PPC bond issue, ESG-linked, attracts top international funds

Some of the world’s biggest investors are among the foreign institutional investors who participated in power utility PPC’s recent bond issue as well as a supplementary issue staged yesterday, through which the corporation raised a grand total of 775 million euros.

Participants included US fund Blackrock, managing capital worth nearly 8 trillion dollars, fellow American fund Fidelity, whose portfolio is worth 440 billion dollars, the UK’s Apollo, managing 455 billion dollars, and France’s Pictet, with an investment portfolio worth 689 billion dollars.

The turnout for PPC’s bond issues was dominated by real-money investors, or institutional investors handling enormous amounts of cash reserves for long-term investments in companies with solid prospects. Their clients are chiefly retirement funds as well as corporations looking to the future.

Information made available until now on PPC’s bond issues indicates that 70 percent of subscribers were from abroad and 30 percent domestic. Among the foreign investors, half are institutional and real-economy investors, many of these cross-Atlantic.

US and European investors participated in the issues with shares of close to 50 percent each, while investors from Australia and Asia represented about 5 percent of subscriptions.

PPC’s initial bond issue raised 650 million euros at a borrowing rate of 3.875 percent, while yesterday’s follow-up issue raised an additional 125 million euros at 3.67 percent.

Bond issues linked with ESG (Environmental, Social and Governance) terms, as was the case with PPC’s two issues, are in high demand, internationally.

Through its issues, five-year bonds maturing in 2026, PPC has committed to a 40 percent reduction of CO2 emissions, from 23.1 million tons in 2019 to 13.9 million tons by 2022. If this target is not achieved, 50 basis points will be added to the yield.

First round of new ministry, lender talks this Wednesday

The current financial standing of state-controlled power utility PPC, effort  to reduce the power corporation’s market share, competition in the electricity market, target model progress, and prospective energy utility privatizations will all feature on the agenda of the recently appointed energy ministry’s first official meeting with the country’s lender representatives, scheduled for this Wednesday in Athens, sources have informed.

Energy minister Costis Hatzidakis will participate in the meeting but the country’s lenders will not be represented at the highest level, the sources added. The energy minister’s participation at the meeting Wednesday highlights the political significance of the PPC rescue effort for the government, the sources noted.

Finalized decisions are not expected during Wednesday’s negotiations. Talks are expected to run until mid-November. A Greek post-bailout  appraisal has been deferred until then as a result of European Commission personnel changes following the European elections last May.

This Wednesday, the energy ministry will inform the country’s lenders on the results of a first round of measures taken by the new Greek government to prevent PPC’s collapse.

A government decision to abandon NOME auctions, introduced about three years ago to offer lower-cost wholesale electricity to independent players, will also be officially announced at Wednesday’s meeting. This measure has cost PPC approximately 600 million euros since its launch, according to Hatzidakis, the energy minister.

The energy ministry officials will also seek a revision of a PPC market share contraction agreement, included in the bailout terms, requiring the utility to reduce its retail market share to less than 50 percent by the end of this year. It is not yet clear if the lenders will accept this request and, if so, what the replacement plan could be.

The key aspects of a government plan for swifter decarbonization, including the closure of PPC’s Amynteo and Megalopoli III power stations; planned efforts for no further target model delays; as well as privatization plans concerning gas utility DEPA and Hellenic Petroleum ELPE will also be discussed Wednesday.

Key energy ministry official holds first session with lender technocrats

The new energy ministry’s secretary-general Alexandra Sdoukou is expected to hold her first meeting today with technocrats representing the country’s lenders, currently in Athens.

Recent tariff hikes at power utility PPC, a campaign intended to improve the utility’s electricity bills collection record and a government plan for the gradual withdrawal of lignite units will all be presented by the energy ministry official.

Sdoukou also intends to present the government’s case supporting the need to end NOME auctions as well as details concerning the target model’s progress and finalized schedule.

NOME auctions have obligated PPC to offer below-cost wholesale electricity to rivals as a market share contraction measure over the past few years. The measure has affected the utility’s financial results and failed to produce results.

The ministry is seeking to establish a fresh setting for the country’s energy-sector negotiations with the country’s lenders, especially the European Commission, on Greece’s energy direction, the electricity market’s structure and PPC’s place in it.

The Greek bailout program includes objectives that have fallen too far behind to be achieved such as PPC’s market share contraction targets and disinvestment of lignite units.

The recently appointed energy minister Costis Hatzidakis is seeking a new overall solution for the country’s electricity market that would entail the adoption and implementation of EU strategic planning, as well as the eradication of any systemic threats, such as a possible collapse of PPC.

As part of this approach, the energy ministry has announced it will accelerate the withdrawal of lignite units and revise the National Energy and Climate Plan for even more ambitious RES targets.

The delay of a post-bailout appraisal of the Greek economy until mid-November, instead of October 31, should give the government additional time to prepare the details of its various energy sector plans, including lignite unit withdrawals, the termination of NOME auctions and privatization of distribution network operator DEDDIE/HEDNO.

New minister set to present PPC recovery plan details

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

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

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

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

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

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

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

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




Top-level meeting between minister, lenders for PPC

Newly appointed energy minister Costis Hatzidakis is expected to hold his first meeting with the country’s lenders either tomorrow or Friday for a session that should put to the test the minister’s plans for the future of the power utility PPC, currently struggling and incurring losses.

Initial reports had indicated the first round of talks – following the July 7 legislative election that brought the main opposition conservative New Democracy party into power – would be held between technocrats. But the opening session has been upgraded to a top-level meeting.

No commitments are expected to emerge from the opening session. Instead, Hatzidakis, the energy minister, will seek to get an idea as to where the country’s lenders stand on a new recovery plan for PPC envisioned by the government.

The PPC recovery plan will not be announced until its finalized shape has been agreed to between the Greek government and the country’s lenders. Though it remains unknown as to when this could be, the plan will certainly not be disclosed before the appointment of a new PPC chief executive.

Manolis Panagiotakis announced his resignation from the state-controlled power company’s top post shortly after the July 7 election.

