bailout agreement

Brussels increasingly vigilant towards Chinese investments

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The European Commission is maintaining a passive yet increasingly vigilant watch on Chinese energy-sector investments in Greece and other EU member states, Brussels officials have indicated in comments to journalists.

China’s penetration of European markets is not viewed negatively as long as the related entrepreneurial activity complies with EU law, officials in Brussels pointed out.

Highlighting this intensifying lookout, Chinese initiatives in the Greek market were raised at a Brussels news conference held by European Commission officials.

Journalists forwarded questions concerning last year’s acquisition by SGCC (State Grid Corporation of China) of a 24 percent stake in Greek power grid operator IPTO, as well as CHN Energy’s interest in an ongoing bailout-required sale of main power utility PPC lignite assets, including the Meliti and Megalopoli power stations.

“Chinese investments can take place as long as they are in line with EU law and meet all obligations regarding electricity supply sufficiency,” one Brussels official noted. “The extent to which this is being observed in Greece’s case will be evaluated when the time comes to do so.”

Investors, discontent with PPC sale incentives, may refrain

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The main power utility PPC’s bailout-required disinvestment of lignite units and mines stands a high chance of not attracting investors for binding offers as additional incentives sought by buyers are not being included in the sale package.

Terms that could ensure CAT remuneration for lignite units, to be announced later this week, represent a step in the right direction for investors but will probably not be enough to draw investors.

Energy minister Giorgos Stathakis plans to meet with prospective buyers this week in an attempt to drum up interest but the combined effect of certain incentives agreed to so far appears incapable of generating genuine investor interest.

As an additional incentive for prospective buyers, the energy  ministry is considering abolishing a special lignite surcharge imposed on lignite-fired power stations, costing 2 euros per MWh of electricity produced.

Some of the prospective bidders requested six-year partnership agreements with PPC, for sharing of both profits and losses, but the power utility appears to have rejected such a prospect.

This proposal by the investors was prompted by a government-ratified term forbidding worker dismissals for six years following the sale of units.

 

 

Potential PPC unit buyers propose six-year partnerships

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A number of the possible buyers of main power utility PPC’s lignite units and mines included in a bailout-required sale representing 40 percent of the corporation’s lignite capacity have proposed a form of co-ownership with the state-controlled power utility for a period of six years, the equivalent number of years potential buyers would be committed to maintain all current jobs at the units sold as a result of related legislation ratified by the government.

Potential buyers have calculated that three power stations in Meliti and Megalopoli included in the disinvestment package each incurred losses of more than 30 million euros during the first half of the year and, presumably, could be expected to incur respective losses of around 60 to 70 million euros for the year.

PPC and potential buyers would share risks entailed and losses and profit over the six-year period, according to the proposals forwarded by possible investors, who want incentives. before making offers.

The power utility has already set an SPA term that would ensure the corporation receives 30 percent of CAT remuneration amounts should the units placed for sale qualify for the mechanism, as providers of grid sufficiency.

Bidders to face November 6 deadline for PPC lignite units

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Prospective buyers of the main power utility PPC’s bailout-required sale of lignite units and mines are expected to face a November 6 deadline for binding offers, energypress sources have informed.

In a weekend newspaper interview, the power utility’s chief executive Manolis Panagiotakis noted the binding offers deadline, for two sale packages offering lignite units and mines in the country’s north and south, went no further than to say that a deadline would be set for the first week of November.

However, investors, who have already been offered one deadline extension, could still seek a follow-up extension as the details of incentives requested by potential buyers remain unclear. Bidders have warned they will not submit offers unless satisfactory incentives are offered.

Rising CO2 emission right costs and indefinite CAT mechanism remuneration prospects are major concerns for prospective buyers looking to invest in PPC’s lignite assets.

Costlier wholesale price mulled for exported NOME electricity

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NOME auction participants will not face any quantitative or post-purchase usage restrictions concerning electricity amounts bought at auctions but will need to cover a higher System Marginal Price (SMP), the official electricity wholesale price, for amounts found to have been exported by follow-up checks, according to a proposal expected to soon be forwarded by LAGIE, the Electricity Market Operator.

It is believed that the European Commission, which has objected to the imposition of export limits on NOME amounts, would endorse such a plan.

Certain electricity suppliers, especially traders possessing supply licenses but no – or virtually no – customer bases, have been buying considerable amounts of lower-priced electricity at NOME auctions for export, a practice offering wide profit margins given the higher electricity prices secured abroad.

Such export-minded participants are pushing NOME auction prices higher for independent suppliers seeking lower-cost wholesale electricity prices at the auctions to compete against the still-dominant power utility PPC in the Greek market.

PPC faces retail electricity market share contraction targets of 62.24 percent by the end of 2018 and 49.24 percent by the end of 2019. The power utility’s market share, which has contracted at a slower-than-required rate, remains at a level of around 80 percent. The issue is expected to be tabled for discussion by lender technocrats, now back in Athens.

