PPC with the operator of the Ahlada mine supplying the Meliti power station in northern Greece. But this agreement does not come into effect until 2020 onwards.

ND, if elected, wants 65% DEPA sale, not split and sale

The main opposition New Democracy party, if victorious in the July 7 snap elections, intends to privatize gas utility DEPA as one corporate entity, through the sale of a 65 percent stake, rather than through a split-and-sale procedure offering separate trading and infrastructure entities, as has been promoted by the ruling Syriza government, currently well behind in polls.

The role of Hellenic Petroleum (ELPE), holding a 35 percent share of DEPA, will be influential when the time comes to make decisions.

Up until now, ELPE has indicated it would be interested in acquiring a 65 percent stake of DEPA Trade – one of the two DEPA entities envisioned by the government for the utility’s split and sale – either alone or with Italy’s Edison, ELPE’s strategic partner.

However, ELPE’s main shareholder, the Latsis group’s Paneuropean Oil, holding a 45.5 percent share, could revise its stance if DEPA’s new sale procedure is redrafted from scratch, as would most probably be the case with a conservative ND election victory.

During a parliamentary debate in March, ND party representatives clearly opposed Syriza’s plan for a DEPA split, describing it as an unnecessary, excessive and complicated approach that would ultimately suppress DEPA’s market value.

The DEPA split, forged by the energy ministry, is not listed as a bailout term, but the country did commit itself to a reduced retail gas market presence for DEPA. This demand was met some time ago when DEPA withdrew from gas supply firm EPA Thessaloniki-Thessaly and acquired Shell’s stakes in EPA Attiki and EDA Attiki, respective supply and distribution firms covering the wider Athens area.

 

 

PPC takes on expropriation plan for Meliti unit’s sustainability

The main power utility PPC’s board is expected to approve, at a session today, a self-financed expropriation plan designed to ensure lignite quantity and quality standards are met for the sustainability of the utility’s Melti power station, included in a bailout-required disinvestment package.

PPC had reached an improved lignite price agreement with the operator of the Ahlada mine supplying the utility’s Melti power station, at 16.5 euros per ton between 2020 and 2025. However, lignite quality and quantity standards demanded by the sale’s participants were pending.

PPC’s decision to finance the expropriation of the village Giourouki promises the extraction of better and greater amounts of lignite from the Ahlada mine, an initiative expected to make the Meliti power station sustainable.

The Ahlada mine operator, citing high expropriation costs, stopped expanding its mining activities for better-quality lignite and instead dug deeper around Giourouki. The resulting lower-quality lignite affected yield rates at the Meliti power station.

A pre-contractual agreement signed by PPC and Giourouki village residents promises an immediate expropriation payment of 60 percent, while the remaining 40 percent, according to the agreement, will be provided as soon as the precise compensation amount is finalized.

Participants of PPC’s sale of lignite units, relaunched after an initial sale failed to produce a result, face a May 28 deadline for binding bids. PPC’s expropriation plan for the village Giourouki has raised hopes at PPC of a successful follow-up sale.

Meanwhile, the Meliti power station’s eligibility for CAT remuneration remains unclear. PPC has no control over this issue. It is being handled by the energy ministry. The European Commission will have the final say.

 

Investors interested in PPC lignite units, challenges remain

With just 19 days remaining until the May 28 deadline for binding bids in the main power utility PPC’s bailout-required disinvestment of its Megalopoli and Meliti lignite power stations, prospective bidding teams appear interested but challenges remain for the sale, relaunched after an initial attempt failed to produce a result.

The candidates are believed to be preparing decent offers based on the current SPA terms, Greek electricity market conditions and EU climate change policies.

The Czech Republic’s Sev.En Energy, joined by GEK Terna; CHN Energy-Damco Energy (Copelouzos Group); Mytilineos; and Elvalhalkor are preparing worthy offers, sources have informed.

China’s CHN Energy and Sev.En Energy have emerged as the chief partners of their respective pairings, while their Greek associates have assumed negotiating roles with PPC.

Mytilineos and Elvalhalkor are both still looking to establish an association for the disinvestment and are also pushing for further sale term improvements.

