Investors interested in PPC lignite units, challenges remain

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

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

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

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

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

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

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

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

 

New PPC lignite sale’s field of contenders disclosed today

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

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

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

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

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

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

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

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

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

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

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

 

 

 

PPC acts against Ahlada mine operator for better supply terms

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.

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

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 lignite units sale failure highly likely, day after examined

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.

PPC sale deadline extension ‘pointless without better terms’

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 unit contenders up pressure, new deadline possible

Three contenders considering the main power utility PPC’s sale of its Megalopoli and Meliti lignite-fired power stations included in a bailout-required disinvestment of lignite units are intensifying their pressure on PPC for more favorable terms as the deadline for binding bids approaches.

In response, PPC has been eager to present any new favorable developments that have emerged from the implementation of incentives in an effort to support the sale’s conditions and price-tag potential.

This was demonstrated yesterday by chief executive Manolis Panagiotakis in comments to journalists.  He made reference to the results of a voluntary exit plan offered to employees at the Megalopoli and Meliti units, both loss-incurring. A total of 360 employees working at the two lignite-fired power stations have accepted the offer. Prospective buyers have indicated they want the workforce at Megalopoli and Meliti, totaling 1,248 prior to the voluntary exit plan, to be cut down to 600. PPC has just announced a voluntary transfer plan for Meliti and Megalopoli unit employees to other company posts.

Panagiotakis also noted PPC is negotiating with the owners of the Ahlada lignite mine, feeding the Meliti power station, for a lower supply price and longer supply agreement.

Reacting to the PPC chief’s comments, China’s CHN and the Copelouzos group’s Damco, one of the sale’s three potential bidding teams, described the results of the staff reduction effort at the two power stations as a good basis for cost reduction.

A consortium comprising the Czech Republic’s Seven Energy and Gek Terna has refused to comment. The Seven Energy firm has yet to present itself as a certain participant in the sale. In recent times, it has made note of narrow profit margins despite the voluntary exit plan, CAT remuneration uncertainties surrounding for the two units, and increased CO2 emission right costs.

Panagiotakis, the PPC chief, yesterday told journalists the Mytilineos group remains a contender for the Megalopoli and Meliti power stations. The Mytilineos group has not responded but, according to sources, remains troubled by what it sees as an unfavorable investment conditions surrounding the lignite sector, including the sharp rise in CO2 emission right costs.

Just days remain before the sale’s January 23 deadline for binding bids expires. An extension could be required as a result of PPC’s last-minute Ahlada mine negotiations and a Brussels delay concerning the European Commission’s position on Greece’s CAT remuneration mechanism proposal, a crucial factor for the lignite units sale.

 

 

Brussels asks RAE to inspect Chinese entry into Greek RES sector, IPTO

RAE, the Regulatory Authority for Energy, acting on a European Commission request, has begun an examination process to determine if a strategic agreement between the Copelouzos group and China’s state-run CHN Energy for the latter’s acquisition of wind energy parks creates any EU regulation issues regarding fellow state-run SGCC’s (State Grid Corporation of China) recent 24 percent stake buy into Greek power grid operator, authority sources have informed energypress.

RAE has been asked to examine whether CHN Energy’s agreement to buy Copelouzos wind energy farms with a total capacity of 1,500 MW violates an EU directive concerning the separation of a single entity’s activities in energy production, supply and transmission, according to the same sources.

In essence, RAE is being asked to inspect IPTO’s current certification as a result of SGCC’s purchase of a stake in the Greek operator before determining whether a follow-up certification process will be needed.

Much ground needs to be covered before the strategic agreement reached between the Copelouzos group and CHN Energy turns into an actual deal, the RAE sources told energypress.

The European Commission’s intervention is also linked to CHN Energy’s interest in the main power utility PPC’s ongoing sale of the Meliti and Megalopoli lignite-fired power stations, part of a bailout-required sale of PPC lignite units, the sources admitted.

Brussels warns Chinese, Czech investors over PPC units sale

Prospective buyers of main power utility PPC lignite-fired power stations included in a bailout-required disinvestment package representing 40 percent of PPC’s overall lignite capacity will need to comply with regulations and utilize these power stations as independently as possible from PPC, the European Commission has noted in a stern warning presumed to be directed at China’s CHN Energy and the Czech Republic’s Seven Energy, both interested in the sale.