Post-bailout energy sector inspections begin next week

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The first post-bailout era meeting between energy minister Giorgos Stathakis and the country’s creditors, planned for next week, will focus on the progress of main power utility PPC’s bailout-required disinvestment of lignite units; the DEPA gas utility and ELPE (Hellenic Petroleum) privatizations; NOME auctions; and the target model, aiming for market coupling, or harmonization of EU wholesale markets.

According to sources, the meeting will take place some time between next Wednesday and Friday, once technocrats have laid the groundwork on Monday and Tuesday.

Energy-sector fronts are expected to be closely monitored in the post-bailout era, PPC’s sale of lignite units being the most pressing issue at this stage.

China’s CHN Energy, which has joined forces with the Copelouzos group for the sale of lignite units – offered as two respective packages representing 40 percent of the utility’s overall lignite capacity in the north and south – has requested a deadline extension of one or two months for the submission of binding offers. The current deadline expires on October 17.

If granted by the European Commission, the announcement of the sale’s preferred bidder or bidders will be delayed until the first quarter of 2019, instead of the end of this year.

 

DEPA split plan finalized, to be presented Monday

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The gas utility DEPA and the energy ministry, aided by consultants and legal advisors, have overcome numerous technical details over the past couple of months to emerge with a finalized a plan entailing the gas company’s split into two firms, DEPA Infrastructure and DEPA Trade, as agreed to by the government and the country’s lenders for the gas utility’s privatization.

This DEPA plan will be presented to a team of post-bailout inspectors arriving in Athens this coming Monday.

The country’s two gas-sector privatizations – DEPA and DESFA gas grid operator – both appear to have made satisfactory progress. On the contrary, the ELPE (Hellenic Petroleum) and main power utility PPC lignite unis sales have been dogged by delays.

DEPA and energy ministry officials have worked against the clock to finalize DEPA’s split plan, involving a highly complex distribution of assets, as related law needs to be ratified by October.

According to the DEPA split plan, a 50.1 percent stake of the trading firm is expected to be offered to investors while 14.9 percent, including veto rights, will be maintained by the Greek State, which is expected to retain a 51 percent stake in DEPA Infrastructure.

The DEPA privatization procedure is scheduled to begin between September or October.

 

IPTO revision offers career-spanning job protection for staff

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The power grid operator IPTO’s board has decided to revise an agreement reached last summer with strategic partner State Grid Corporation of China (SGCC) to protect the jobs of employees until they have qualified for pension rights.

The previous agreement, signed by the two sides in June last year, offered limited job protection for three years, until 2020.

IPTO’s move has been accepted by SGCC, according to an announcement released by the power grid operator.

The decision means that a total of 1,250 IPTO employees and an additional 75 new staff members undergoing recruitment procedures through the Supreme Council for Civil Personnel Selection (ASEP) will be protected until they reach pension ages.

As a result, IPTO now stands as the only state-controlled utility offering career-spanning job protection. Following last year’s privatization, the Greek State controls 51 percent of IPTO, SGCC holds a 24 stake, and public investors the remaining 25 percent.

Job protection until retirement has even been abolished at the main power utility PPC, until recently IPTO’s parent company. All employment agreements at PPC, controlled by the Greek State with a 51 percent stake, were revised several years ago, during the bailout period. Specific time periods of employment agreements were made indefinite, entitling PPC’s administration to cut jobs whenever this is deemed necessary for the corporation’s sustainability.

 

PPC lignite sale regaining pace, 4 of 5 candidates interested

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Four of five investment teams that submitted first-round expressions of interest for the main power utility PPC’s sale of bailout-required sale of lignite mines and power stations appear to have sustained their interested now that the disinvestment procedure is regaining speed following the summer slowdown in August.

Investors have actively sought sale-related information in the virtual data room established for the disinvestment ahead of a series of separate interviews, planned to begin next week, with PPC officials for further clarification of the assets up for sale, including technical and financial details. Interested parties are expected to submit binding second-round offers in October.

Czech firm EPH (Energeticky a Prumyslovy Holding) appears to have retreated and will most likely not take part in the upcoming series of meetings. Until now, EPH representatives have yet to request any meeting with PPC officials.

On the contrary, Seven Energy, another Czech firm that emerged in the first round, has stationed a representative in Athens, seems very interested, and has joined forces with local powerhouse GEK Terna.

Investors still need to gain further information as the two companies founded to offer two separate sale packages, respectively representing PPC lignite units in Greece’s north and south, did not exist prior to this sale’s launch. As a result, prospective buyers need to be particularly careful and seek further details on corporate, legal and sale matters.

PPC’s chief executve Manolis Panagiotakis is not expected to participate in the power utility’s series of forthcoming meetings with investors.

Despite certain reservations as a result of lignite’s indefinite future in Greece’s energy mix, all other four investment teams appear interested in PPC’s two sale packages, representing 40 percent of the power utility’s overall lignite capacity.

Besides the GEK Terna-Seven Energy partnership, the Copelouzos group has been joined by China Energy (Beijing Guohua Power), while the Mytilineos group and ElvalHalcor also emerged in the first round.