Scheduled to take part at an Economist Conference in Athens today, the Greek energy minister is expected to highlight his concerns over PPC’s frail financial state; the need for a restructuring plan at the corporation; as well as the operating pressure faced by the grid, which Hatzidakis, dreading blackouts at the beginning of his tenure, has already described as being on the edge.

Local officials question potential of minister’s DEPA sale plan

Local officials have expressed doubts over the potential of an alternative DEPA privatization plan prepared by energy minister Giorgos Stathakis, entailing the establishment of a holding company to serve as an umbrella for three new subsidiaries respectively covering commercial, distribution and international projects divisions.

Besides the domestic disagreements, it remains to be been how the troika will react to the minister’s proposal when its head officials arrive in Athens next week for bailout negotiations.

According to energypress sources, certain local officials have expressed concerns as to whether the minister’s DEPA plan can raise the expected privatization funds. The skeptics believe the plan will not be able to raise more than 180 million euros. A total of 250 million euros is expected from the sale of a 66 percent stake of DEPA.

These officials fear the plan’s appeal may be insufficient for investors.

DEPA’s networks will definitely draw the interest of investors, pundits have told energypress. On the contrary, the gas firm’s commercial division is expected to be a less sought after prospect given the increasing competition in the natural gas market, the pundits added.

A new proposal entailing the establishment of two subsidiaries, one representing DEPA’s networks and the other the firm’s commercial division, without a holding company, has now also been tabled, it is believed. Each subsidiary would be sold separately to represent a 65 percent privatization.

The picture should start clearing up next week, on Wednesday, when the troika meets with government officials.

PPC’s five-year YKO returns period may exclude 2018

The country’s lenders have reacted against a proposal by RAE, the Regulatory Authority for Energy, for coverage of a Public Service Compensation (YKO) retroactive return to the main power utility PPC, totaling 360 million euros and concerning 2012 to 2016, through the national budget over a five-year period beginning next year.

The Greek finance ministry, facing a year of tough fiscal policies in 2018, has also not embraced the RAE proposal as it wants to avoid any new budget issues.

The government has adopted the RAE proposal, resorting to the national budget for financial support, as its implementation would prevent electricity bill hikes.

It is believed the government may revise the plan presented to the country’s lenders and exclude 2018 from PPC’s collection period, narrowing it down to four years, from 2019 to 2022.

PPC had initially demanded 735 million euros in retroactive YKO payments before RAE limited the figure to 360 million euros. The payment’s settlement is a bailout requirement.

An YKO surcharge is imposed on electricity bills to primarily subsidize high-cost electricity production on Greece’s non-interconnected islands and also support the Social Residential Tariff (KOT) program offering underpriviledged households subsidies for lower-cost electricity.


Minister, lenders to tackle energy issues at end of week

Energy minister Giorgos Stathakis and the lender representatives have scheduled a meeting for the end of this week, sources informed, with the aim of resolving pending energy-sector issues, or, at least, putting them on track towards settlement.

The main power utility PPC’s bailout-required sale of units representing 40 percent of its lignite capacity, as well as a road map for the natural gas market’s full liberalization, expected by the end of the year, stand as the key issues.

At present, the European Commission’s Directorate-General for Competition and Greek officials remain at odds over the content of PPC’s unit sale package.

A letter forwarded by the DG Comp to the Greek energy ministry last week reiterated the Brussels authority’s rejection of an intention by Greek officials to include state-controlled PPC’s ageing Amynteo lignite-fired facility, located in Greece’s north, on the sale list. The DG Comp appears to favor this unit’s replacement by PPC’s more modern Megalopoli facility, located in the Peloponnese.

In its letter, the DG Comp rejects a Greek argument claiming PPC would be comparatively disadvantaged – in terms of unit lifespans – if the more modern Megalopoli facility is sold to investors, leaving PPC with older facilities, including Amynteo, which requires a major upgrade if its lifespan is to be prolonged.

The DG Comp, in the letter, also stressed PPC’s lignite sale ordeal needs to be settled as time is running out.

According to sources, the energy ministry is working on various scenarios, still under wraps, ahead of this week’s meeting.

As for the gas market reforms, a solution for DEPA’s (Public Gas Corporation) reduced market presence has yet to be found. A previous Greek proposal was rejected a while ago.


Four regulatory issues on agenda of RAE meeting with lender technocrats

Four pending regulatory issues will stand as key matters – besides crucial details concerning the main power utility PPC’s bailout-required sale of lignite units – when a technical team representing the country’s lenders recommences negotiations in Athens tomorrow, including with RAE, the Regulatory Authority for Energy, ahead of next week’s arrival of lender representatives.

New tariff policy regulations for DESFA, the natural gas grid operator, directly linked to the prospects of a current international tender offering a 66 percent stake of the operator, stand as one of the four regulatory issues to be tackled.

According to sources, an additional two years will most likely end up being added to the time period concerning DESFA’s collection of a recoverable amount for sums from 2006 to 2015.

The most recent in a series of proposals concerning the duration of the collection period, beginning in 2018, had proposed 2030 as the year by which the entire amount would need to be returned to the operator. Now, as a result of the anticipated two-year addition, 2032 appears to be the new choice, which would provide a 14-year period for settlement of the recoverable amount.

DESFA stands to receive 220 million euros. The recoverable sum actually amounts to 320 million euros but 100 million euros of this will be covered through extra revenues generated by DESFA’s overperformance in 2017 and anticipated overperformance in 2018, reducing the figure to 220 million euros.

On another regulatory front, RAE hopes NOME auction term revisions, to apply for the next session, postponed by a week and reset for October 25, will be announced today. If so, the authority may inform the technical officials representing the lenders at tomrrow’s meeting and also provide a wider update on the progress of this measure.

NOME auctions were introduced in Greece a year ago to offer independent suppliers access to PPC’s lower-cost lignite and hydropower sources.

EVIKEN, the Association of Industrial Energy Consumers, has requested the exclusion of high-voltage electricity amounts from the NOME measure, noting that, one year since their introduction, the auctions have failed to make any impact on the high-voltage electricity market, leaving PPC as the sole option for industrial consumers.

