bailout agreement

PPC set for legal action to resolve mine supply concerns

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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

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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

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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 Elvalhalcor 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

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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.

PPC ups pressure on Ahlada mine operator for better lignite supply terms

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The main power utility PPC is increasing its pressure on the operator of northern Greece’s Ahlada lignite mine, feeding the utility’s nearby Meliti power facility, for improved supply terms.

The existing contract, which does not secure price and quantity stability, was seen as a drawback by participants of PPC’s failed sale of lignite units, relaunched today. The Meliti unit is included in the bailout-required sale’s package.

PPC will pursue measures, including loss of earnings charges, against the Rozas family, operating the Ahlada mine, if the existing agreement’s supply terms are not improved, Manolis Panagiotakis, the power utility’s boss, has warned.

Late in 2018, the Greek State extended state-controlled PPC’s agreement with the Ahlada mine’s operator until 2023 with an option for a further five-year extension.

However, Panagiotakis has condemned the operator for under-producing and not fully utilizing the Ahlada mine’s potential, which, he supports, is prompting price instability.

The mine’s operator has supplied PPC’s Meliti facility at price levels ranging between 19 and 23 euros per ton, but these can be reduced to 18 euros per ton, leading to annual savings of 12.5 million euros, the PPC chief noted.

Panagiotakis claims flawed mining practices are being applied at Ahlada as the operator is avoiding expropriation costs concerning three settlements in the region. As a result, potential for better-quality lignite is not being realized, the PPC boss said. Expropriation costs are estimated at between 25 and 30 million euros.

“The operator can choose between the roads of understanding and conflict. Opting for the latter will lead to defeat,” Panagiotakis warned, adding successful negotiations would offer the operator an opportunity to sell considerably greater lignite amounts to Meliti’s prospective new owner.

 

 

Relaunched PPC lignite sale planned for completion May 5-8

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The main power utility PPC’s follow-up sale attempt offering lignite units, planned to move ahead swiftly with the aim of producing a preferred bidder between May 5 and 8, ahead of European Parliament and local elections, is being relaunched today with investor-friendly terms intact following the initial sale’s failure to excite candidates.

Besides three bidding teams that took part in the first sale attempt, the relaunched sale is expected to include new entries.

PPC’s chief executive Manolis Panagiotakis has returned from a brief trip to China having secured the participation of two Chinese entries, China Energy and CMEC, while two more firms, Russian and American, have also decided to bid for the PPC units, according to the PPC boss.

Last-minute revisions were needed following intervention by the European Commission’s Directorate-General for Competition. Panagiotakis is scheduled to visit Brussels next week for further talks.

According to the revised terms, PPC holds the right to commission a new evaluation of the assets included in the disinvestment, a bailout requirement.

The previous evaluation, projecting an IRR figure of 10.7% and lignite costs at 28.5 euros per ton, was not to blame for the initial sale effort’s failure, the PPC chief has insisted.

Extremely unfavorable market conditions at the time of the sale, including investor insecurity over CO2 emission right costs, as well as serious pending issues such as the need for an improved lignite supply agreement with the operator of the Ahlada mine feeding the Meliti power station, one of the units up for sale, were key reasons behind the failure, Panagiotakis has supported.

A voluntary exit plan for employee reductions at units included in the sale package, Brussels pre-notification for CAT remuneration eligibility of units, and the result of ongoing negotiations with the Ahlada mine’s operator all offer improved potential for a successful sale procedure, the PPC boss has highlighted.

Interested bidders will need to express interest by the end of next week. The re-registration procedure for bidders who took part in the initial sale attempt will be limited to an official statement noting that no changes have been made.

Consultation for the sale and purchase agreement (SPA) will be held over a period of 20 days to one month. Its finalized terms will be announced a week later. Contenders will then have one week to submit their binding offers before a preferred bidder is declared between May 5 and 8. An extraordinary PPC shareholders’ meeting and a parliamentary session will follow to approve the transfer of units to new owners.

 

 

 

Swift procedure planned for renewed PPC lignite sale effort

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The revised framework for a follow-up sale attempt of main power utility PPC lignite units, included in an energy ministry draft bill to be submitted to parliament today, is expected to be driven by a fast-moving schedule aiming for the procedure’s completion by early May.

Sources have not ruled out a relaunch of the bailout-required sale midway through next week, offers ahead of Orthodox Easter (April 28), and an endorsement of the result at a PPC shareholders’ meeting on May 8.

Besides the procedure’s short time span, which could end up subduing investor offers, revised terms agreed to by the energy ministry and the European Commission’s Directorate-General for Competition for the renewed sale attempt include a profit-and-loss sharing arrangement between PPC and investors for two years.