Heightened electricity market reforms period approaching

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A period of heightened electricity market reform activity is expected as of next month due to tight deadlines and the insistence of the country’s lenders for a target model launch by April, 2019. New market codes will need to be established for the target model, aiming to harmonize EU electricity markets.

RAE, the Regulatory Authority for Energy, is moving to stage a public consultation procedure for the establishment of codes concerning the futures market, it has become known in the marketplace.

Greece’s industrial sector, which has already intervened publically and forwarded a related letter to the European Commission, is urging for the establishment of a competitive energy market based on European standards.

The industrial sector has set as a paramount objective the opening up of the energy market for a greater level of competition. The NOME auctions, introduced in Greece roughly two years ago to offer third parties access to the main power utility PPC’s lower-cost lignite and hydropower sources, have not succeeded as appropriate conditions were not established, according to industrial consumers, who consider PPC partially responsible.

The maintenance of a mandatory pool, which has enabled PPC to shape electricity prices in both the wholesale and retail markets, has been a key factor behind the failure, industrialists have asserted.

As a result, the industrial sector believes the codes to be implemented for the futures market will be crucial. Industrialists are expected to forward three key proposals to RAE’s public consultation procedure.

According to sources, one of these will entail requiring PPC to satisfy a lower limit of production sales to third parties in the futures market. Industrialists will also request the exclusion of PPC’s trading division from futures markets products offered by the utility’s production division as this is expected to restrict PPC’s retail market dominance and lead to a market share contraction, not achieved by the NOME auctions. Industrialists are also expected to request a term preventing PPC from having access to futures markets products linked with lignite units included in the utility’s bailout-required lignite disinvestment.

PPC, NOME, target model to preoccupy authorities in the post-bailout era

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Commitments and reforms remain pending despite the completion of Greece’s third and final bailout program. A reinforced surveillance mechanism covering not only fiscal, social security and banking matters but also market reform policies, including for the energy sector, will follow the final bailout program, which was completed yesterday, according to an official announcement made by the European Stability Mechanism (ESM), designed to safeguard financial stability in the euro area.

Quarterly surveillance reports will be issued as part of the reinforced effort. These will include assessments of energy sector commitments, including a plan to phase out a RES-supporting supplier surcharge.

Three key energy sector issues will preoccupy authorities in the country’s post-bailout surveillance. The sale procedure and schedule for the main power utility PPC’s disinvestment of lignite-fired power stations and mines, representing 40 percent of the utility’s lignite capacity, will be closely watched.

The role, beyond 2020, of NOME auctions, introduced in Greece two years ago to offer third parties access to PPC’s lower-cost lignite and hydropower sources, will be examined at the end of 2019, once the results of new target-model markets have become clear. Retail electricity market shares will be assessed and a formula will be established to keep the market’s conditions competitive, as was envisioned with the NOME auctions, for the benefit of consumers.

As for the target model, aiming for market coupling, or harmonization of EU wholesale markets, Greece’s lenders have set an April 1, 2019 launch date for the Greek market’s coupling with the Italian and Bulgarian markets. A delay in the introduction of new target-model markets until the summer of 2019 or failure to achieve market coupling before 2020, as has been speculated, would be viewed negatively by the lenders.

 

Lignite units not excluded from local CAT payment proposal

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A finalized power compensation mechanism plan prepared by RAE, Greece’s Regulatory Authority for Energy, and believed to have been received at the energy ministry does not make any distinctions that exclude lignite-fired power stations from CAT payments, energypress sources have informed.

The CAT remuneration eligibility of lignite-fired power stations has drawn attention in recent times as this detail is believed to be crucial to the sustainability of lignite power stations and mines included in the main power utility PPC’s bailout-required disinvestment of lignite units. The CAT payment eligibility of lignite units is seen as pivotal to the success or failure of the sale procedure.

It remains to be seen if the finalized Greek power compensation mechanism plan, to be forwarded by the energy ministry to the European Commission in September or October, will be approved in Brussels.

Conventional power stations such as lignite units need to meet a CO2 emission upper limit of 550 grams per KWh to qualify for CAT payments, according to current EU regulations. However, EU officials are still negotiating details for a finalized clean energy package. A five-year adjustment period for existing facilities appears probable.

On a visit to Athens earlier this month, Klaus-Dieter Borchardt, Director of the European Commission’s Directorate-General for Energy, appeared willing to exempt Greece from strict EU regulations as acknowledgment of lignite’s important role in the country’s energy mix. However, no details of any exemption plan have yet to be been released.

In a decision reached on April 17, the European Commission recognized the special role of lignite-fired electricity generation for energy supply security in Greece.

According to the RAE plan, CAT payments would be made available through annual auctions offering Reliability Options four years in advance. CAT payments would be valid for one year for existing facilities, while new units would secure CATs for seven years, as an investment and financing incentive, according to the plan.