The CAT mechanism is another pending regulatory issue. The energy ministry still needs to send a related update on the plan to the European Commision. RAE is working on it.

Also pending is a fourth regulatory issue concerning the gas market’s liberalization and the gas release plan at DEPA, the Public Gas Corporation. RAE’s task is purely perpipheral here.


RAE moving to block NOME-related electricity exports

RAE, the Regulatory Authority for Energy, is moving to restrict exports of lower-cost electricity amounts purchased by suppliers at NOME auctions, energypress has been informed.

Electricity traders have been exporting certain electricity amounts purchased at the NOME auctions, related auction data has confirmed. Given the current regulations, the practice is not illegal.

When the NOME auction process was adopted in Greece last October to offer third parties access to main power utility PPC’s low-cost lignite and hydrocarbon sources, the country’s creditors had pressured for the avoidance of all restrictions concerning export activity performed by suppliers.

At the time, Greek officials supported that the aim of the auctions was to help liberalize the local retail electricity market rather than boost profits for exporters.

RAE is expected to resort to the same reasoning. Greece’s creditors, especially the European Commission, are expected to react against the intention of local energy authorities to limit NOME-related electricity exports. The outcome of the issue remains unclear at this stage.



Energy bailout talks resume with basics done, details to go

The energy-sector measures required at this stage of the country’s bailout program have been agreed on except for certain fine details, to be examined today at a meeting between energy minister Giorgos Stathakis and creditor representatives, back in Athens to resume talks for the second review’s conclusion.

The government has already agreed to the sale of 40 percent of main power utility PPC’s carbon-fired capacity, including mines, well informed sources have noted.

A market test is planned for September to determine the level of interest of investors. If the investor interest in the utility’s carbon-fired units, old and new, is subdued, and, in addition, the progress of state-controlled PPC’s market share contraction targets is deemed to be insufficient, then hydropower units operated by the utility will also be added to the sale package.

Greek officials will seek to limit the capacity of units to be sold by contending that a considerable proportion of the utility’s carbon-fired production capacity will be withdrawn over the next few years, as a result of age and the EU’s greenhouse gas targets. Therefore, the capacity of PPC’s production capacity to be sold could be reduced to less than 40 percent.

Legislative revisions for the number and content of PPC units to be sold are planned for December this year, while the sale process is slated for June, 2018.

A review of PPC’s market share contraction progress, scheduled for June, is unlikely to convince lenders that the utility is on track for a retail electricity market share of 75.24 percent by the end of this year. To get there, the utility needs to shed a further 12 percent from its current market share.

The two sides have agreed to limit potential buyers of PPC units to firms already active in Greece’s electricity supply market.

They have also agreed to maintain NOME auctions, introduced last October to offer independent traders access to PPC’s low-cost carbon-fired and hydropower sources, until the target model is implemented. Also, as demanded by the European Commission, one of the country’s three lenders, electricity amounts to be offered at the NOME auctions will be successively increased through a compounding system. Electricity auction amounts offered each preceding year will be added to the following year’s amount. As a result, PPC will need to offer 20 percent of its output in 2017 and 33 percent in 2018. From then on, amounts are expected to fall as it is anticipated PPC will have sold units and cut its production capacity.

Buyers of PPC’s carbon-fired power stations will also be required to offer electricity amounts to NOME auctions. This measure is expected to prevent uneven competition between enterprises that have bought PPC production units and ones that have not.

Greek energy authorities will also need to update public service compensation (YKO) figures concerning previous years.

The lenders, especially the European Commission, also want DEPA, the Public Gas Corporation, to end its involvement in the country’s EPA gas supply firms.

An attempt by Greek officials to transfer a 17 percent share of PPC from the TAIPED state privatization fund to a superfund, intended to offer state assets a chance of improving their business performance ahead of privatization, appears unlikely to succeed.

The Greek State would maintain 51 percent control of PPC if privatization of the 17 percent stake of the utility currently under TAIPED’s control is avoided.



Energy issues not delaying bailout review’s conclusion

Enery-sector issues are not responsible for the delays encountered in the ongoing effort to conclude the bailout’s second review, sources involved in the negotiations have ascertained, without offering any further details.

Greek energy ministry officials held marathon talks yesterday with lender representatives handling technical issues to decide on details to be included in a Staff Level Agreement.

The same sources informed that Greek officials will take part in today’s Eurogroup meeting of eurozone finance ministers having essentially resolved all energy sector issues at a technical level.

It appears that a number of pending labor, fiscal and social security concerns are preventing the negotiating sides from reaching a finalized agreement needed to conclude the second review. Subsequently, the outcome of today’s Eurogroup meeting, expected to determine when the lender representatives could return to Athens in a bid to seal the second review, is difficult to forecast.

Yesterday’s talks between energy ministry officials and lender technocrats focused on the alternatives to be resorted to should a market test in autumn for main power utility PPC’s sales package of carbon-fired power stations indicate insufficient investor interest or a forthcoming review to examine the progress of PPC’s required retail electricity market share contraction produce poor results.

As has been extensively reported by energypress, an agreement on the bailout-required measures has essentially been reached.

The two sides have agreed to the sale of old and new carbon-fired PPC stations representing 40 percent of the utility’s capacity. Details on which units will be picked will be determined over the next six months. The European Commission will be involved in this process. The market test, expected in September, will be crucial. A legislative revision specifying the content of the unit sales package, or packages, will need to be made by the end of December, while the sale process must be launched by June next year.

The two sides have also agreed to include a clause requiring the continuation of NOME auctions, not only for PPC but also private-sector buyers expected to end up with carbon-fired stations currently owned by the utility.

NOME auctions were introduced last October in an effort to break PPC’s market dominance by offering independent traders access to PPC’s low-cost carbon and hydropower sources. The NOME auction progress will be reviewed in two stages, initially in June and followed by December.