The Megalopoli and Meliti lignite-fired facilities included in the sale package are believed to have been loss-incurring in the lead-up to the sale.

Evaluation procedures have also been revised for the new sale attempt, sources noted.

Pending bailout energy matters resolved by draft bill, minister notes

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An energy ministry draft bill submitted to a parliamentary committee ahead of its parliamentary vote on Thursday resolves pending post-bailout energy sector requirements, the privatization plan for DEPA and disinvestment of main power utility PPC lignite assets being the two main matters, energy minister Giorgos Stathakis has pointed out.

Besides sections on lignite and gas network ownership, the draft bill includes a provision for an upgrade of the Institute of Geology & Mineral Exploration (IGME), to be renamed the Greek Geological & Mineral Exploration Authority (EAGME).

Less bureaucracy and simpler licensing procedures for the utilization of geothermal fields can be expected by the change, Syriza party speaker Anastasia Gara told the parliamentary committee.

The draft bill also includes town planning and building regulation revisions aimed at strengthening the government’s stance against unregulated building activity, stressed Stathakis, the energy minister.

The government’s wider plan to maintain the state’s control of public infrastructure is also observed by the draft bill, the minister noted.

Main oppostition New Democracy speaker Konstantinos Skrekas warned the parliamentary committee that the country’s bailout-related commitments concerning PPC are “not faring well”.

Ministry, DG Comp talks on PPC sale terms not over yet

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Negotiations between the energy ministry and the European Commission’s Directorate-General for Competition for an agreement on the revised terms of the main power utility PPC’s follow-up effort to sell lignite units will continue this week but are not expected to exceed it as a crucial Eurogroup meeting of eurozone finance ministers is scheduled for next Monday, March 11.

PPC’s lignite disinvestment is a pending bailout requirement. It is one of the key commitments for the release, by the country’s lenders, of a one-billion euro tranche.

Throughout the previous week, the talks between the energy ministry and the DG Comp were said to be nearing a deal. The fundamentals of the new sale’s revised terms, to feature improved conditions for investors following the initial effort’s failure, have been set but participation details concerning new entrants still need to be clarified, sources explained.

“The main objective of the two sides is to resolve whatever pending issues remain in a way that will maximize the sale’s chances of success this time around,” one source informed.

PPC is also making a committed effort for a successful follow-up sale. Last week, the utility’s chief executive Manolis Panagiotakis provided the European Commission with a letter listing a series of factors he sees as crucial to the disinvestment’s success.

Panagiotakis drew attention to an EU law limiting investment activity of non-EU investors, which he views as an obstacle for the sale. Russian, Chinese and American players of repute are interested in the PPC sale, according to the PPC boss, currently in Beijing for talks with Chinese firms.

PPC chief informs Brussels of crucial factors in lignite units sale

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The main power utility PPC’s chief executive Manolis Panagiotakis has provided the European Commission with a series of a factors he sees as crucial to the success of the utility’s follow-up sale attempt of lignite units following a failed initial effort.

EU law limiting investment activity of non-EU investors is indirectly yet quite clearly presented as an obstacle that should not restrict the PPC sale, the utility’s chief official pointed out in his letter, forwarded to Brussels competition and energy authorities.

According to Panagiotakis, Russian, Chinese and American players of repute have obtained the sale’s necessary data and are considering participating in the sale. The relaunch of the sale, a bailout requirement, is expected to feature improved terms for investors.

The PPC boss also lists CAT remuneration eligibility for the lignite-fired power stations included in the sale package as pivotal.

Staff reductions at the Megalopoli and Meliti power stations, both believed to be loss-incurring, are also crucial for the sale, according to the PPC chief. A voluntary exit plan offered by PPC is currently in progress and leading to payroll cost reductions, he informed. Savings at the Megalopoli plant are expected to reach approximately 25 million euros a year, Panagiotakis noted in his letter.

An existing lignite supply agreement between PPC and the license holder of Ahlada, a mine feeding PPC’s nearby Meliti lignite-fired power station in northern Greece, remains a problem as it does not secure price and quantity stability, the utility boss also pointed out, adding that legal pressure is being applied on the license holder.

The lack of a clear-cut national energy plan, or, more specifically, the ambiguity surrounding the future of the country’s lignite-fired power stations, is another issue that troubled investors in the previous sale effort, Panagiotakis noted.

Greek energy planning studies indicate the need for lignite-related output in the medium term, but at levels clearly below current levels, the PPC boss supported.