 

 

Prospective PPC unit buyers maneuvering for partnerships

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First-round participants in the main power utility PPC’s bailout-required sale of lignite mines and power stations representing 40 percent of capacity are heightening their efforts to form partnerships for the sale procedure ahead of an upcoming July 31 deadline and could be close to announcing arrangements, energypress sources have informed.

In one of two main fronts taking shape, one of two Czech firms that have emerged for the sale and said to be displaying a strong interest in Greece’s lignite market is close to reaching a deal with a major Greek corporate group, sources said.

On the other main front, a high-voltage industrial enterprise also taking part in the sale is said to be exploring the possibility of merging with the aforementioned scheme or partnering with the Copelouzos-China Energy scheme.

The high-voltage industrial enterprise is entitled CO2 emission right cost offsetting support, a definite advantage, even though most recent calculations indicate CAT remuneration support is also needed to make competitive the PPC lignite facilities being sold.

Though no further details on the players have emerged at this point, the sale appears to be developing into a showdown between the Copelouzos-China Energy scheme and a second team to be comprised of a foreign firm with a Greek partner, sources noted.

The aforementioned high-voltage industrial enterprise could side with either team, the sources added.

Also, both candidate teams are believed to be interested in the sale’s two separate packages, respectively comprised of PPC assets in the country’s north and south.

Union cites PPC employee asset rights in European Court case

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Genop, the power utility PPC’s main union, has resorted to an older argument used as an attempt to stop the split and sale of power grid operator IPTO, a former subsidiary, by citing PPC employee asset ownership rights in an effort to delay the bailout-required disinvestment of PPC lignite units and mines, representing 40 percent of the power utility’s overall lignite capacity.

The union, in a case prepared for the European Court, contends that PPC employee and retired personnel asset ownership rights have been incorporated into the company as a result of social security contributions withheld by PPC.

Genop used the same argument, more or less, in a case filed about a year ago to the European Court against the sale of 24 percent stake of IPTO to the State Grid Corporation of China (SGCC). Though the European Court has yet to deliver a verdict on the matter, neither the IPTO sale nor its operation under an entirely new ownership set-up, were obstructed.

Genop was encouraged to also resort to European Court action against the PPC disinvestment obligation as the union is counting on the pending IPTO-related verdict.

The union group is basing its worker asset co-ownership rights case on an agreement reached in 1999 between the then-Development Ministry and Genop over social security issues for personnel ahead of PPC’s bourse listing.

 

PPC union attacks utility over unit upgrades, consultation cost

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Genop, the power utility PPC’s main union, has unleashed a wide-ranged attack on the utility’s administration by condemning upgrade projects of two pivotal power stations as well as the eventual cost of consulting services provided by McKinsey.

The union group also criticized the leadership’s handling of a bailout-required disinvestment of PPC lignite units and reiterated threats to intensify its protest activity with the aim of preventing the sales of lignite-fired power stations and mines, representing 40 percent of the power utility’s overall lignite capacity.

Genop alleged that serious problems hang over upgrades conducted at the Agios Dimitrios III and Agios Dimitrios IV power stations, planned to play crucial production roles at PPC following the disinvestments, while adding that high-cost desulphurization work at the facilities in not making good progress.

If these allegations are true, then PPC could have trouble operating the power stations as of 2020, following the end of an exemption to an EU law concerning power station emission limits for high-polluting units.

Also, work at Ptolemaida V, a new unit, is well behind schedule, Genop contended. This investment may not be sustainable if CAT payments for production are not secured, the union warned.

In its criticism of the amount paid by PPC to the consulting firm McKinsey for a business plan, the Genop union group alleged an initial 1.2 million-euro cost for the consulting services ended up reaching 1.8 million euros.

McKinsey was paid an additional 600,000 euros for a six-month extension to its contract with PPC as its initial report, presented in February, did not include crucial issues such as the power utility’s debt restructuring plan, completed later, the union alleged.

 

 

First CAT flexibility auction expected in September

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A new transitional CAT mechanism model compensating electricity generation flexibility, to soon be implemented in Greece, is expected to be valid for less than a year, all the way up to the implementation of the target model, seen occurring in the first half of 2019.  The target model is aiming for a single European electricity market.

The first auction for the CAT flexibility mechanism, taken on by the government as a fourth-review bailout commitment, will not be staged any sooner than September, despite initial efforts for a launch by July, energypress sources have informed.

Independent electricity producers are keen to see the new CAT flexibility mechanism up and running as its previous version expired in April, 2017. This has prompted financial issues at production units.

If no major changes are made to the CAT flexibility mechanism plan ahead of its implementation, then it should offer compensation for 4,263 MW of annual output. Hydropower facilities are expected to be entitled to compensation for output totaling 750 MW, up from the previous model’s amount of 582 MW. Starting prices at the CAT flexibility mechanism’s descending-price auctions are expected to be set at 39,000 euros per MW, higher than 25,000 euros per MW originally planned.