Staff level agreement on energy issues sought today

Greek energy ministry officials will seek to reach a Staff Level Agreement today, during a teleconference with lender representatives, on the pending energy sector issues required to conclude the bailout’s second review.

A government official with direct involvement in the negotiations told energypress that efforts over the past few days have further narrowed the gap between the two sides. The official described the current differences as marginal.

Technocrats representing Greece and the lenders will seek to find solutions that may satisfy both sides.

Finalizing the details for prospective hydropower station additions to main power utility PPC’s sales package should a market test in September indicate insufficient investor interest in the utility’s carbon-fired power stations will be a tricky issue. Poor results in a forthcoming review to examine the progress of PPC’s required retail electricity market share contraction would force the utilty to add hydropower stations to its sales package.

Energy minister Giorgos Stathakis is battling hard to avoid the inclusion of hydropower units to the PPC sales package. Any formal addition of such a prospect is not expected to go down well within the ranks of the Syriza party, the coalition’s main partner, and, of course, local communities that would be affected.

According to sources, the two sides are expected to agree to the sale of old and new carbon-fired PPC stations representing 40 percent of the utility’s capacity. Details on which units will be picked will be determined over the next six months. The European Commission will be involved in this process.

The agreement is also expected to include a clause requiring the continuation of NOME auctions, not only for PPC but also private-sector buyers expected to acquire carbon-fired stations currently owned by the utility.

NOME auctions were introduced last October in an effort to break PPC’s market dominance by offering independent traders access to PPC’s low-cost carbon and hydropower sources. The NOME auction progress will be reviewed over two stages, initially in June and followed by December.



‘Market test to shape future of PPC’s hydropower plants’

Despite previous denials, the government is now making increasingly clear the prospect of main power utility PPC hydropower stations being added to the bailout-required package of PPC unit sales should an upcoming market test, to be held around September or October, indicate insufficient investor interest in the utility’s coal-fired power stations alone.

Energy minister Giorgos Stathakis tried as best he could to allude to the prospect of hydropower stations being added to PPC’s sales package in comments last Friday, during a visit to the country’s north, where the demand by lenders for utility unit sales is a particularly politically sensitive issue. Much of PPC’s coal-fired producing capacity is located in the wider region.

Stathakis, responding to reporter questions, informed that a three-way plan for a sale package made up of coal-fired power stations would be established between the government, lenders and the state-controlled utility within the next few months. The minister added that if this plan fails to make it through the upcoming market test then the “threat of additional structural measures will exist.”

Pundits believe that investors anticipate the initial plan’s failure and are already focusing their attention on the addition of hydropower stations to the PPC sales package. Coal-fired power stations alone, analysts contend, will not attract investors as such units generate electricity at a cost of between 50 to 60 euros per MWh at a time when electricity may be purchased through the NOME auctions for no more than 37 euros per MWh.

NOME auctions were introduced last October to provide independent traders access to PPC’s low-cost carbon and hydropower sources.

The country’s lenders want 40 percent of PPC’s coal-fired production capacity to be placed for sale. The details remain vague and will need to be clarified during the upcoming three-way negotiations between the government, lenders and PPC.

The three sides will need to agree on whether the 40 percent figure will apply to PPC’s capacity as it stood in 2015, this year’s capacity figure, which has contracted as a result of unit withdrawals, or the prospective figure of 2020, when PPC’s coal-fired production capacity is expected to have shrunk further. It also remains unclear whether coal mines will be included in the package.




Minister, concerned MPs play down harsh PPC prospects

The bailout-related requirements for state-controlled main power utility PPC, well behind on market share contraction targets and, consequently, facing prospective unit sales, are far bleaker than is being portrayed by government officials.

Governing Syriza party MPs representing seats in northern Greece’s western Macedonia region, who oppose utility unit sales, emerged from a meeting yesterday with energy minister Giorgos Stathakis declaring that not a single unit would be sold. The minister met with the MPs to updated them on the energy-sector developments at a meeting with lenders in Brussels several days earlier.

The defiant words by the MPs were presumably aired to avoid further anger among the utility’s union members and secure more political time for the Syriza-led coalition, holding a slim majority.

In actual fact, the minister updated his MPs on the hard facts resulting from the Brussels talks. He slightly sweetened the pill by noting that the government, in exchange for accepting the PPC unit sales demand by lenders, intends to remove a 17 percent stake of PPC from the TAIPED (State Privatization Fund) privatization list and transfer it to a superfund that would protect this sale until further notice. This 17 percent share is currently included in the Greek State’s 51 percent majority stake of PPC.

However, at a meeting earlier in the day, finance minister Euclid Tsakalotos informed TAIPED officials that PPC’s 17 percent would remain on the fund’s privatizations list, finance ministry sources informed energypress.

As things currently stand, old and new PPC lignite-fired power stations will be put up for immediate sale. If the utility’s market share is deemed to have not contracted sufficiently then hydropower stations will also be added to the sales package. It appears that the government, engaged in prolonged negotiations to conclude the bailout’s second review, will be given nothing in exchange by the lenders.

An even tougher stance by the lenders cannot be ruled out. A plan for the sale of a 40 percent proportion of PPC’s lignite and hydropower production capacity may be retabled. Whether this demand will be added to the overall requirements set by the lenders could be determined within the next few days.

The odds are against PPC, facing a review of its market share contraction progress this June. The utility needs to shed 13 percent – from February’s share of 88.5 percent – by December to reach an end-of-year target of 75.24 percent.



Gov’t to seek TAIPED removal for PPC in exchange for sales

The government intends to try and have a 17 percent stake of the main power utility PPC transferred from the TAIPED (State Privatization Fund) list to a wider superfund – a move that could offer this stake temporary protection from privatization – in exchange for acceptance of a plan demanded by the country’s lenders for the sale of PPC units.

Transfering the 17 percent stake of PPC to the superfund would delay ths stake’s privatization until further notice, whereas its current inclusion on the TAIPED list represents a countdown towards certain privatization.

The Greek State would lose its 51 percent majority control of PPC should this 17 percent stake be privatized.