CHN Energy, expected to bid for PPC’s Megalopoli and Meliti power stations along with the Copelouzos group as a bidding partner, is owned by the Chinese state, also the owner of State Grid Corporation of China (SGCC), holding a 24 percent stake in Greek power grid operator IPTO, until recently a PPC subsidiary.

As is widely known, the European Commission has not embraced Chinese involvement in strategic firms located on European territory. It is believed IPTO will need to undergo a renewed certification procedure if CHN Energy submits an offer for the two aforementioned PPC power stations.

The Czech Republic’s Seven Energy, planning to join forces with Terna for the PPC sale, has proposed a still-unspecified collaboration with PPC entailing a share of profits and losses over a six-year period.

Brussels increasingly vigilant towards Chinese investments

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.”

Brussels grants investors one-month extension for PPC bids

Investors have been given a one-month extension for second-round binding bids concerning the main power utility PPC’s sale of lignite units following the European Commission’s approval of a request made by China’s CHN Energy, which has joined forces with the Copelouzos group for this sale.

Subsequently, prospective buyers now face a November 17 deadline for their binding bids. The deadline extension had been widely anticipated over the past ten days or so following hints made by energy ministry officials at the recent Thessaloniki International Trade Fair.

The additional time provides energy ministry and PPC officials with an opportunity to negotiate with Brussels for the possible inclusion in the sale of a CAT remuneration system for lignite-fired electricity generation.

CHN Energy and the Copelouzos group had requested up to two months of additional time but the deadline extension was limited to one month by a  Monitoring Trustee overlooking the overall sale procedure on behalf of the European Commission.

Both the energy ministry and PPC officials fear offers by investors could remain low, higher CO2 emission right costs being a key factor. CAT remuneration would offer some incentive for bigger bids.

Initial hopes of a total sale price of around one billion euros for PPC lignite units and mines representing 40 percent of the utility’s overall lignite capacity have now deescalated to levels of several hundred million euros. Some investors have suggested offers could be considerably lower.

GEK-Terna, which has united with the Czech Republic’s Seven Energy for the PPC sale; another Czech firm, EPH; ElvalHalkor, a member of the Viohalko group; as well as Mytilineos, are the sale’s other second-round qualifiers.

Brussels considering small deadline extension for PPC sale

The European Commission appears to be considering a second-round binding bids deadline extension for the main power utility PPC’s bailout-required sale of lignite units following a request made by China’s CHN Energy, one of the sale’s contenders.

According to Greek energy ministry officials, Brussels could extend the deadline by a few weeks, less than an additional one to two months sought by CHN. The current deadline expires on October 17.

CHN, which has joined forces with the Copelouzos group for the PPC sale, has so far submitted 224 queries regarding PPC’s sale of lignite units.

Both the energy ministry and PPC are concerned increased CO2 emission rights costs, currently up to levels of around 22 euros per ton, could negatively impact the price levels prospective investors would be willing to pay for the power utility’s lignite units.

Also, the European Commission does not appear likely to make PPC’s lignite units eligible for CAT remumeration rewarding grid input. However, an unspecified partial reward system is believed to be in the making.

 

CHN Energy requests deadline extension for PPC unit sale bids

China’s CHN Energy, which has joined forces with the Copelouzos group for the main power utility PPC’s bailout-required 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.

CHN Energy is seeking additional time for its analysis of data collected by company officials, including through the PPC sale’s virtual data room, energypress sources informed. CHN Energy officials have forwarded numerous questions concerning the units up for sale, the sources added. Company practices, including approval procedures, applied at CHN Energy are a contributing factor to the need for additional time, sources said.

The CHN Energy request is now being examined by the European Commission, supervising the PPC sale.

Other participants do not appear to have requested more time. GEK-Terna, which has united with Seven Energy for the PPC sale, Czech firm EPH, ElvalHalkor, a member of the Viohalko group, as well as Mytilineos, have all submitted first-round expressions of interest.

The prospect of other partnerships being formed by these players does not seem probable, sources noted.

PPC officials will begin a series of management interviews today with participants for clarification of financial data collected through the video data room during the summer. Despite union resistance, some candidates managed to make on-site inspections of PPC facilities included in the sale.