The demand response mechanism (interruptability) – compensating major-scale consumers, such as industrial enterprises, when the TSO (IPTO) asks them to shift their energy usage (lower or stop consumption) during high-demand peak hours, so as to balance the electricity system needs – will not be incorporated into the new CAT flexibility mechanism.

 

PPC units sale second-round deadline set for October 7

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Participants through to the second round of the main power utility PPC’s bailout-required sale of lignite mines and power stations representing 40 percent of the utility’s overall lignite capacity have been given 90 days, as of July 7, to submit binding offers, according to the second round’s terms, just revealed to qualifiers.

This sets an October 7 deadline for what represents the first major step to be taken by the power utility towards its future role in the energy market.

The corporation’s overall restructuring, to be based on a new strategic plan being prepared by PPC with consulting firm McKinsey – commissioned by the power utility last year – will represent the second, and most fundamental, step towards PPC’s future shape and role.

McKinsey delivered its plan last month following a six-month extension that was needed as a result of reactions by the power utility and energy ministry against certain proposals.

The consultant’s strategic plan, in its finalized form, will be presented to PPC’s board today, according to sources. Adjustments are believed to have been made as a result of major developments at PPC, including the refinancing of a loan extended to PPC by the country’s main banks.

The main aspects of the consultant’s draft plan, parts of which were leaked earlier this year, are expected to remain intact. These include recommendations for a turn by PPC to new business activities, including in the RES and natural gas markets, as a means of offsetting revenue losses as a result of the lignite unit sale and market share contraction concerning electricity supply; improved efficiency in various sub-sectors; and better utilization of personnel.

An initial McKinsey recommendation for tariff hikes, which would limit the benefits of a 15 percent discount offered by PPC to punctual customers, is expected to be limited following a reaction by the energy ministry.

DG Energy boss in Athens to inspect on reforms, wider EU commitments

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Klaus-Dieter Borchardt, Director of the European Commission’s Directorate-General for Energy, is currently in Athens for a series of meetings with local authorities to inspect on energy-sector reforms included in the bailout agreement, and, beyond the Greek progam, ensure the country is on the right track for EU energy policy commitments leading to the European energy market’s unification, as presented in the target model.

The DG Energy top official’s two-day agenda, concluding today, includes meetings with officials at IPTO, the power grid operator, RAE, Regulatory Authority for Energy, the main power utility PPC, and the Athens Energy Exchange.

Borchard is focused on ensuring the country’s ongoing and prospective energy-sector reforms will be implemented following the Greek program’s conclusion next month, according to certain local officials who have held talks with the visiting authority.

The DG Energy boss also appears to be applying pressure for the maintenance of schedules, by all local energy institutions, as presented in a binding road map resulting from the country’s EU membership, which stretches beyond the Greek bailout agreement.

Prior to his arrival in Athens, Borchard was in Bulgaria.

 

PPC sale draws expected local players, Shenhua, Czech firms

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Three major local players, GEK-Terna, Mytilineos and ElvalHalcor, a member of the Viohalko group, as well as a fourth, the Copelouzos group, joined by Beijing Guohua, a wholly owned subsidiary of China’s Shenhua, have – as was anticipated – all submitted first-round expressions of interest for the main power utility PPC’s sale of bailout-required sale of lignite mines and power stations. Two Czech firms, EPH (ENERGETICKÝ Α PRŮMYSLOVÝ HOLDING) and Indoverse Coal Investments Limited, also emerged as surprise participants. The deadline for expressions of interest expired yesterday afternoon.

PPC needs to disinvest power stations and mines units representing 40 percent of the utility’s overall lignite capacity.

The list of first-round bidders could be revised if partnerships are established or entrants fail to meet criteria enabling qualification for binding bids in the second round. The PPC board will decide on the qualifiers.

Finalized investment schemes will need to be officially declared by the end of July. A September deadline is expected to be set for binding bids.

It is not yet known if any of the sale’s early participants intend to submit binding second-round bids. They are expected to decide after examining PPC’s financial, technical and legal information to be made available to first-round participants through a data room. Investors are not expected to decide any sooner than next month.

The sale price to be demanded by PPC will be a crucial factor for investors. Though definitely interested in acquiring lignite-fired power stations and mines as a means of  controlling their cost of electricity sold, participating suppliers are troubled by the rising production cost of solid fuel-based power generation, a development prompted by EU climate change policies.

DEPA board unanimously OKs Shell local takeover agreement

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The board at DEPA, the public gas corporation, yesterday unanimously approved an agreement reached with Shell just days ago following prolonged negotiations for the gas utility’s acquisition of the Dutch firm’s 49 percent share of the EPA Attiki gas supply and EDA Attiki gas distribution ventures covering the wider Athens area.

This development had been preceded by DEPA’s finalized agreement with Italy’s Eni for the latter’s full acquisition of the EPA Thessaloniki-Thessaly gas supply company, commercially dubbed Zenith. This agreement is now being examined by the competition committee. A final decision is expected by the end of this month.