 

 

Minister, DG Comp close to deal on new PPC lignite terms

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The energy ministry and the European Commission’s Directorate-General for Competition appear to be just days away from  finalizing terms of the main power utility PPC’s new sale of lignite units, to feature improved conditions for investors, following the initial effort’s failure.

A profit-and-loss sharing mechanism, which had been requested by a bidding team comprised of Seven Energy and Gek Terna, will most likely be included in the disinvestment’s revised sales and purchase agreement and given a two-year duration.

It is believed the matter was discussed by energy minister Giorgos Stathakis in a high-level teleconference early yesterday with Margrethe Vestager, the European Commissioner for Competition, which highlights the energy ministry’s urgency for a finalized PPC sale plan ahead of an imminent Eurogroup meeting of eurozone finance ministers, scheduled for March 11.

A follow-up session between the two officials would have taken place in the evening had the energy minister not rushed off for Crete on an emergency visit following extensive weather-related damages on the island.

PPC’s lignite disinvestment is a pending bailout requirement. It is one of the key commitments if the country’s lenders are to release a one-billion euro tranche for Greece.

The Directorate-General for Competition has yet to present a position on whether the PPC lignite units up for sale will be eligible for CAT remuneration.

 

PPC acts against Ahlada mine operator for better supply terms

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The main power utility PPC has taken extrajudicial action against a family-run enterprise licensed by the utility to operate the Ahlada mine supplying the nearby Meliti lignite-fired power station in northern Greece in an effort to secure improved terms for prospective buyers of the power station. It is included in the utility’s bailout-required disinvestment of lignite assets.

The existing agreement between PPC and the Rozas family enterprise,  licensed to operate the mine, does not secure price and quantity stability. Prices vary depending on the yield offered by extracted lignite. Also, PPC believes development at the mine is too reserved. It is anticipated that greater output would lower the price of lignite per ton.

Prospective buyers who took part in PPC’s recently failed first attempt at completing its lignite package sale identified the Ahlada mine’s current supply agreement for Meliti as a disincentive. A team comprising China’s CHN Energy and the Copelouzos group was particularly troubled. The supply agreement will be passed on to Meliti’s prospective owner.

Two other requests forwarded by prospective buyers – staff cuts and the adoption of a profit-and-loss sharing mechanism for the units sold – are in the process of being added to the follow-up sale effort’s new terms.

PPC is currently supplied Ahlada lignite at a price of 23 euros per ton for its Meliti mine but wants the price level reduced by five euros per ton, which would generate annual savings of approximately 12.5 million euros.

Czech offer to serve as lower limit in new PPC sale attempt

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The main power utility PPC’s recently failed bailout-required sale of lignite units is headed for a relaunch rather than an extension, which will enable the entry of new candidates, as well as a market-based evaluation rather than a book value estimate of assets, as was the case with the first attempt, ongoing negotiations between the energy ministry and the European Commission are strongly indicating.

Bids submitted by participants in the initial sale attempt are expected to be taken into account for the new evaluation.

The Mytilineos group had offered 25 million euros for PPC’s Meliti unit while a Greek-Czech bidding team comprising Gek Terna and Seven Energy submitted a 103 million-euro offer for Meliti and two Megalopoli units.

However, this latter offer was rejected as it included a profit-and-loss sharing condition that had not been included in the sale’s terms. Authorities are now looking at including a profit-and-loss sharing mechanism to the new sale’s terms. Also, the amount offered by Gek Terna and Seven Energy is expected to be adopted as a lower limit.

Energy ministry officials are aiming for a finalized agreement by this Thursday’s Eurogroup meeting of eurozone finance ministers. PPC’s lignite disinvestment is a key bailout commitment that remains pending. A one-billion euro tranche for Greece depends on this sale procedure.

PPC’s chief official Manolis Panagiotakis believes that a renewed sale attempt cannot take place sooner than May, given the preparations required.

Greek officials are hoping for a sufficient time period that will enable the completion of a staff reduction demand made by prospective buyers for the sale package’s units.  Local authorities also hope PPC’s lignite units will qualify for CAT remuneration by May.

PPC units sale to be relaunched with profit-loss sharing system

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The main power utility PPC’s recently failed bailout-required sale of lignite units will be relaunched rather than extended to enable entries of new candidates, while a temporary profit-and-loss sharing mechanism concerning the buyers and seller will be introduced.

Ongoing negotiations between the energy ministry and the European Commission’s Directorate-General for Competition for the sale’s new terms and conditions are now well in progress.

The profit-and-loss sharing mechanism had been requested by some of the prospective buyers who emerged for the sale’s initial effort but its finalized version was rejected by Brussels after a series of revisions were made. This mechanism’s duration and details, such as limits, still remain unclear.

