Italgas, DEPA Infrastructure’s top bidder, step from acquisition

Italgas, Italy’s biggest natural gas distribution company and the third largest in Europe, is now one step away from acquiring Greece’s DEPA Infrastructure as, according to energypresss sources, it has submitted the highest bid in the DEPA Infrastructure sale and is the only bidder to which the privatization fund TAIPED has extended a request for an improved offer, by September 8.

The Italgas offer is believed to be close to 700 million euros, a figure expected to rise further, and well above an offer submitted by rival bidder EPH from the Czech Republic.

The preferred bidder may be officially announced on September 9. The sale procedure is expected to be finalized by the end of the year as national and European authorities will need to re-certify DEPA Infrastructure as a natural gas network operator under its new ownership to emerge from the sale.

The 100 percent privatization of DEPA Infrastructure comprises 100 percent of gas distributor EDA Attiki, covering the wider Athens area; 100 percent of gas distributor DEDA, representing all other areas in Greece except for Thessaloniki and Thessaly; as well as a 51 percent stake in gas distributor EDA THESS, covering the Thessaloniki and Thessaly areas.

The preferred bidder will also submit an offer for the remaining 49 percent stake in EDA THESS, based on an agreement reached between TAIPED, the privatization fund, with Italy’s Eni Gas e Luce, the current holder of this minority stake.

As a result, DEPA Infrastructure’s winning bidder stands to become the sole stakeholder in the three gas distribution companies.

DEPA Infrastructure sale now a showdown for two, Italgas, EPH

With the deadline for binding bids in the 100 percent sale of gas company DEPA Infrastructure expiring tomorrow, a latest update from sources indicates that two suitors will submit offers, Italy’s gas network operator Italgas and the Czech Republic’s EP INVESTMENT ADVISORS (EPH). An additional bid by a third participant has not been ruled out.

Besides Italgas and EPH, four other bidders have qualified for the privatization’s final round, these being two Australian funds, FIRST STATE INVESTMENTS (European Diversified Infrastructure Fund II) and MACQUARIE (MEIF 6 DI HOLDINGS), international fund KKR and Chinese consortium SINO-CEE FUND & SHANGHAI DAZHONG PUBLIC UTILITIES (GROUP) Co., Ltd.

The Greek State is selling its 65 percent stake in DEPA Infrastructure, through the privatization fund TAIPED, and Hellenic Petroleum (ELPE) the other 35 percent.

Italgas’ chief executive Paolo Gallo, in an interview with Greek daily Ta Nea, has stated the company will be submitting a binding offer for the DEPA Infrastructure sale.

Italgas is Italy’s biggest natural gas distributor, holding a 34 percent market share, and also ranks as Europe’s third biggest network operator. Italgas operates 70,000 kilometers of networks serving over 1,800 municipalities.

Rival bidder EPH is a formidable energy group with vertically integrated investments in central Europe. It owns and utilizes assets in the Czech Republic, Slovakia, Germany, Italy, the UK, France, Hungary and Poland, covering a range of domains such as energy and heat production, natural gas transmission and storage, as well as distribution and supply of natural gas, heating and electricity.

DEPA Infrastructure controls gas distributors EDA Attiki and EDA THESS, both with 51 percent stakes, as well as DEDA.

DEPA Infrastructure buyer must also buy Eni 49% in EDA Thess

The winning bidder in a privatization offering gas company DEPA Infrastructure will be obligated to also purchase gas distributor EDA THESS’s 49 percent stake held by Italy’s Eni gas e Luce, wanting to sell, according to an agreement between the two sides, revealed by a European Commission post-bailout surveillance report, the 10th edition, on Greece.

DEPA Infrastructure, EDA THESS’s parent company, holds a 51 percent stake in the gas distributor covering the Thessaloniki and Thessaly areas, while Eni gas e Luce, holding 49 percent, wants to withdraw.

A total of six qualifiers through to the DEPA Infrastructure privatization’s final round have been informed of the condition requiring the eventual DEPA Infrastructure buyer to also purchase Eni gas e Luce’s 49 percent stake in EDA THESS.