The Greek participants are particularly keen to acquire the lignite units as a means of breaking PPC’s monopoly and avoiding any new sale attempt that would also bring hydropower units into the picture and end up attracting major European players with financial might.

Greek energy firms are looking to avoid the market entry of foreign competitors as this would lead to market share contractions and a loss of their leading domestic roles.

Despite the investor interest, the sale attempt remains challenging for all sides. The Megalopoli and Meliti lignite units, according to PPC’s financial results for 2018, incurred losses of more than 360 million euros. Also, CO2 emission right costs are continuing on their upward trajectory, while Brussels’ tough stance on carbon is  stiffening.

 

Lender representatives visiting Athens in a pre-election mood

Pending energy market reforms, including privatizations, PPC’s disinvestment of lignite units, and other market liberalization measures, will be discussed between government officials and the country’s lender representatives, visiting Athens to begin a post-bailout review this week.

Long-term decisions on various matters will most likely need to be made following Greece’s elections, due in autumn, once the political climate has settled. This delay, though, could end up prompting tougher demands by the lenders, including the European Commission.

PPC’s sale of lignite units, relaunched following a failed previous effort, is expected to dominate the talks. The disinvestment’s deadline for binding bids has been extended to May 28, which virtually coincides with the European elections, making the prospect of the sale procedure’s punctuality uncertain.

The lenders are expected to push for financial restructuring measures at state-controlled PPC, which has just posted disappointing results for 2018. Some of these measures will entail political cost.

The lender representatives will also push for decisions on slow-moving energy-sector privatizations. The sale procedure for gas utility DEPA has fallen behind schedule while uncertainties have crept into the the ELPE (Hellenic Petroleum) privatization.

The target model as well as Crete’s urgently-needed electricity grid interconnection with Athens will also be on the agenda. The latter has led to a control-related dispute between Greek power grid operator IPTO and Euroasia Interconnector, a consortium of Cypriot interests heading a wider PCI-status Greek-Cypriot-Israeli electricity grid interconnection project.

PPC’s renewed lignite units sale faces crucial three-week period

The main power utility PPC, in its financial report for 2018, has made blatantly clear the positive impact on the company of a successful sale of its Meliti and Megalopoli power stations, included in a bailout-required disinvestment of lignite assets.

Besides being rid of annual operating losses incurred by these facilities, estimated at a total of 100 million euros, PPC also stands to benefit from reduced CO2 emission right cost purchases, a lighter environmental footprint, a gain of approximately 223.8 million euros from the gradual withdrawal of NOME auctions, and less European Commission pressure for an additional disinvestment of hydropower units.

The 25-day period remaining until the sale procedure’s completion on May 28 will be crucial for the effort’s outcome. Possible buyers remain reserved.

An improved lignite supply agreement reached by PPC with the operator of the Ahlada mine feeding the Meliti power station, uploaded several days ago to the sale’s virtual data room, has not fully eased the concerns of investors. A number of issues concerning the expropriation of the village Giourouki in the area, which needs to be completed by December 31, remain unresolved. Otherwise, the new supply agreement’s terms cannot apply.

Also, investors appear to have raised wider energy mix issues and proposed other adjustments that could increase the likelihood of a successful sale, renewed after an initial effort failed to produce a result.

PPC’s board has noted it cannot guarantee the prevention of further disinvestment obligations in the future concerning its interests in lignite and other sectors as a means of meeting market share contraction targets in electricity production and supply.

 

PPC uploads improved Meliti lignite supply deal to VDR

The main power utility PPC has uploaded to its virtual data room an improved lignite supply agreement reached with the operator of the Ahlada mine feeding the Meliti power station, thereby resolving one of the biggest ambiguities that has shadowed the utility’s bailout-required sale package of lignite units for prospective buyers. The Meliti unit is included in this disinvestment package.

The agreement guarantees the Meliti power station a minimum annual amount of 2 million tons of lignite at a cost of 16.5 euros per ton over a five-year period beginning in 2020. These terms are based on the condition that the village Giourouki, in the Meliti area, will undergo expropriation procedures by the end of this year.