CAT remuneration eligibility for the lignite units included in PPC’s sale package is another crucial factor for the effort’s outcome. Brussels has yet to offer its approval for CAT eligibility.

The energy ministry is striving for a finalized sale plan ahead of an imminent Eurogroup meeting of eurozone finance ministers, scheduled for March 11.

 

Ministry’s DEPA hiring plan raises privatization concerns

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An energy ministry plan to orchestrate hirings of 200 subcontracted external associates working for gas utility DEPA through a procedure that would skip bailout-related employment restrictions imposed on public sector enterprises has swiftly raised objections on a number of fronts and troubled authorities over the move’s impact on the utility’s prospective privatization.

Company shareholders fear the currently profitable utility’s market value will be diminished as a result of these hirings, seen as unnecessary additions that will bloat the payroll and reduce DEPA’s operating profit levels.

Besides the shareholders, DEPA employees on the payroll have also reacted fearing these hirings could affect their interests.

The ministry, looking to hand out favors as this is an election year, is planning to hire the 200 subcontracted workers through three subsidiaries not subject to the bailout-related employment restrictions imposed on public sector enterprises.

These are gas supplier EPA Attiki and gas distributor EDA Attiki, both covering the wider Athens area, as well as DEDA, responsible for gas network development in regions not covered by the parent company. Head officials at these subsidiaries have also expressed concerns over the repercussions of the energy ministry’s recruitment plan.

The DEPA privatization, not expected to be launched before July, may end up being loaded onto the agenda of the country’s next administration.

DEPA will be split into two new entities, DEPA Infrastructure and DEPA Trade, for the privatization, to begin with a tender offering a majority stake (50% plus one share) in DEPA Trade. A 14 percent stake of DEPA Infrastructure will also be placed for sale at a latter date.

DEPA privatization draft bill set for parliament on February 28

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The energy ministry has been given a February 28 date for its submission to parliament of a draft bill designed to split the gas utility DEPA into two entities, DEPA Trade and DEPA Infrastructure, ahead of its privatization. This parliamentary move comes with slight delay as it was initially expected in December.

Investors will be offered a majority stake (50% plus one share) in DEPA Trade, while, at a latter date, a 14 percent stake of DEPA Infrastructure will also be placed for sale.

Having reserved an end-of-Febuary date for its DEPA draft bill, the energy ministry expects its ratification within the first five days of March. If so, the government will have fulfilled yet another bailout requirement ahead of an imminent Eurogroup meeting of eurozone finance ministers, scheduled for March 11.

The tender offering a majority stake in DEPA Trade should be launched within a month’s time of the bill’s ratification, according to the TAIPED privatization fund’s annual development plan. Given this schedule, the sale’s official announcement can be expected in early April.

One of the annual development plan’s next steps concerning the DEPA privatization entails ensuring veto rights for the Greek State, through its role in DEPA Trade, if extraordinary situations require intervention or any DEPA supply agreements – reached prior to the sale –  for gas quantities concerning PCIs be placed in any doubt. DEPA Trade’s portfolio will include the utility’s international gas supply agreements.

 

PPC disinvestment flop costly, NOME tally at 115% of output

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Besides generating further pressure for a new, broadened and more generous disinvestment package offering to buyers, the failure of the main power utility PPC’s bailout-required sale of lignite units has also drawn increased attention to the utility’s unrelenting retail market share, another Greek bailout commitment.

A considerably increased electricity amount the power utility must now offer through NOME auctions in 2019 is one direct consequence.

As has already been announced by RAE, the Regulatory Authority for Energy, PPC must offer 1,972 MWh/h to market players over four NOME auctions this year. Previously, 1,444 MWh/h had been scheduled for 2019 but a penalty amount of 528 MWh/h has been added as a result of PPC’s failure to meet its end-of-2018 market share contraction target.

The new NOME tally for 2019, representing 115 percent of the utility’s total lignite and hydropower production, essentially means PPC must not only offer market players its entire lignite and hydropower-based output at prices lower than the System Marginal Price (SMP), or the wholesale price level, but also  purchase a considerable extra electricity amount from the wholesale market, representing 15 percent of its lignite and hydropower-based output, to make up the numbers, before selling this supplementary amount through the NOME auctions.

PPC’s market share at the end of 2018 stood at 80.29 percent, well over the target of 62.24 percent. A 49.24 percent target has been set for the end of 2019.

RAE allotted just 350 MWh/h to last week’s first auction for the year assuming PPC’s disinvestment of lignite units would succeed.