Acceptance by the lenders of the government plan for a transfer of PPC’s 17 percent from the TAIPED list to the superfund would maintain the Greek State’s 51 percent control of the utility, even if downsized following the sale of units.

It is believed that investors would not be drawn to PPC’s 17 percent if this stake were to be placed for sale right now as the vague conditions surrounding the utility would act as a deterrent. Investors require further clarity on the business units to remain with PPC and those to be sold, as well as on the future shape of market conditions.

This presumed lack of interest amid the current conditions could offer unanticipated support to the government’s plan for a transfer of PPC’s 17 percent to the superfund.

Though the inclusion of PPC’s 17 percent on the TAIPED list is based on an older agreement between the government and lenders, this has yet to be endorsed by KYSOIP, the Government Council for Economic Policy, meaning that leeway for revisions, including the transfer of PPC’s 17 percent to the superfund, still exists.


PPC unit sales package to be determined by September test

The rescheduling, for a latter date, of the sale of main power utility PPC hydropower units, a more immediate sale of old and new lignite-fired power stations, as well as the continuation of NOME auctions – not only by PPC but any independent electricity firm that may acquire lignite-fired stations from the utility – make up the three key points included in a summary by Greek government officials of where the bailout-related energy sector demands currently stand following talks with lenders in Brussels last week, energypress sources have informed.

It is believed that plenty more work will be needed to finalize an energy sector deal contributing to the conclusion of the bailout’s second review.

This summary is expected to be presented tomorrow by energy minister Giorgos Stathakis to five fellow Syriza party MPs representing the west Macedonian region of Greece’s north, where political opposition to the sale of any PPC units runs high and could trouble the coalition, holding a slim majority in parliament.

The absence, for the time being, of PPC hydropower units from the utility’s bailout-imposed sale plan, as well as the continuation of NOME auctions – offering traders electricity produced by low-cost lignite and hydropower sources – for all firms operating such units, both represent new factors in the energy sector negotiations, according to the Greek government’s portrayal of the current situation.

Though the plan to include PPC hydropower units in the utility’s sale package is believed to have been placed on hold, it should be pointed out that the European Commission, which has studied Greece’s electricity market for years, appears convinced that persisiting market distortions can only be eliminated if PPC surrenders its exclusive control of hydropower units.

Seeking to push the PPC unit sales plan as deep into 2018 as possible in a bid to bolster its chances of political survival, the coalition appears to have agreed to stage a market test this coming September. This stage of the sale process is intended to reveal the level of interest in PPC’s units by both local and foreign investors. The current schedule also entails an ensuing legislative revision by December this year, to specify the number and type of PPC units to be included in the sale package. The sale plan, according to the schedule, will then be carried out in June, 2018.

Though the lenders appear to have softened on a demand that would require PPC to sell a proportion of units representing 40 percent of its production capacity, this is by no means definite, sources informed. This demand echoes a European Court decision issued in 2009.



Minister back from Brussels carrying PPC unit sales plan

Energy minister Giorgos Stathakis returned to Athens from Brussels last night having agreed to lender demands for the sale of main power utility PPC units. The minister held a series of bailout-related meetings with lenders during the week.

The new agreement’s framework recognizes that the recently introduced NOME auctions are proving futile on two issues they were intended to resolve. One of these issues is Greece’s adjustment to a European Court verdict requiring PPC to offer independent traders greater access to its lignite sources. The other is a demand by the lenders for a drastic reduction of PPC’s retail electricity market share.

The Greek side’s admittance of the NOME tool’s failure to deal with both these issues sets the path towards PPC unit sales.

The current demand tabled by the country’s lenders for a 40 percent sale of PPC’s lignite-fired production capacity is not new. It had initially emerged through a European Court decision in 2009. Prolonged negotiations concerning this ruling’s implementation followed. The European Commission pushed for the ruling’s adoption while Greek officials sought its least painful application. The ordeal included a court ruling in favor of PPC that was eventually overturned.

The European Commission is now renewing its older demand for PPC units sales but adjusting it to the current reality.

Besides lignite-fired units, the lenders are also believed to be pressuring for hydropower stations to be included in PPC’s overall sale package.

The government and state-controlled PPC will maneuver to avoid selling major hydropower stations at the Aliakmonas and Acheloos rivers, representing the bulk of the utility’s hydropower production.

The details of PPC’s sale package and its schedule will be discussed at upcoming meetings to be based on the delivery of related information on the utility’s units requested by the lenders.


Parliamentary bypass to be sought for energy measures

Negotiations seeking to settle pending bailout-related energy sector issues will restart today in Brussels with Greek energy minister Giorgos Stathakis to take part. Final decisions could be reached during the course of the day.

A demand by the country’s lenders for the sale of PPC units is at the core of the overall energy package.

As previously reported by energypress, the energy ministry has pushed hard to avoid the sale of PPC units as it is believed that such a measure would not make it though parliament, where the coalition maintains just a slim majority.

The country’s lenders want the sale of a 40 percent proportion of PPC’s lignite-fired and hydropower stations and are linking this demand to a recent European Court decision requiring the Greek State to ensure lignite source access to third parties besides the state-controlled power utility.

With this in mind, the negotiating sides will seek a PPC units sale solution that could bypass a parliamentary vote. The government appears willing to accept the prospect of a PPC downsize va such a route as the utility’s prospective contraction into a smaller yet more robust enterprise is now viewed as an inevitable development.

Besides progress needed on other enery sector issues, the starting date to be set for the sale of PPC units will be a key factor in the effort by the negotiating sides to reach a compromise deal.

The lenders are pushing for the sale procedure to begin immediately following a review of PPC’s market share contraction progress in June and be completed within the first half of 2018. The Greek government is attempting to delay the review of PPC until September and use the procedure’s findings to determine the capacity of PPC units that will need to be sold.


Capacity loss of lenders demand for PPC unit sales being calculated

Though the government is publically claiming it will not bow to pressure by the lenders for the sale of main power utility PPC units, fearing the political cost, it is believed to be searching for a formula that may limit the utility’s degree of contraction without affecting negotiations for an agreement on the bailout’s second review.