In the lead-up, a price of 21 euros per ton has been set for 2019.

The Meliti agreement’s annual lignite output of 2 million tons could be increased by 25 percent if certain requirements are met.

The Meliti unit’s high operating cost was a key factor behind PPC’s failure to attract investors to its initial sale effort offering the same package of lignite units.

 

PPC unit contenders promised 30% price return without CATs

Investors have been promised a 30 percent return of the price paid for the acquisition of the main power utility PPC’s Meliti and Megalopoli power stations, included in a bailout-required package of lignite units, if these units are not remunerated through a European Commission CAT mechanism within nine months of the acquisition’s completion, according to the sale’s revised SPA terms, endorsed by the utility’s board yesterday, energypress sources have informed.

It remains unclear if the SPA includes an improved lignite supply agreement reached between PPC and the operator of the Ahlada lignite mine supplying the Meliti power station.

Some sources contend this agreement has been incorporated into the revised SPA while others claim it concerns an arrangement for the supply of additional lignite quantities to Meliti from other producers.

PPC has relaunched its sale of lignite units after an initial effort failed to produce a result.

CAT remuneration eligibility for the Meliti and Megalopoli units, as has been called for by some of the sale’s participants, is absent from the revised SPA terms.

 

 

PPC sale participants want extension beyond May 6 date

The main power utility PPC’s finalized SPA terms for a bailout-required sale of lignite units that includes its Meliti and Megalopoli power stations will, barring unexpected developments, be presented at a board meeting today.

The power utility is aiming to set a May 6 deadline for binding bids but prospective buyers fear such a date offers little time for a thorough assessment of terms and shaping of bids and is made even tighter by the loss of working days as a result of the upcoming Greek Orthodox Easter break, sources informed. The prospective buyers will push for a few extra days to prepare their bids, the sources added.

The revised SPA terms for this sale, relaunched after an initial effort did not produce a result, do not feature any spectacular changes, sources informed. The package will not include a profit-and-loss sharing arrangement for PPC and new unit owners, as had been requested by some of the prospective buyers seeking investment protection.

Calls by investors for clarification on the CAT remuneration eligibility of units remain murky as the European Commission has yet to endorse such a plan.

However, improved lignite supply terms between the operator of the Ahlada mine feeding Meliti and this power station’s owner will be included in the revised SPA terms.

The new terms will be uploaded onto the sale’s video data room within the next few hours, sources informed.

PPC views its Meliti and Megalopoli power stations as profitable following the recent implementation of a voluntary exit plan that has reduced staff numbers. Investors will have the final say once they receive the sale’s SPA terms.

PPC defers crucial lignite units SPA meeting for next Tuesday

A main power utility PPC board meeting scheduled today for a presentation of proposed SPA terms concerning the Meliti and Megalopoli power stations included in a bailout-required sale package of lignite units, has been postponed until next week, the session’s new date being April 23, when the utility’s financial results for 2018 will be announced, sources have informed.

SPA details, pivotal for the interest of investors, have yet to be finalized. Today’s deferral suggests last-minute efforts are being made to embellish Meliti and Megalopoli as more appealing prospects for investors. PPC was recently forced to relaunched its sale of lignite units after an initial effort failed to produce a result.

Sources with inside information on the proceedings have contended that no major changes have yet to be made to previous SPA terms.

“PPC’s disinvestment effort once again finds itself at a crucial stage, given the EU’s adverse regulatory framework concerning carbon,” one source stressed, adding that the sale’s details remain murky despite efforts by the board to clarify.

An agreement reached between PPC and the operator of the Ahlada lignite mine feeding the Meliti power station, for a lignite supply price reduction to 16.5 euros per ton from 23 euros per ton, has yet to be uploaded to the sale’s virtual data room.

Whether the units up for sale will be eligible for CAT remuneration also remains unclear. The European Commission has yet to respond to a Greek request on the matter.

PPC sale contenders embrace coal cost cut, await SPA terms

Prospective buyers considering the main power utility PPC’s bailout-required sale package of lignite units, relaunched after an initial effort failed to produce a result, have responded favorably to news of a lignite supply cost reduction for Meliti, one of the stations up for sale, but they remain on hold awaiting the sale’s finalized SPA terms before reaching conclusions.