 

Brussels questions PPC over market manipulation suspicions

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The main power utility PPC, suspected by the European Commission’s Directorate-General for Competition of abusing its dominant position and manipulating Greece’s energy market through its hydropower units, has been asked to provide thorough responses to a list of questions forwarded by Brussels, investigating the utility’s practices.

The DG-Comp, which has delivered an initial report, began investigating the Greek power utility two years ago after invading its headquarters in Athens, as well as those of the power grid operator IPTO in February, 2017, for information concerning the probe. Brussels officials already possessed some PPC-related information prior to their walk-in and also accumulated further details following the invasion.

The probe has been an underlying threat for PPC ever since the DG-Comp invasion. The effort’s initial report has emerged at a bad time for the power utility, hot on the heels of its failed attempt to sell lignite units, a bailout requirement.

Speculation has already begun as to what the follow-up demands on PPC could be. The energy ministry, doing its utmost to keep intact as much of the state-controlled power utility’s corporate make-up as possible, fears Brussels may start applying pressure for the inclusion of PPC’s hydropower plants into an upgraded sale package.

The set of questions forwarded by the DG-Comp, a procedure required once initial reports have been completed, could represent the first step in a process leading to EU law infringement charges against PPC and Greece.

Though not confirmed, the data collected by the Brussels officials from the PPC and IPTO Athens offices is believed to include details suggesting wholesale price manipulation by the power utility through overstated capacities concerning its hydropower units, as well as overstated unit capacities of other PPC units not actually available at the time, the objective being to sideline facilities operated by rival electricity producers.

On a recent visit to Greece, as part of a post-bailout review, lender representatives, hinting at what the DG-Comp had in store, adamantly questioned whether market- abuse restrictive measures have been enforced.

 

 

 

 

 

PPC fate in hands of Brussels, hydropower units addition a fear

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The main power utility PPC’s future corporate make-up, following the apparent debacle of its bailout-required disinvestment of lignite units, now lies in the hands of the European Commission, whose intentions are soon expected.

Even if the Mytilineos group does submit an improved follow-up offer today, as has been requested, for PPC’s Meliti facility in Florina, northern Greece, and the unit is sold, the country’s commitments to the European Commission will not have been fulfilled.

Two units of PPC’s Megalopoli facility failed to attract investors, meaning the sale’s objective of reducing PPC’s lignite market share by 35.6 percent cannot be attained.

The initial offer made by the Mytilineos group for Meliti is believed to be well under the price tag set by an independent evaluator for the facility.

Another offer made by Seven Energy and Terna, for Megalopoli, was apparently rejected for not meeting terms, while the sale’s third contender, a team comprised of the Copelouzos group and CHN Energy, ended up not submitting any offers.

The crucial question, as things have turned out, is whether Brussels will bring Greece’s hydropower units into the picture, as an addition to the lignite package.

The energy ministry is definitely worried about such a prospect and insists this remains a red-line issue for energy minister Giorgos Stathakis.

Greece will be under considerable pressure should Brussels and the country’s other lender institutions decide to associate the lignite unit sale’s apparent debacle with Greece’s slow progress in opening up the retail electricity market to competition.

Data provided by the energy exchange for December showed PPC’s retail market share rose to 80.29 percent from 78.63 percent in a month. According to bailout terms on the matter, PPC’s market share at the end of 2018 was supposed to have dropped to 62.24 percent before reaching 49.24 percent by the end of 2019.

 

 

PPC units sale close to failure, call for improved sole valid offer

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The main power utility PPC’s bailout-required sale of units at Meliti in Greece’s north and Megalopoli in the south could end up being half successful, at best, but a full debacle is considered most likely, the disclosure of binding bids submitted yesterday, the sale’s deadline day, has indicated.

Sale authorities have requested an improved bid from just one participant, the Mytilineos group, for its offer concerning the Meliti facility, while another offer made by Seven Energy and Terna for Megalopoli has apparently been rejected as it does not meet the tender’s terms, energypress has understood following a thorough cross-examination of incoming information.

According to one of Greece’s bailout commitments, based on a European Court verdict, the sale effort requires a disinvestment representing 40 percent of PPC’s lignite capacity. Meliti I and II and Megalopoli III and IV need to be sold if this disinvestment target is to be achieved.

PPC has suggested it will strive for an imminent follow-up sale in an effort to honor the European Court disinvestment decision. If this is permitted, problems that have made the current sale unattractive to investors will need to be resolved. The current composition of the Megalopoli package, in particular, is virtually unsellable, investors agree.

PPC remains determined to achieve decent sale prices for Meliti and Megalopoli, despite the fact that both facilities have been assessed as loss-incurring by investors. In recent comments, the power utility’s chief Manolis Panagiotakis noted that PPC is “selling not selling out.”