Investors have also been informed on, and agreed to, a formula to be applied to evaluate the additional sum that will be required by the DEPA Infrastructure buyer for the 49 percent stake of EDA THESS.

The finalists face a July 15 deadline for binding bids in the DEPA Infrastructure privatization, according to the European Commission report.

Until then, the government has a series of pending issues to resolve, including legislative revisions to unify the asset bases of the DEPA Infrastructure subsidiaries EDA THESS, EDA Attiki, distributing in Athens, and DEDA, covering the rest of Greece.

These legislative revisions will be needed for both the sales of DEPA Infrastructure and Eni gas e Luce’s 49 percent stake in EDA THESS, sources informed.

Legislative revisions to unblock DEPA Infrastructure sale

The energy ministry is planning to soon submit to Parliament legislative revisions designed to resolve pending issues that have held back the final stage of a privatization concerning gas company DEPA Infrastructure, sources have informed. The ministry will aim for the submission of binding offers by July.

Issues that have held back the sale, offering suitors 100 percent of DEPA Infrastructure, include a pending unification of the asset base of DEPA Infrastructure’s trio of EDA gas distribution subsidiaries and the establishment of a sale procedure for Eni Gas e Luce’s 49 percent stake in EDA THESS.

DEPA Infrastructure, EDA THESS’s parent company, holds a 51 percent stake in the gas distributor covering the Thessaloniki and Thessaly areas, while Italy’s Eni gas e Luce, maintaining the management rights with its 49 percent share in the gas distributor, wants to sell its stake.

Eni gas e Luce’s involvement in distribution has remained secondary to retail energy, the company’s primary focus, on an international scale.

The ministry’s anticipated legislative revisions promise to unify the asset bases of EDA Attiki, distributing to the wider Athens area, EDA THESS (Thessaly and Thessaloniki), as well as DEDA, covering the rest of Greece.

This asset base unification concerning the three distributors will lessen DEDA’s cost burden resulting from its network expansion projects as small distribution surcharge hikes by the two other EDA companies will hasten DEDA’s recovery of investment costs.

EP INVESTMENT ADVISORS; FIRST STATE INVESTMENTS (European Diversified Infrastructure Fund II); ITALGAS SpA; KKR (KKR Global Infrastructure Investors III L.P.); MACQUARIE (MEIF 6 DI HOLDINGS); and a consortium comprising SINO-CEE FUND & SHANGHAI DAZHONG PUBLIC UTILITIES (GROUP) Co., Ltd are the qualifiers through to the final round of the DEPA Infrastructure privatization.

RAE incentives-based plan for IPTO as part of new policy for operators

RAE, the Regulatory Authority for Energy, is set to forward a package of incentives for power grid operator IPTO designed to influence the operator’s annual earnings when specific objectives are achieved or missed.

This move by the authority comes as part of its wider effort offering incentives to electricity and gas market operators.

RAE, at its latest board meeting, approved a first set of incentives proposed for IPTO by an external consultant, energypress sources have informed. This set of incentives is expected to be forwarded to IPTO within the next few days for observations and comments.

The regulatory authority is aiming to forward the package of IPTO incentives for public consultation towards the end of this month, before it is endorsed by the board and published in the government gazette by the end of June, and implemented six months later.

The authority is essentially aiming for the package to be implemented by January 1, 2022, as part of a new framework covering 2022 to 2025.

The same external consultant was hired for a similar-minded set of incentives concerning the electricity distribution network operator DEDDIE/HEDNO.

RAE’s chief executive Thanassis Dagoumas recently told a news conference that the authority intends to adopt an incentives-based strategy for all operators with the aim of improving their services.

The authority will intensify its monitoring of operator projects in development and ultimately hand out bonuses or penalties, depending on the degree of progress, he noted.

For the time being, the incentives-based strategy applies for DEDDIE/HEDNO, as well as the gas distribution operators (DEDA, EDA Attiki, EDA THESS), offering extra WACC for the achievement of objectives concerning gas market penetration and distribution cost reduction for consumers.

 

RAE to intensify its operator monitoring, starting with gas

RAE, the Regulatory Authority for Energy, is gearing up to intensify its monitoring of the Greek energy market’s gas and electricity operators with the aim of minimizing operator surcharges for consumers and helping improve operator services, the authority’s chief executive, Thanassis Dagoumas, has told a news conference, reiterating the intention, also stressed during a recent presentation of its annual report.