Given the seeming inevitability of the sale of PPC units, Greek officials, are attempting to calculate what this would mean in terms of capacity lost if the demand by the lenders for PPC’s sale of 40 percent of its lignite-fired and hydropower stations is accepted.

According to energypress sources, this sale demand by the country’s lenders was calculated based on PPC’s installed capacity in August, 2015, which stood at 12,500 MW.

However, a number of older fuel and and lignite-fired power stations representing a total capacity of 1,000 MW have since been withdrawn by the utility, reducing its capacity to 11,500 MW. More ageing lignite-fired power stations operating at two locations in northern Greece, Amynteo and Kardia, are also set to be withdrawn between 2018 and 2020.

Well-informed local officials contend that the demand by lenders on the government for PPC to sell 40 percent of its units should be applied to the total of PPC’s remaining installed capacity once the aforementioned stations have also been withdrawn, and not on the current capacity of 11,500 MW.

One official argued that the sale of 4,000 MW of PPC units, as would be the case if the demand by the lenders is implemented, is excessive. The official added that the sale of a total capacity representing around 1,200 MW would be more appropriate, while also admitting this is a best-case scenario. Pressure by the lenders on PPC to sell units representing a far greater capacity total would devastate the utility, the official warned.

According to this official, the lenders appear to be losing faith in the recently introduced NOME auctions as an effective tool that may reduce PPC’s dominant market share and, instead, are turning their attention to demands for the sale of utility production units.

Greek officials are pushing for the NOME auctions to be extended until at least December, which would allow extra time for results. Introduced last October with the intention of providing independent traders access to PPC’s low-cost lignite-fired and hydropower sources, the auctions have so far failed to impact PPC’s market dominance.

The Greek government intends to legally challenge claims by the lenders that the country is not honoring a European Court decision making compulsory the access of PPC’s lignite sources to third parties.

The lenders are exploiting the verdict to intensify the pressure being applied on the government to sell PPC units. However, the Greek government, in the challenge it is preparing to mount, is expected to argue that the lenders are generalizing the verdict’s application as it makes compulsory the access to PPC’s lignite sources, not production units, to third parties.

In more recent times, the energy ministry has contemplated proposing to the European Commission a solution that would provide independent players access to unutilized coal deposits in northern Greece’s regions of Elassona, Drama, Vegora and Vevi. This solution, which had also been tabled in 2009, would completely exclude PPC from the sources. It is hoped that such an alternative could ease the pressure for the sale of PPC units. The European Commission’s view of such a prospect remains unclear.



Energy issues, on hold, must be cleared for review conclusion

Disagreements and pending issues concerning bailout-related energy sector measures are high on the agenda and will need to be overcome if the ongoing and prolonged second review of Greece’s program is to be concluded, European Commission officials have underlined.

Creditor representatives cannot be expected to return to Athens in the effort to conclude the bailout’s second review unless the pending energy issues are resolved, an official in Brussels has pointed out.

A decision by finance minister Euclid Tsakalotos, his deputy Giorgos Houliarakis, as well as labor minister Efi Achtsioglou to remain in Brussels yesterday appears to be linked to an effort aimed at settling pending labor issues. A team of IMF officials is currently also in Brussels. It has become apparent that the Greek bailout’s second review will not be concluded unless the IMF offers its approval, especially on labor measures.

This does not appear to be the case with the energy-sector issues. Convergence with the European Commission on a schedule mapping out a sale plan for main power utility PPC units would suffice for an agreement at a technical level.

Also yesterday, energy minister Giorgos Stathakis was in Berlin to participate in an energy conference before heading to Italy following an invitation by Italian multinational oil and gas company Eni to discuss hydrocarbon prospects.

Though Greece’s energy issues appear to have been temporarily placed aside as government officials grapple with the lenders on labor matters, the second review’s finalization cannot be expected without an agreement on the future of Greece’s electricity market and PPC.

According to sources and leaks, government officials have now realized that the lenders will not tolerate any further maneuvering from the Greek side that could delay the implementation of inevitable structural reforms needed to support the electricity market’s liberalization.

Certain sources claim that PPC has already begun preparing a portfolio of company units to be sold. Utility officials hope a downsize will reshape the corporation as a leaner but meaner enterprise.


Lenders propose September market test for PPC unit sales

A Greek government delegation will participate at today’s Eurogroup meeting of finance ministers without any progress to show on the country’s bailout-required energy-sector measures.

Greece’s energy minister Giorgos Stathakis failed to make progress on energy sector issues during a teleconference with the lenders last Friday.

The government team hopes to receive some support at today’s Eurogroup meeting which could lead to convergence with the lenders on bailout measures, both in the energy sector and other domains, needed to conclude the second review and avert problems at a politcal level for the coalition.

However, a demand by the lenders for the sale of 40 percent of main power utility PPC’s lignite-fired and hydropower units greatly limits the prospects for any swift deal.

An MOU proposal presented to the Greek government by the lenders sets a tight schedule through which the PPC units would be sold as one, two or three packages within the first half of 2018, assuming certain other intermediate targets are met along the way.

The MOU includes a proposal to stage a market test in September for the PPC unit sales plan, the submission of non-binding offers by investors by November of this year, binding offers by February, 2018, signed sale agreements the following month, and a full review of the procedure within the first half of 2018.

The lenders have also made clear that any future buyers of PPC units must not share any direct or indirect links with the Greek State.

The lenders reject a PPC proposal entailing the sale of new utility subsidiaries with existing clients on board as a means towards achieving market-share contraction targets.

Instead, the lenders insist on a drastic increase of electricity amounts offered by PPC through the recently introduced NOME auctions as a key tool that could reduce the utility’s market share.

The NOME auctions were introduced last October to break PPC’s market dominance by offering other traders access to the utility’s low-cost lignite and hydropower sources.


Energy-sector bailout talks at impasse, PM informed

Energy sector reforms demanded by the country’s lenders are developing into one of the biggest obstacles preventing the conclusion of the bailout’s second review. Rather than bring the negotiating sides closer together, a teleconference held two days ago between energy minister Giorgos Stathakis and creditor representatives has widened the gap.