PPC lignite units sale stands little or no chance of success

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Latest developments concerning the main power utility PPC’s ongoing effort to sell its Megalopoli and Meliti power stations strongly suggest the sale stands little or no chance of attracting even just one offer by tomorrow, when the procedure’s extended binding bids deadline expires.

Indicative of the friction that has simmered between the seller and buyers, PPC’s chief executive Manolis Panagiotakis, speaking yesterday at a company event for the New Year, remarked: “We don’t expect private-sector investors to offer amounts that will take 25 years to recover, as has been the case with PPC. Let them recover these amounts in half the time.”

The utilization of electricity quantities promised by the acquisition outweighs the importance of profit margins, the PPC boss contended.

“In markets and countries of far greater maturity and economic development enterprises do not rely on big profit margins but product quantity,” Panagiotakis said.

PPC will do whatever possible for a successful outcome in the sale, he stressed, thereby suggesting the power utility should not be held accountable if the procedure fails to produce a result.

PPC may need to deal with European Commission pressure for the inclusion of hydropower facilities into an expanded sale package if the current effort sinks.

Potential buyers have adamantly pushed for improved sale terms in the lead-up and remain dissatisfied, reminding that Megalopoli and Meliti are both loss-incurring units.

 

 

Government, PPC, Brussels examining lignite sale options if effort fails

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The main power utility PPC’s ongoing effort to sell its Megalopoli and Meliti power stations as part of a bailout-required disinvestment of lignite units seems headed for failure, as suggested by the lack of interest of investors in a teleconference staged by the utility last Friday.

Possible buyers either did not take part or emerged expressing disappointment following the session, held just days ahead of this week’s extended February 6 deadline for binding bids.

Only a further deadline extension, seen as highly unlikely, could save or delay the sale effort from a seemingly inevitable debacle.

The government, state-controlled PPC and the European Commission are believed to be working on alternatives given the subdued mood of participants.

In Athens, officials are making an effort to avoid any undesirable developments such as a new call from Brussels for the inclusion of hydropower units into the sale.

Government officials are also seeking to gain as much time as possible in the hope that the forthcoming European Parliamentary elections, to be held May 23-26, will intervene.

PPC’s sale of lignite units was agreed to with the European Commission following a European Court decision setting measures aimed at ending the power utility’s exclusive access to the country’s lignite deposits.

The government is clearly banking on the presumption that it will not be held accountable for a disinterest or obstruction of the PPC disinvestment package, should the current procedure fail. In this case, new talks for new plans will be needed.

Not to be neglected, the European Commission’s Directorate-General for Competition is currently conducting a study examining Greece’s utilization of hydropower reserves and units. DG Comp officials invaded PPC and power grid operator IPTO offices in Athens over a year ago.

 

PPC-related penalty added to year’s NOME auction amount

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RAE, the Regulatory Authority for Energy, has decided to increase the overall NOME electricity amount to be offered over four auctions in 2019 by adding 520 MWh/h to the scheduled 1,444 MWh/h tally as a penalty for the main power utility PPC’s failure to reach an end-of-2018 market share contraction target.

The year’s auctions are planned to start with a modest electricity amount of 350 MWh/h at 2019’s opening session, scheduled for February 8, according to a just-released Energy Exchange chart detailing the distribution of amounts over the year’s four auctions.

Authorities are believed to have decided on a small electricity amount for the opening session so as to enable a reduction of bigger amounts set for the year’s three ensuing auctions if PPC’s ongoing bailout-required disinvestment of lignite units succeeds.

Independent suppliers have already reacted against the distribution plan for the year after interpreting this approach as a form of further protection for PPC.

The NOME auctions were introduced over two years ago to offer independent players access to PPC’s lower-cost lignite and hydropower sources as a means of intensifying competition in the retail electricity market, still dominated by the state-controlled power utility.

According to the Energy Exchange chart, 355 MWh/h has been planned for the year’s second NOME auction on April 17, 500 MWh/h is scheduled for a July 17 auction, and 767 MWh/h for 2019’s fourth and final auction on October 16.

PPC lignite units sale failure highly likely, day after examined

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The main power utility PPC’s ongoing effort to sell its Megalopoli and Meliti power stations as part of a bailout-required disinvestment of lignite units appears increasingly likely to fail as possible buyers are maintaining an unfavorable view of the prospects of the units on offer.

An extended deadline for binding bids is nearing and expires on February 6.