PPC has secured a lignite supply cost reduction of 28 percent for its Meliti power station following an agreement with the operator of the Ahlada mine feeding the power station. The lignite supply price has come down to 16.5 euros per ton from 23 euros per ton.

“The finalization of any pending issue is positive news [for the sale], but we will take positions once we see the SPA,” one source noted.

A total of six bidding teams are participating in the sale. Beijing Guohua Power Company Limited, joined by Damco Energy; China Western Power Industrial; the Czech Republic’s Sev.En Energy – Indoverse Coal Investments Limited; GEK Terna; Elvalhalkor; and Mytilineos make up the field of contenders.

 

Gov’t, employees on edge amid PPC, Ahlada mine operator dispute

An ongoing effort by the main power utility PPC for improved terms of its supply agreement with Lignitorihia Ahladas, the licensed operator of the Ahlada lignite mine exclusively supplying the utility’s Meliti power station in northern Greece, has led to escalated tension between the two sides.

PPC has opted to stop payments to the operator for its lignite supply as a means of offsetting lower-than-expected output and pressuring Lignitorihia Ahladas for a lower supply price that would help the Meliti power station become sustainable.

Meliti is included in PPC’s bailout-required disinvestment package of lignite units, whose sale has just been relaunched following the initial effort’s failure to excite prospective buyers.

The government needs to intervene in an effort to resolve the dispute between state-controlled PPC and Lignitorihia Ahladas but must tread carefully as it knows well the power utility’s disinvestment could prompt political damage if its relaunch fails to produce a result.

The operator has dismissed eight of 600 employees amid its clash with PPC. Workers at the mine and Meliti power station fear the ongoing dispute could lead to more job losses.

Lignitorihia Ahladas contends it will not be able to continue operating the Ahlada mine should it succumb to PPC’s pressure for a supply price reduction to 18 euros per ton from the present level of 23 euros. The operator has counter-proposed reducing its supply price as of 2020, when its expropriation procedure concerning the Ahalda settlement, needed to facilitate output, is expected to have been completed.

PPC claims the supplier’s current price does not reflect actual conditions and potential at the mine, noting inefficient practices applied by the operator are increasing production costs.

 

Target model’s market coupling seen no sooner than early 2020

The target model, aiming for market coupling, or harmonization of EU wholesale markets, in order to unify energy markets, intensify market competition and provide energy security, remains a pending issue for Greece and seems set for further delays.

Already behind by a number of years, Greece’s target model was given an April 1, 2019 implementation date through the country’s bailout terms. However, this does not appear likely to occur until October this year, while the actual coupling of the Greek market, a fundamental aspect of the target model, does not seem achievable within 2019, the date of a related tender being staged by power grid operator IPTO indicates. At best, Greece’s market coupling should not be expected before the first two months of 2020.

The IPTO tender concerns the supply of necessary software for the Greek market’s coupling with neighboring markets, not the balancing market.

 

 

PPC set for legal action to resolve mine supply concerns

The main power utility PPC is preparing to take legal action against the operator of the Ahlada lignite mine feeding the utility’s nearby Meliti power station in northern Greece in an effort to overcome issues with the existing supply contract that have kept prospective buyers away from Meliti.

The facility, included in PPC’s bailout-required sale of of lignite assets, just relaunched following the initial sale effort’s failure, is seen as a major drawback for the overall sale effort.

The existing agreement with Lignitorihia Ahladas, the Ahlada mine’s operator, is regarded as unappealing by investors as it does not secure price and quantity stability.

One of the sale’s participants, a consortium comprised of the Copelouzos group and CHN Energy, did not submit an offer to the initial sale effort, citing Ahlada mine supply contract concerns.

Late last year, the energy ministry extended the Ahlada lignite mine operator’s contract until 2023 with an option for a further five-year extension.

However, state-controlled PPC’s chief executive Manolis Panagiotakis has condemned the mine operator for under-producing and not fully utilizing the Ahlada mine’s potential.