The lenders are not making any concessions and, on the contrary, proving relentless in their demand for the launch of a sale process offering 40 percent of main power utility PPC’s lignite-fired and hydropower stations.

This demand is being linked to a recent European Court decision supporting the access of third parties to the country’s coal deposits.

At the same time, the lenders do not appear willing to include into any agreement a proposal made by PPC to sell off new subsidiary retail units with existing clients on board as a means towards satisfying the market share contraction targets imposed on the utility through the bailout.

Instead, the lenders are insisting on their proposal for a drastic increase of electricity amounts offered to independent traders through the recently introduced NOME auctions. Lower-cost electricity produced at the utility’s lignite-fired and hydropower stations is made available to independent traders at these auctions.

Energy ministry officials are unquestionably troubled by the adamant stance of the lenders. Until recently, Stathakis, the energy minister, insisted energy-sector issues would not hold back the second review’s conclusion. However, the sector’s issues have now been become a crucial aspect for any agreement between the government and the lenders.

Prime Minister Alexis Tsipras has been informed of the impasse and is expected to intervene at a political level, especially on the demand for the sale of PPC units.

Such a development could prove devastating for the coalition’s hold on power. A considerable number of MPs supporting the coalition’s slender majority in parliament, especially ones representing seats in northern Greece’s western Macedonian region, have made clear they will not endorse any plan that would include the sale of PPC production units.

No progress made by energy minister, country’s lenders in teleconference

No progress was made on bailout-required energy sector reforms during a teleconference yesterday between Greek energy minister Giorgos Stathakis and creditor representatives, who departed Athens last week with plenty more work still needed to conclude the bailout’s second review, energypress sources have informed.

The creditor representatives insisted that the main power utility PPC’s market share contraction targets included in the bailout are not being met and, therefore, alternative structural measures entailing the sale of PPC lignite-fired and hydropower stations will need to be mapped out following a review of the utility, planned for June.

Stathakis was adamant in his views, supporting that the recently introduced bailout-required NOME auctions and PPC’s additional plan to sell off new retail units with existing clients on board suffice for the achievement of the market-share contraction targets imposed on the state-controlled utility.

The energy minister is politically motivated to avoid PPC’s sale of electricity production units at all costs. A considerable number of MPs supporting the coalition’s slender majority in parliament, especially ones representing seats in northern Greece’s western Macedonian region, have made clear they will not endorse any plan that would include the sale of PPC production units.

The energy-sector bailout teleconference will continue today at a technical level, energypress sources informed. Participants here are expected to forward proposals in an effort to bring the two sides closer together.

PPC to prepare strategic plan as a leaner, meaner enterprise

The main power utility PPC, acknowledging the inevitability of its transformation into a smaller yet possibly more robust corporation in the near future, if its unpaid receivables are effectively managed, is gearing towards appointing a consultant for the preparation of a strategic plan that will map out its business moves over the following five years, at least.

Facing bailout-related market share contraction targets that promise to considerably reduce its size, PPC will be looking to expand into new fields, including gas, with new products and  services.

The strategic plan to be prepared will assume a significantly downsized corporation with a far smaller client base and present a business strategy to cope with the sale of PPC units, already widely regarded as an unavoidable development.

To date, PPC officials, in their defense against the bailout-related contraction pressure, have argued that the utility is producing far less electricity (53%) than it is actually selling (88.5%) and is therefore forced to purchase electricity amounts in order to sell. In presenting this argument, PPC officials contend that the forced sale of business units would increase the utility’s operating costs and threaten its sustainability.

Despite their stubborn fight, PPC officials have come to realize that the country’s creditor representatives will remain relentless in their demand for the sale of PPC units, which is severely restricting any leeway for negotiations that could lead to the avoidance of the prospect or delay it.

Officials at the state-run utility, as well as the government, know well that the bailout-related pressure for the sale of units will return in full force this coming summer, or, possibly, no later than the end of the year, once the creditor representatives have conducted a review of the NOME auctions, introduced recently as a tool aiming to reduce PPC’s market share by offering independent traders access to PPC’s low-cost lignite and hydropower sources.

“We are backed by a strong brand name and market presence and intend to utilize the European energy market integration process, especially in the regional Balkan and Italian markets, which interest us,” PPC’s chief executive Manolis Panagiotakis noted recently.

This statement may be interpreted as a declaration that the utility is already preparing for its new life as a leaner and, hopefully, more robust enterprise.

The strategic plan will need to take into account the Greek electricity market’s ongoing liberalization as well as the corporation’s financial woes caused by an alarming unpaid receivables figure now in excess of two billion euros.




Market players, expecting sale of PPC units, planning ahead

The local electricity market’s players, considering the prospective bailout-related sale of main power utility PPC production units a certainty, are preparing plans in anticipation of such a development.

Despite the government’s stubborn stance in the ongoing and prolonged effort to conclude the bailout’s second review, all sides appear to have recognized, to lesser and greater extents, the inevitability of these PPC sales.

Highlighting PPC’s hesitance and resistance to prospective production unit sales, the utility’s chief executive Manolis Panagiotakis recently contended that the country’s independent suppliers, currently possessing 150,000 electricity supply connections, are not ready to take on 4.5 million PPC clients, a shift that is needed if the state-controlled utility’s market share reduction is to fall to 50 percent by 2020, as demanded by the bailout.

Energy minister Giorgos Stathakis, in comments published by local media over the weekend, acknowledged, for the first time in public, that if the NOME auctions – imposed by the country’s creditors – or sale of new PPC subsidiaries with PPC clients on board – a utility proposal – fail to reduce the utility’s dominant market share, then a bailout clause would be triggered for the sale of PPC production units.

Market players have stretched their thoughts further ahead and are already focusing their thoughts on the possible sale methods to be adopted for these sales.

At this stage, the government is battling to delay a review of PPC’s market share contraction progress and hopes this check will be shifted from June, as demanded by the creditor representatives, to December.