PPC has planned a series of meetings for today with the sale’s three possible buyers – CHN Energy-Copelouzos group, Seven Energy-Gek Terna and Mytilineos – to update on the progress of its voluntary exit plan offered to employees at the Megalopoli and Meliti units and transfer of 400 employees to other units.

PPC believes these changes will transform the loss-incurring units into profitable ventures but the buyers remain tentative. Their analysis of data made available paints a darker picture.

The sale’s participants have called for the implementation of a profit-and-loss sharing system for Megalopoli and Meliti. The European Commission has rejected a plan forwarded by PPC but the investors contend it was very different to a preliminary plan embraced by Brussels. The buyers also want a more drastic reduction of employees at the two plants to 480 from the previous combined total of 1,248. They are also demanding clarity on the CAT remuneration eligibility of the two plants and a clearer picture on the lignite price for supply from the Ahlada mine to the Meliti unit.

The energy ministry is believed to already be examining options based on EU regulations should the sale effort fail. If so, the ministry believes the forthcoming European Parliamentary elections, to be held May 23-26, will hold up and thrust forward the sale to a future date.

Finalized CAT agreement expected within fortnight

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Greece and the European Commission are no more than a fortnight’s time away from reaching a deal on the country’s CAT mechanism, reliable sources closely following ongoing negotiations on the matter between the energy ministry and Brussels officials have informed.

Once an agreement is finalized, Brussels will deliver its notification, in other words a finalized list of observations on the Greek CAT plan. Its finalized look, to emerge following any needed adjustments, could be announced by the end of March, barring unexpected developments.

A certain period of time, depending on the pace of bureaucratic procedures in Brussels, will then be needed for the plan’s approval by the European Commission. This will enable preparations for the first CAT auction, expected, without a doubt, within 2019.

The nucleus of the Greek CAT plan, based on an Italian model that has already been endorsed, complies with EU directives, the European Commission has already recognized. Brussels officials have apparently requested revisions from Greece that will result in a CAT mechanism version sharing an even greater amount of similarities with its Italian equivalent.

Greece’s new CAT plan mainly concerns private-sector thermal electricity producers and the main power utility PPC as it will greatly shape their operating conditions over the next decade.

Investors considering PPC’s Megalopoli and Meliti power stations included in an ongoing bailout-required disinvestment of lignite units are also monitoring developments as the resulting CAT plan will greatly determine the earning potential of these units.

The PPC’s Ptolemaida V power station, now under construction, is expected to be among the units to qualify for CAT remuneration.

Meliti, Megalopoli units still a profit challenge for buyers

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Transforming the Meliti and Megalopoli lignite-fired power stations into profitable ventures continues to represent a major challenge, latest data acquired by investors on the two units included in the main power utility PPC’s bailout-required sale of lignite units has indicated.

Investors contend their calculations based on fresh data do not result in better financial prospects for the two units, both loss-incurring at present, despite certain incentives. A voluntary exit plan offered to employees as a means of cutting payroll costs and other sales and purchase agreement (SPA) term revisions do little to ensure the sustainability of Meliti and Megalopoli, investors have pointed out.

On the contrary, PPC insists appropriate sale term adjustments will generate profit potential for both units.

According to data examined by possible buyers, turnover and operating cost figures concerning Meliti last November produced a deficit of approximately 10 euros per MWh. Earnings of 64.5 euros per MWh were outweighed by operating costs totaling 74.9 euros per MWh and pushed higher primarily by increased CO2 emission right costs.

Revenue and cost figures for Megalopoli have fluctuated wildly, data showed. This facility underwent maintenance on many occasions and often did not contribute to the grid. Last July, revenues at the unit were 64.2 euros per MWh and operating costs reached 68.9 euros per MWh. In September, revenue rose slightly to 66 euros per MWh while operating costs rose sharply to 96 euros per MWh.

Last week, authorities decided to extend a January 23 binding bids deadline to February 6. Investors considering the sale expect new sale-term improvements beyond certain incentives already offered, they have made clear.

 

NOME export revisions ahead, extra power amounts to be cut

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The energy exchange, understandably in agreement with RAE, the Regulatory Authority for Energy, plans to revise a NOME auction electricity exports measure to secure NOME prices instead of System Marginal Price (SMP) levels for new customers joining independent electricity suppliers during three-month intermediate periods between auctions.

In a related public consultation procedure held over the past few days, suppliers warned a framework of measures planned by authorities would expose them further to SMP levels and prevent suppliers from broadening customer bases between auctions.

Authorities are also examining ways to maintain rights acquired by suppliers and traders for futures products bought at previous auctions.

In its public consultation procedure intervention, ESAI/HAIPP, the Hellenic Association of Independent Power Producers, called for additional measures that could help increase the retail electricity market shares of independent suppliers.