The regulatory authority’s plan includes commissioning certified auditors to inspect the financial data of market operators.

Gas grid operator DESFA, gas distributors EDA Attiki, EDA THESS and DEDA, as well as the power grid operator IPTO and electricity distribution network operator DEDDIE can, as a result, expected closer inspections.

The authority intends to commence its intensified monitoring effort with the natural gas sector, where numerous new projects are planned for development, in an effort to ensure fair surcharge costs for consumers.

Dagoumas, at the news conference, reiterated that the operators, whose revenues are regulated, cannot enjoy wider profit margins than other market players.

Operators will be offered incentives for swifter completion of projects, which, combined with the stricter monitoring effort, will result in either bonuses or penalties, depending on the degree of progress made, the RAE chief highlighted once again.

RAE intends to introduce incentive-based policies, standard practice around Europe, for all energy market operators active in transmission and distribution.

 

Guaranteed revenues for operators ‘must not breed complacency’

Operators must not become complacent as a result of their guaranteed revenues but, instead, strive to keep improving their services, RAE (Regulatory Authority for Energy) chief executive Thanassis Dagoumas has stressed.

High yields secured by electricity and gas market operators active in Greece’s transmission and distribution networks are breeding complacency and prompting these companies to skip crucial investments needed for upgraded consumer services, the RAE chief has suggested.

The regulatory frameworks these operators are subject to, offering natural monopolies, result in considerable advantages compared to other sectors of the economy, Dagoumas noted.

It must be widely accepted, as a matter of principle, that perpetually high profit margins resulting from activities free of competition, without improved services in return, is not reasonable, the RAE chief noted.

Fair competition is a fundamental component of the EU itself, Dagoumas pointed out.

RAE plans to implement incentives for all operators, not just the electricity distribution network operator DEDDIE/HEDNO, and the gas distributors DEDA, EDA Attiki and EDA THESS, as is the case at present, Dagoumas disclosed.

DEDA, EDA Attiki and EDA THESS have been offered extra WACC returns for meeting gas penetration objectives and reducing overall distribution costs for consumers.

DEPA Commercial, Infrastructure sales delayed, new June bids deadline seen

The privatization schedule for gas utility DEPA’s two offshoots, DEPA Commercial and DEPA Infrastructure, appears headed for further delay as a result of four main issues holding back procedures, sources closely monitoring these sales have informed.

The privatization fund TAIPED had initially planned to accept financial offers for DEPA Commercial and DEPA Infrastructure this month but has since unofficially extended these offer deadlines to April. Further revisions cannot be ruled out, the most likely outcome being a deferral of these deadlines to the end of June.

As for the DEPA Commercial sale, lockdown restrictions have made it difficult for potential buyers to visit the company facilities for on-the-spot technical and financial appraisals as well as clarification on vague points. This has delayed the accumulation of information needed by possible buyers for a complete picture on the gas company’s financial standing.

In addition, an ongoing legal battle between DEPA Commercial and ELFE (Hellenic Fertilizers and Chemicals) has also unsettled potential buyers. According to sources, investors are demanding protection in the form of guarantees should any court verdict require DEPA Commercial to compensate ELFE over a gas-pricing dispute.

Two issues are also obstructing the DEPA Infrastructure sale. Firstly, Italy’s Eni, currently holding a 49 percent stake in EDA THESS, a DEPA Infrastructure subsidiary distributing to the Thessaloniki and Thessaly areas, wants to sell its stake. As a result, two options are being examined. One entails DEPA Infrastructure buying Eni’s 49 percent stake in EDA THESS. The other involves incorporating EDA THESS into the DEPA Infrastructure sale.

The other concern holding back proceedings for the DEPA Infrastructure sale has to do with pending appraisals, by the possible buyers, of new distribution network development plans prepared by the gas company’s three distribution subsidiaries, which, besides EDA THESS, include EDA Attiki, covering Athens, and DEDA, covering the rest of Greece. Suitors may require as much as two months to complete their respective appraisals.