In 2007, PPC signed an agreement with the operator for 2,000 tons of lignite per year at a price of 13.4 euros per ton. Focusing on a high-yield mine area, the operator was able to honor these terms until the end of 2009. However, since 2010, the operator has mined at lower-yield areas to avoid expropriation costs.

New evaluation of PPC lignite units crucial for follow-up sale

Legal framework provisions enabling lower evaluations of lignite units offered in the main power utility PPC’s bailout-required disinvestment will play a crucial role in the success of a follow-up sale just launched after an initial effort failed to produce results.

Much will depend on how state-controlled PPC’s board will decide to use the evaluation-related framework. The utility’s chief executive Manolis Panagiotakis has warned that investors looking to buy for quick profit within a year or two should look elsewhere.

Despite this tough stance, PPC officials know well that a failure of the latest lignite sale effort to produce a result will increase the likelihood of eventual European Commission pressure for the inclusion of hydropower units into the sale package or lead to greater electricity amounts for independent players through NOME auction, offering access to PPC’s lower-priced hydropower and lignite sources.

The energy ministry is well aware of these dangers and appears determined to push ahead with the current lignite-only disinvestment plan for PPC.

New PPC lignite sale’s field of contenders disclosed today

The field of contenders entering the non-binding first round of main power utility PPC’s renewed sale of lignite units, a bailout requirement, will be unveiled to the utility this afternoon by HSBC, managing the sale’s expressions of interest procedure.

It remains unknown if two undisclosed investors from Russia and the USA, as well as China’s CMEC will emerge as additional entries to the previous sale attempt’s list of contenders, as was recently announced by PPC’s chief executive Manolis Panagiotakis.

The PPC boss has also indicated that Czech firm EPH, a participant in PPC’s initial sale effort, intends to reenter.

Expressions of interest are once again expected from Seven Energy, another Czech firm, with Gek Terna as its partner for this sale, China’s CHN Energy with the Copelouzos group, as well as Mytilineos, according to sources.

All three formations had taken part in the initial sale effort and reached a consultation stage that shaped the disinvestment’s sales and purchase agreement. Offers were submitted by Seven Energy-Gek Terna and Mytilineos.

The participation of Elvalhalkor is uncertain. This firm could move to take part in a consortium at a latter stage.

On the one hand, a wider field of prospective buyers promises to intensify bidding, while, on the other, this will increase investor demands for greater incentives as a condition for binding bids.

The PPC boss contends Meliti and Megalopoli power station units included in the sale are profitable but investors see unfavorable prospects given the EU’s decarbonization policy.

Also, an unfavorable supply agreement between PPC and the operator of the Ahlada mine feeding the utility’s Meliti unit remains unresolved. PPC wants improved terms. The existing contract, not securing price and quantity stability, was seen as a drawback by participants in PPC’s initial sale.

Furthermore, CAT remuneration eligibility for sale package units remains uncertain. The European Commission has yet to deliver news on this front.

The sale’s new evaluation procedure, seen producing a lower price, is another headache for PPC. The utility’s boss insists PPC units “will not be sold to investors seeking swift profit within a year or two.”

 

 

 

Resurging CO2 costs a major concern for PPC lignite sale

Rebounding after sliding to a three-month low in late February, CO2 emission right price levels have risen sharply to remind they are a key tool for the EU’s climate change policies and a problem for the main power utility PPC’s bailout-required sale of lignite units, relaunched last week after an initial effort failed to excite investors.

CO2 emission right price levels rose sharply by more than 23 percent over a two-week period between February 21 and March 4, from 18.71 euros to more than 23 euros per ton, and have since stabilized at levels between 22 and 23 euros per ton. CO2 emission rights ended trading yesterday at 22.17 euros per ton.

Price levels had exceeded the 25-euro mark in January before dropping later next month and rebounding over recent weeks.

The EU has confirmed its free CO2 emission right handouts for energy-intensive industry will not be increased following 2020, but, instead, will remain unchanged until 2030.

Quite clearly, elevated CO2 emission right price levels are not a temporary phenomenon but highlight the unfavorable conditions amid which PPC’s sale of lignite units is taking place.