Currently holding an 88.5 percent share of Greece’s retail electricity market, PPC is expected to have lowered this share to 75.24 percent by the end of this year.



Energy issues remain as latest bailout review talks end

The latest visit to Greece by the country’s creditor representatives, seeking to conclude the bailout’s second review, has ended after ten days of negotiations without any finalized agreements on the energy, labor, social security and taxation fronts.

The energy-sector talks are primarily focused on a main power utility PPC proposal entailing the transfer of existing clients to new subsidiaries that could be sold as a means of reducing the utility’s dominant market share, as well as on a request by the lenders for the utility to increase its low-cost carbon and hydropower generated electricity amounts offered to independent suppliers through the recently introduced NOME auctions to a level of 17 percent of total annual demand.

A demand by the lenders that would require state-controlled PPC to sell a considerable proportion of its production units may have been removed from the negotiating table at this stage.

It appears that PPC will be given until the end of 2017 to display satisfactory progress in its bailout-related market share contraction targets. Failure to do so will most likely prompt the lenders to demand the sale of production units.

PPC also needs to deal with on an ongoing market-abuse probe by the European Directorate for Competition.

Pending issues that require more work and negotiating will be discussed through teleconference sessions with the lenders next week, a leading government official informed following yesterday’s last round of talks in Athens.

This government source contended that “significant progress” for a balanced package of additional fiscal measures was made.

According to sources, the lenders are demanding additional measures worth two percent of the country’s GDP, which works out to 3.6 billion euros. The lenders want half of this amount to be shouldered by a reduction of the tax-free threshold in 2019 and the other half by pension cuts in 2020.

The lenders appear to have rejected a government request for a reduction of the ENFIA property tax and, instead, are expressing a preference for a reduction of company and personal income tax, especially for individuals with higher income levels.

Lenders could turn to ongoing PPC probe for extra pressure

The country’s creditor representatives, threatening to table unfavorable European Directorate for Competition findings linked to a market abuse probe being conducted on the main power utility PPC, are applying relentless pressure for the sale of PPC units, a leading government official informed last night, during a break at the ongoing bailout negotiations in Athens, believed to not be producing real progress in the energy-sector issues being tackled.

Though it remains unclear whether either side has shown any willingness to compromise, the energy ministry is conveying a message of cautious optimism and insists that the bailout’s second review will not be obstructed by energy-sector matters.

Pundits keeping a close watch on the developments contended that the country’s lenders are remaining resolute on their demands but could offer some leniency on a demand to review PPC’s bailout-related market share contraction progress in June. This review could instead be staged in December, one well-informed contended.

The review could spark a demand for the immediate sale of 40 percent of PPC’s production units if the utility fails to meet market reduction targets, expected to gradually reduce PPC’s market share to less than 50 percent by 2020. PPC, maintaining a dominant market share of nearly 90 percent, missed its end-of-2016 target.

Privatizations list unchanged, contrary to government claims

All energy sector enterprises currently included on the country’s privatizations list will remain on it despite claims by Greek government officials, including ministers, that they would be removed.

According to finance ministry officials, the latest updated privatizations list held by TAIPED, the state privatization fund, essentially remains unchanged.

It includes 17 percent of the main power utility PPC, a prospective privatization that has been disputed by local officials for quite some time now, 65 percent of DEPA, the Public Gas Corporation, and 35 percent of ELPE, Hellenic Petroleum.

As for DESFA, the natural gas grid operator, a new international tender, to follow last December’s collapse of a long-running previous sale effort, is expected to be announced within March. Once again, a 66 percent stake will be offered.

By the end of this month, TAIPED will need to hire consulting firms for the PPC, ELPE and DEPA privatization procedures, finance ministry officials informed.

Until recently, certain Greek ministers, among them the energy minister Giorgos Stathakis, contended that PPC’s 17 percent would be transferred to one of the privatization system’s other divisions, EDIS, a Public Holding Company in the making, where the focus would turn to better utilization rather than an outright sale of the power utility stake.

It remains to be seen whether the government will seek to dismantle the updated privatizations program, now at the finance ministry, when it is forwarded to KYSOIP, the Government Council for Economic Policy, for required approval.

Given that the country’s creditor representatives are applying relentless pressure on the government for the privatizations, 19 in total, to proceed, any major changes from here on would come as a surprise.



Wide gap remains in energy-sector bailout issues

The gap separating the country’s creditor representatives and the energy ministry on energy-sector reforms needed as part of the overall effort to conclude the bailout’s second review remains wide and, at this stage, seemingly unbridgeable.

Two meetings held last week between energy minister Giorgos Stathakis and the creditor representatives and three more sessions involving main power utility PPC officials, including the CEO Manolis Panagiotakis, with a technical team representing the lenders, failed to produce any results on issues concerning the electricity amounts to be offered by the utility to independent traders through NOME auctions and, especially, the establishment of alternative structural measures should the auction process fail to deliver.

A PPC proposal entailing the creation and sale of new utility supply subsidiaries, through the transfer of existing clients to these new firms, an approach preferred by the utility to lower its dominant market share, was presented in detail last week. The response by lenders, who seem hesitant at best, remains to be seen.

The lenders are pushing for PPC to increase its electricity amounts offered through the NOME auctions, introduced last October as a means of providing other traders with access to the utility’s low-cost carbon-fired and hydropower stations. The objective is to gradually decrease PPC’s market share to less than 50 percent by 2020.

At this stage, it appears that the lenders will insist on PPC increasing its electricity amounts for the NOME auctions.

The lenders want to conduct a review of the NOME plan’s progress in June and then implement alternative measures should the auction plan be deemed ineffective in PPC’s market share contraction plan.  The utility, whose market share remains dominant at just under 90 percent, missed its end-of-2016 target.

Lenders have proposed the sale of a 40 percent portion of PPC’s carbon-fired and hydropower stations as a NOME alternative.

During last week’s meetings, PPC officials contended that the utility’s counterproposal concerning the establishment and sale of new electricity supply subsidiaries could be actualized by June.