Meanwhile, the energy ministry is planning a legislative revision to abolish a bailout tern requiring the addition of NOME auction electricity amounts in 2019 as a penalty against the main power utility PPC for its failure to meet a market share contraction target set for 2018. This action will be taken assuming PPC sells its Meliti and Megalopoli lgnite-fired power stations included in its bailout-required disinvestment package of lignite units.

According to the bailout term, RAE – this month – was supposed to add approximately 520 MWh/h to 2019’s NOME electricity amount of 1,444 MWh/h. Instead, 520 MWh/h now appears set to be reduced from the year’s NOME tally.

The government and country’s lenders have agreed on a reduction of the NOME auction tally from 22 percent of total consumption to 13 percent if the ongoing sale effort for these two lignite units is completed.

 

 

PPC sale deadline extension ‘pointless without better terms’

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Investors considering the main power utility PPC’s bailout-required sale of lignite units expect new sale-term improvements beyond certain incentives already offered now that a last-minute decision was taken by authorities earlier this week to extend a January 23 binding bids deadline to February 6.

“There is no point in the deadline extension if further incentives are not offered,” a source at one of the sale’s contender firms told energypress, echoing the thoughts of all possible buyers. The PPC units on offer are not capable of generating profit figures under the sale’s existing terms, the source added.

Contenders have remained adamant on earlier views. The Czech Republic’s Seven Energy, which has teamed up with Gek Terna for this sale, insists on a 50 percent staff cut at two power stations, Megalopoli and Meliti, included in the sale package. Both plants remain loss-incurring, the candidates remind.

A team made up of China’s CHN Energy and the Copelouzos group is demanding a lignite supply cost reduction, especially for the Meliti plant.

The energy ministry is under less pressure to complete state-controlled PPC’s sale effort now that Greece’s bailout program has concluded and the country’s borrowing ability is no longer directly linked with the bailout terms.

At worst, energy ministry officials believe, the PPC sale effort will sink and the European Commission will again challenge the power utility’s dominant position in Greece’s lignite market, seen as a slow bureaucratic procedure.

PPC lignite units sale given extension amid negative news

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Investors considering the main power utility PPC’s bailout-required sale of lignite units were granted a last-minute deadline extension for their binding bids yesterday afternoon, a development that resets the date for February 6 instead of today.

In the lead-up, the sale’s prospects were seen as unfavorable by the government and state-controlled PPC, while the country’s lender representatives, scheduled to meet tomorrow with Greek energy minister Giorgos Stathakis, have also added to this negativity.

Participants who were rumored, as late as yesterday, to be preparing to submit competitive bids, eventually made it clear they would not take part under the disinvestment’s current conditions, seen as unfavorable.

Judging by the developments, Greece’s lender representatives appear to have prepared for alternative solutions, as part of a wider effort to make the Greek electricity market more competitive, in the event of a debacle of the current sale effort. If so, the sale of hydropower facilities, a taboo subject dreaded by the government, could end up entering the picture.

 

 

 

Electricity suppliers facing challenges despite good news

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Despite certain favorable developments emerging for the country’s independent electricity suppliers in 2019, such as the abolishment of a RES-supporting supplier surcharge and the main power utility PPC’s plan to reduce a 15 percent discount offered to punctual customers, independent suppliers face challenging times as a result of a gradual rise of the system marginal price (SMP), or wholesale electricity prices, driven up by increased CO2 emission right and fuel costs, as well as the diminished role of NOME auctions.

NOME auctions will become a less effective source for lower-cost electricity as amounts to be offered to participants will be greatly reduced, starting prices will be sharply higher, and electricity export restrictions planned by RAE, the Regulatory Authority for Energy, promise to confine the quests of players for new customers in other markets.

RAE has planned a 1,444 MWh/h electricity amount offering through NOME auctions in 2019. According to sources, the prospect of an additional 520 MWh/h offering, as a penalty against PPC for its failure to meet a market share contraction target set for 2018, will be dropped as the power utility is now downsizing its assets through a bailout-required disinvestment of lignite units.

Instead, the 1,444 MWh/h NOME amount allotted by RAE for 2019 is expected to be reduced by approximately 520 MWh/h, presuming the PPC disinvestment effort goes according to plan.

Should PPC successfully sell its Meliti and Megalopoli lignite-fired power stations, both part of the lignite disinvestment package, then the country’s electricity amount to be offered through NOME auctions in 2019 will be reduced to represent 13 percent of total consumption, from the previous level of 22 percent, according to a bailout term. This would reduce the NOME amount for 2019 to approximately 920 MWh/h.