Returning to DEPA’s agreement with Shell, the gas utility’s shareholders – TAIPED, the state privatization fund, controls 65 percent and ELPE, Hellenic Petroleum, the other 35 percent – are expected to decide within the next fortnight before this agreement is forwarded to the competition committee for approval. A finalized decision by the committee is anticipated by August.

The agreement between DEPA and Shell was reached for 150 million euros – approximately 40 million euros for the EPA gas supply company and 110 million euros for the EDA distribution company. The total amount is within DEPA’s evaluation range – close to the lower end.

DEPA stands to collect 52 million euros for the sale of its 51 percent in the Zenith gas supply company in the north to Eni, plus five million euros for dividends. This amount is also within the gas utility’s evaluation range, towards the higher end, according to data provided by the utility’s financial advisers.

DEPA’s three agreements, heralded as a major achievement by the government, given the bailout’s prior action restrictions and deadlines, represent the completion of the first stage of the gas utility’s transformation following its withdrawal from the retail gas market in Greece’s north and bolstered position in the wider Athens market.  These agreements now clear the way for the commencement of DEPA’s privatization.

The gas utility realized, from early on, that it would need to reinforce its standing in infrastructure and realign itself in the retail gas market to remain competitive amid the newly liberalized, competitive market, pundits told energypress.

DEPA also needed to find solutions to meet bailout obligations, their objective more or less being to break the gas utility’s local dominance, which is why the company worked closely with the energy ministry on many position papers, negotiations with the lenders and board decisions.

 

 

PPC market share contraction, behind schedule, continues at a slow pace

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The main power utility PPC’s market share contraction continued at a slower-than-required pace in May, unofficial data has shown, keeping the utility – and country – well behind on bailout agreement target figures.

PPC ended May with a retail electricity market share of approximately 80.7 percent, a drop of around 1.3 percent compared to April’s 82 percent, the unofficial data showed.

Independent suppliers made just a slight overall gain between April and May.

ELTA (Hellenic Post), holding an electricity supply license, has made sharp gains since its relatively recent entry into Greece’s retail electricity market. ELTA now holds a market share of over one percent, up from 0.78 percent in April.

Additional electricity amounts to be offered to independent suppliers through NOME auctions are scheduled to be determined this month, during a review of the auctions, as a bailout-related penalty prompted by PPC’s failure to meet its market share contraction targets so far.

NOME auctions were introduced in Greece nearly two years ago to offer independent players access to PPC’s lower-cost lignite and hydropower sources.

According to the bailout, PPC’s market share needs to fall to 62.24 percent by the end of this year, now seen as an impossible feat. The power utility’s market share was supposed to have fallen to 75.24 percent by the end of 2017 but ended the year more than ten percentage points over the target. A 49.24 percent target has been set for the end of 2019.

 

 

Ministry pushing for DEPA-Shell agreement, guarantees sought

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Long-running negotiations between DEPA, the public gas corporation, and Shell concerning the former’s acquisition of the Dutch firm’s 49 percent share of the EPA Attiki gas supply and EDA Attiki gas distribution ventures covering the wider Athens area, now well past a June 6 deadline agreed to by the government and country’s lenders, failed to produce a finalized agreement at a meeting yesterday, which was intended to be the closing session, and will require an additional session today.

Greece’s energy ministry is applying heavy pressure on DEPA for a finalized agreement, believed to be worth 150 million euros. Price is not the issue. Instead, the delay has been attributed to guarantees demanded by DEPA to ensure the deal will not be breached at a future date.

DEPA wants Shell’s full market withdrawal through terms that would block any future market reentry attempt by the Dutch firm, including indirectly, as a member of an investment scheme.

For its EPA Attiki joint venture with DEPA, the majority partner with a 51 percent stake, Shell was not represented directly or through a subsidiary but a special purpose vehicle (SPV).

During yesterday’s meeting, DEPA officials made clear there will be no final agreement unless protective clauses demanded by the gas utility are included in the deal.

DEPA is also pushing for a term that would safeguard the Greek gas utility against any pending issues that may arise in the future, including tax matters or accidents resulting from faulty infrastructure development. Shell has yet to agree to such commitments.

In parliament, Democratic Alignment MP Giorgos Arvanitidis tabled a question demanding a full update from energy minister Giorgos Stathakis on the Shell-DEPA negotiations, including the progress of talks and the level of significance of an agreement for the ensuing privatization of DEPA.

The energy minister was also asked to confirm whether a 150 million-euro price for the agreement has been set and, if so, provide details on the criteria used given the fact that the negotiations are still in progress.

Arvanitidis also questioned if DEPA shareholders have offered their approval and sought confirmation of an alleged 4 million-euro fee for Rothschild, the gas utility’s consultant on matter.

Investor queries for PPC units sale indicate interest exists

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A total of 26 questions forwarded by potential investors seeking clarification of terms in the main power utility PPC’s bailout-required sale of mines and power stations representing 40 percent of the utility’s overall lignite capacity indicates that considerable interest exists at this early stage of the sale.

