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.

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.

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.

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.

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.

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.

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.

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.