Subsidy program for Athens gas heating system installations just launched

A latest subsidy program supporting natural gas heating system installations, the third to be offered, this time focused on households in the wider Athens area, has just been launched by distributor EDA Attiki.

No income criteria have been attached to this latest subsidy program, promising applicants cost savings of between 300 and 3,000 euros for conversions of existing heating systems to natural gas.

The subsidy program will remain open until applications have fully covered its budget of 2.85 million euros.

A strong response to the offer is expected. Applications will be processed on a first-come, first-served basis.

Subsidy amounts will be directly paid by EDA Attiki to the tradesmen selected by successful applicants for their gas heating system installations, once all supporting documents have been provided.

 

Balanced growth of Athens gas distribution network, PPC notes

Power utility PPC, participating in public consultation for Athens gas distributor EDA Attiki’s five-year development plan, has called for an expansion of the gas distribution network in the Athens area that is both sustainable and balanced – socially and geographically – for maximum gas network penetration and fair cost distribution.

Prospective interest in less populated parts of the wider Athens area will grow and, as a result, could lead to a greater number of gas connections, higher consumption levels, and further retail gas market growth in these areas, PPC noted.

As a result, greater attention needs to be given to lower-priority areas in Athens possessing growth potential, the power utility pointed out.

PPC also called on gas grid operator DESFA to examine co-financing possibilities for projects covering gas network connection needs at social service points such as schools and other public buildings.

 

RAE approval of gas distributor tariffs paves way for DEPA Infrastructure sale

RAE, the Regulatory Authority for Energy, has approved tariffs for gas utility DEPA’s distribution companies EDA Attiki, covering the wider Athens area, EDA Thess, covering Thessaloniki and Thessaly, and DEDA, covering the rest of Greece, a move that paves the way for the sale of DEPA Infrastructure, one of DEPA’s new entities established for the utility’s privatization procedure.

DEPA Infrastructure is now the parent company of the three distribution firms.

RAE examined tariff-related data submitted by the gas distributors before giving the green light.

The authority hesitated to deliver a decision on distributor tariffs over concerns that connection term discounts offered by the distributors could be regarded as a form of state aid.

RAE also appears to have approved revisions made by the distribution companies to their five-year development plans from 2020 to 2024 after making slight alterations.

The revisions by the gas distributors concern the entry of certain areas to networks as well as more rational use of CNG solutions.

The regulatory authority’s approval of the tariffs, development plans of the distribution companies, and their connection term incentives were all a prerequisite for the continuation of the DEPA Infrastructure sale.

RAE set to permit gas link fee discounts after initial hesitation

Following initial hesitation, RAE, the Regulatory Authority for Energy, appears set to permit distribution network connection fee discounts offered by natural gas distributors to attract new customer. But this approval will only apply to areas where gas market penetration levels remain low.

RAE has hesitated to approve such discounts offered by gas utility DEPA’s subsidiaries EDA Attiki, EDA Thess and DEDA – the three gas distributors covering the wider Athens area, Thessaloniki-Thessaly and rest of Greece, respectively – fearing the special offers could be regarded as a form of state aid by the European Commission’s competition officials.

However, DEPA Infrastructure, a new DEPA entity now controlling these three gas distribution subsidiaries, recently warned that RAE’s delays are undermining its privatization procedure. This warning was highlighted in a letter to the authority that was also shared with privatization fund TAIPED and the energy ministry.

RAE’s delay in endorsing EDA tariffs for 2019 to 2022 has consequently also placed the gas company’s development plan in turmoil, DEPA Infrastructure pointed out in the letter.

RAE has overcome its concerns and is now preparing to endorse the tariffs. The authority will also permit connection fee discounts in areas where natural gas market penetration levels do not exceed 25 percent.

In areas where natural gas market penetration levels are exceeded but not greater than 75 percent, RAE will permit connection fee discounts of up to 90 percent in 2022, 80 percent in 2023, 70 percent in 2024 and 60 percent in 2025.

The authority will not endorse any connection fee discounts for municipalities where natural gas market penetration levels exceed 75 percent.