Possible buyers, who had until Wednesday to submit their questions, focused mostly on procedural matters. The investors will be given an  opportunity for close-up inspections of the Meliti and Megalopoli power facilities included in the sale package during the sale procedure’s second stage.

Interestingly, one questioned, concerning foreign currency calculations and the sale, revealed the early interest of a non-EU buyer, from China.

In other questions, potential buyers enquired if the representation of their bids could be replaced by special purpose vehicles (SPV) controlled by the firm or firms expressing initial interest. This will be permitted, enabling SPVs to participate in the latter stages of the sale.

Investors also asked if letters of gurantee issued by banks established in countries that are WTO members would be accepted for the sale. Letters of guarantee issued by banks with outlets in any EU member state or other European financial regions will be accepted.

PPC informed interested parties that official translations of all related sale documents will be provided, while also offering further information on details concerning documents that will need to be submitted by participants and certification issue dates.

 

 

PPC set to appoint boards of two firms selling lignite units

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The main power utility PPC intends to appoint, within the next few days, the boards of two new companies to carry the utility’s lignite mines and power stations included in a bailout-required sale representing 40 percent of the corporation’s overall lignite capacity, CEO Manolis Panagiotakis has announced.

Procedures for the disinvestment are believed to be progressing on schedule. Investors have until June 21 to express first-round, non-binding interest for the units included in the sale.

A broad turnout is expected in the first round, but many local investors insist they will emerge for the sale’s preliminary stage on an exploratory basis.

The two new PPC firms will operate concurrently with the sale procedure, according to the power utility’s boss.

The increased cost of CO2 emission rights, consistently over 15 euros per MWh in recent times, is a concern for the sale as it adds to the risk faced by prospective investors.

“We could make a bid if we see that the units can operate even with a marginal profit margin,” the representative of one potential investor, still reserved about the prospects of the units up for sale, told energypress.

The Mytilineos group and GEK-Terna have both declared they will submit non-binding offers on June 21, but it remains unknown whether they will be willing to make follow-up offers. Elpedison has insisted it will not turn up for the first round. The Stasinopoulos group is expected to participate, either independently or as part of a consortium. The first-round participation of a consortium comprised of the Copelouzos group and China’s Shenhua is also seen as a certainty.

According to the sale plan, binding offers will be submitted in September following the provision of data-room access to participants, offering details on the units to be sold.

 

 

 

 

 

Country’s big energy players gearing up for DEPA sale

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The past couple of days could be regarded as an unofficial launch of DEPA’s (public gas corporation) privatization, given the strong interest expressed by major players for the gas utility’s commercial division.

Two of the country’s biggest energy market players, the Mytilineos corporate group and ELPE (Hellenic Petroleum), which holds a 35 percent stake of DEPA, made clear their interest in the gas utility’s commercial section yesterday, just hours after energy minister Giorgos Stathakis updated energypress on the DEPA privatization model to be adopted.

The government and country’s lenders have agreed on a DEPA sale model entailing a split of the gas utility into two subsidiaries representing its commercial and distribution network divisions. This split is expected in September.

Motor Oil Hellas is also expected to emerge as a candidate, highlighting how coveted the DEPA privatization is for energy players.

Motor Oil Hellas recently announced a plan to enter the retail natural gas market through its Coral network of gas stations.

The petroleum firm has filed a complaint to the competition committee over DEPA’s close-to-finalized effort to acquire Shell’s 49 percent of their EPA Attiki joint venture covering supply in the wider Athens area. DEPA already holds a 51 percent stake and would fully own EPA Attiki if the deal with Shell is finalized.

The Motor Oil Hellas complaint could turn into legal action as DEPA, already controlling the country’s biggest wholesale gas agreements, would also gain major control in the capital’s retail market and affect competition.

This issue is certainly not one of minor importance and could end up delaying the overall plan for the retail gas market’s restructuring as well as DEPA’s privatization.

Greece’s wholesale gas market is also changing. Until recently, DEPA controlled this market as the dominant importer of natural gas. DEPA held a 96 percent of the wholesale gas market in 2016.

Things began to change in 2017 when Prometheus Gas, a joint venture formed by the Copelouzos group and Gazpromexport, imported a total of one billion cubic meters, capturing a 20 percent share of the market. M&M Gas, a joint venture involving Motor Oil Hellas and Mytilineos, also imported gas amounts in 2017, through the Greek-Bulgarian interconnection.

Mytilineos is already very active in the wholesale natural gas market as an LNG importer. It plans to import a first Qatar Gas shipment next month. Mytilineos has also established a direct trading partnership with Gazprom and is believed to be negotiating a deal with another major player.

 

GEK Terna: Industrial role crucial for PPC lignite units sale

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The GEK Terna Group intends to take part in the first round of the main power utility PPC’s bailout-required sale of lignite units, like all other major corporate groups active in Greece’s energy market, but its participation in the second round of the disinvestment procedure, when binding offers will be submitted, will depend on a series of factors, the most important of these being whether investing in the lignite sector makes business sense, given the terms to be offered, board members made clear at a company shareholders’ meeting held yesterday.