 

RAE issues undermining DEPA Infrastructure privatization

Delays, instability and flawed intervention by RAE, the Regulatory Authority for Energy, on important operating issues concerning gas utility DEPA’s subsidiaries EDA Attiki, EDA Thess and DEDA – the three distributors covering the wider Athens area, Thessaloniki-Thessaly and rest of Greece, respectively – are undermining the privatization procedure for DEPA Infrastructure, a new DEPA entity placed for sale, DEPA Infrastructure has warned in a letter to the authority.

In the letter, also forwarded to privatization fund TAIPED and the energy ministry, DEPA Infrastructure complains of a RAE delay in endorsing EDA tariffs for 2019 to 2022, which has consequently placed the gas company’s development plan in turmoil.

Besides not having reached a decision on gas distribution pricing policy, the authority has changed the WACC level three times since last year, including recently, which has negatively impacted the yields of DEPA subsidiary investments, sources noted.

Also, RAE regards initiatives taken by the three gas distributors to attract more consumers to the natural gas market as a form of state aid, DEPA Infrastructure protests in the letter, referring to distribution network connection fee discounts offered by the distributors, as well as subsidy support for natural gas system installations.

Any moves to curb these initiatives promoting gas usage would derail the natural gas sector’s energy-mix penetration target for 2030, as specified in the National Energy and Climate Plan, DEPA Infrastructure contends.

These unfavorable conditions threaten to delay the DEPA Infrastructure privatization, company sources stressed.

The sale procedure’s video data room is still lacking vital information for prospective bidders, who could begin seeing the DEPA Infrastructure privatization as a high-risk investment, the sources noted, adding that WACC level reductions will ultimately reduce the market value of DEPA Infrastructure and the subsidiaries.

Gas distributors want surcharge rebate decision cancelled

Gas distributors DEDA, EDA Thess and EDA Attiki will seek the nullification of a decision by RAE, the Regulatory Authority for Energy, requiring them to gradually reimburse industrial enterprises for increased network surcharges  between August 14, 2015 and December 1, 2016.

The RAE ruling was delivered following a complaint by EVIKEN, the Association of Industrial Energy Consumers.

The amount that needs to be returned by the three distributors to energy-intensive industries is estimated to be between 2.5 and three million euros.

As a first step, DEDA, EDA Thess and EDA Attiki will apply for the RAE decision to be nullified and, if unsuccessful, will then resort to legal action, including at the Council of State, Greece’s Supreme Administrative Court.

A bill ratified in 2015 enabled the gas distributors to impose a temporary network surcharge of 4 euros per MWh, prompting a reaction from energy-intensive industries.

EVIKEN argued that the increase in distribution charges did not reflect the costs of each distributor, was a disproportionate burden for certain categories of network users, while adding that distribution charges should be set by RAE, not through legislation.

According to the RAE decision, the gas distributors will need to introduce measures reimbursing industrial consumers for higher network surcharge payments over the aforementioned 16-month period. Payment of the reimbursements, to be determined by a specific formula, will be possible through installments over a period of as long as five years, according to the RAE decision.

Clearer framework needed for new gas distribution networks

RAE, the Regulatory Authority for Energy, has identified the need for clear-cut, objective terms, based on technocratic criteria, for an improved strategy to help take natural gas to regions around the country without distribution network access at present.

Approval procedures for development plans submitted by gas distribution companies are currently in progress, and, in addition, the distribution sector is being restructured.

The energy ministry has made clear it wants a consistent and modern framework to facilitate the development of new distribution networks in as many parts of Greece as possible, a government objective.

Gas sector conditions also need to be made as clear as possible ahead of the privatization of DEPA Infrastructure, owning gas distributor EDA Attiki, servicing the wider Athens area; 51 percent of EDA Thess, covering the Thessaloniki area; and DEDA, distributing to all other regions not serviced by the two aforementioned firms.

RAE is now preparing a new framework concerning the appraisal and approval of development plans by gas distribution companies, as well as a formula for their earnings.

 

 

 

RAE’s WACC reduction for operators ultimately neutralized

A recent decision by RAE, the Regulatory Authority for Energy, reducing the WACC rate amid a fixed four-year period for energy market operators, as a result of the government’s corporate tax reduction from 29 to 24 percent, is ultimately expected to be neutralized as the authority has asked operators to submit updated data based on latest market conditions, including borrowing costs, all factors applied by the authority to its WACC formula.