Terna plans to take part in the PPC sale, offering investors power stations and mines representing 40 percent of the utility’s overall lignite capacity, through the parent company, not Terna Energy, board members informed in response to shareholder questions.

GEK Terna Group’s CEO Giorgos Peristeris (photo), in sideline discussions, pointed out that participation in the sale appears feasible only if industry is involved. More specifically, investment teams vying for the units would need to include companies eligible for energy-cost offsetting mechanisms, or buyers would need to establish long-term energy sale agreements with major-scale industrial consumers.

Energy-cost offsetting mechanisms are crucial as rising CO2 emission right costs are changing the wider market conditions, GEK Terna Group officials noted.

The number of employees to be attached to each PPC lignite unit sold is another vital factor as this will shape operating costs and the sustainability of respective units, group officials stressed.

The acquisition of all three of the sale’s lignite-fired power stations on offer by just one buyer represents a major risk as the resulting exposure to coal would come at a time when market changes, on a European scale, do not encourage such moves, GEK Terna Group officials noted.

For the time being, the GEK Terna Group, a leading player in Greece’s renewable energy market, plans to continue placing emphasis on the RES sector, and will also seek a greater role in foreign markets, through Terna Energy, company officials said. The company plans to further increase its investments in the US market and reduce exposure to the Greek market and the risks entailed.

 

DEPA, Shell agreement still not reached as deadline expires

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Long-running negotiations between DEPA, the public gas corporation, and Shell concerning the former’s acquisition of the Dutch firm’s 49 percent share of the EPA Attiki gas supply and EDA Attiki gas distribution ventures covering the wider Athens area, are still not over despite the energy ministry’s commitment to the country’s lenders for a settlement of the matter by June 6, today.

Price is not believed to be an issue in the delay. The two sides have agreed on a 150 million-euro price, according to sources, following evaluations carried out independently by DEPA and Shell.

Instead, the delay has been attributed to the great detail of attention shown by DEPA to guarantees that will ensure Shell’s full market withdrawal and also block any future market reentry attempt by the Dutch firm, including indirectly, as a member of an investment scheme.

Shell is not represented directly or through a subsidiary for its EPA Attiki joint venture with DEPA, but, instead, through an SPV (Special Purpose Vehicle). DEPA wants Shell, or one of its subsidiaries, to commit the Dutch company to a lawful execution and maintenance of the agreement to be signed.

In addition, DEPA is pushing for a term that would safeguard the Greek gas utility against any pending issues that may arise in the future, including tax matters and accidents as a result of faulty infrastructure development. Shell has yet to agree to such commitments.

An agreement between DEPA and Shell would clear the way for the Greek gas utility’s privatization, originally scheduled for 2018 but now not expected to be completed until some point in 2019.

 

DEPA sale to spill over into 2019, many steps still needed

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Revisions presented to a parliamentary committee last week for a complete ownership split of DEPA, the public gas corporation, and DESFA, the natural gas grid operator, promise to settle a pending bailout-related issue concerning distribution network ownership but many steps still lie ahead before the DEPA privatization, another bailout demand, is completed.

Although the government has included this sale’s proceeds in the 2018 national budget, the privatization is not expected to be finalized until 2019. Pending issues include the need to split of the gas utility’s commercial and distribution network divisions into two companies.

The energy ministry and country’s lenders agreed on a DEPA privatization model during recent fourth-review bailout negotiations but its specifics still need to be determined. The precise DEPA stake to remain with the Greek State and the sale’s time frame both remain undetermined.

Government officials have already unofficially admitted that it will be extremely difficult to announce two DEPA tenders offering investors stakes in the company’s trading and distribution network divisions within 2018, let alone collect the sale’s budgeted amount within the current year.

Negotiations between DEPA and Italy’s Eni for the latter’s full acquisition of the EPA Thessaloniki-Thessaly gas supply company, commercially dubbed Zenith, have been completed. DEPA previously held a 51 percent stake in this venture and Eni the other 49 percent.

However, DEPA has yet to finalize an agreement with Shell concerning the utility’s acquisition of the Dutch firm’s 49 percent share of the EPA Attiki gas supply and EDA Attiki gas distribution companies covering the wider Athens area. DEPA currently holds 51 percent shares in these ventures.

DEPA’s agreements with Eni and Shell both need to be completed to clear the way for the privatization. Furthermore, both agreements will require approval from related supervisory bodies, including the European Commission’s Directorate General for Competition. It is estimated the required approvals cannot be completed sooner than autumn.

The ongoing bailout-required sale of a 50.5 percent stake of ELPE (Hellenic Petroleum), which holds a 35 percent share of DEPA, is another crucial pending issue.

Also, related legislation will need to be ratified before DEPA’s tenders offering investors stakes in the prospective commercial and distribution network companies are announced.

Given all these pending steps, the DEPA tender for the commercial division could  be launched within 2018 but, realistically, the sale concerning the distribution network cannot be announced any sooner than early 2019.