Gas grid operator DESFA, power grid operator IPTO, as well as the country’s gas distributors EDA Attiki, EDA Thess and DEDA, initially reacted against RAE’s intention to reduce the WACC rate, determining earnings, within the preset four-year period. It is supposed to be adjusted every four years.

However, RAE’s latest call for updated data from operators and distributors, effectively promising to offset any WACC rate adjustment, has been well received.

 

DEDA to challenge RAE removal of 8 cities from 5-year development plan

Gas distributor DEDA is examining legal options in order to challenge a decision by RAE, the Regulatory Authority for Energy, to remove the entire Peloponnese and the provincial cities of Veria and Giannitsa from the distributor’s five-year development plan covering 2020 to 2024.

The authority excluded these areas as estimated completion dates for projects exceeded deadlines by more than 18 months.

At the very least, DEDA is expected to ask RAE to reconsider its decisions and request further details concerning the exclusion of a total of eight cities from its five-year development plan.

Besides Veria and Giannitsa, both in the north, RAE removed six Peloponnesian towns, Tripoli, Corinth, Argos, Nafplio, Kalamata and Sparti, from DEDA’s development plan.

DEDA, now under the wings of DEPA Infrastructure, a new entity formed by gas utility DEPA ahead of its privatization, covers areas not served by EDA Attiki (wider Athens) and EDA Thess (Thessaloniki and Thessaly).

It remains unclear whether DEDA will publish the shortened five-year plan in the government gazette. Failure to do so would delay procedures for the remainder of projects on the list, including the setting of customer tariffs. The company’s administration wants to avoid such delays.

 

DEPA Trade sale’s PPC-Motor Oil union, Shell return surprise

The privatization of DEPA Trade – a new entity established by gas utility DEPA – offering the Greek State’s 65 percent stake in a procedure whose deadline for first-round offers expired yesterday, produced two surprises. Firstly, Shell reemerged in the country’s gas market following a withdrawal less than two years ago. Secondly, in an unanticipated move, power utility PPC teamed up with Motor Oil for a joint bid.

Shell departed from the Greek natural gas market in July, 2018 by selling its 49 percent stakes in gas supplier EPA Attiki and gas distributor EDA Attiki, both covering the wider Athens region, to DEPA.

Shell received a total of 150 million euros, 39 million for its 49 percent stake in EPA Attiki and 111 million euros for its 49 percent stake in EDA Attiki.

The company’s reemergence can be primarily attributed to an interest in DEPA’s long-term contracts with Gazprom, Sonatrach and Botas, with an eye on the wider Balkan and southeast European regions, sources said.

PPC and Motor Oil decided to join forces for the DEPA Trade sale as a result of the failure of both to secure slots for 2020 at gas grid operator DESFA’s LNG terminal on the islet Revythoussa, just off Athens. PPC holds a 30 percent stake in its partnership with Motor Oil, sources informed.

Following its Revythoussa failure, PPC has been more aggressive in a market test for the Alexandroupoli FSRU, expiring today. PPC wants to secure a capacity at this prospective unit in the country’s northeast as the company is determined to have LNG access. A successful bid in the DEPA Trade sale would bolster this position.

Hellenic Petroleum (ELPE) and Edison did not submit a joint bid for DEPA Trade through Elpedison, their joint venture for Greece’s retail energy market, as had been speculated. Instead, they are believed to have made separate bids. The two had not shaped a common action plan in the event of a successful DEPA Trade bid, sources said. However, the establishment of a new joint venture by the two firms at a latter stage, specifically for DEPA Trade, cannot be ruled out.

The country’s planned privatizations, including DEPA Trade, face likely delays as a result of the coronavirus pandemic’s repercussions. The progress of these sales will depend on the course of the pandemic.

DEPA Trade’s first-round bidders forwarded their offers on-line and must follow up with deliveries of official documents by April 24. The evaluation of first-round offers is not expected to begin any sooner than April 25.

Energy firms react against RAE plan for WACC reduction

The prospect of upcoming WACC level reductions reportedly planned by RAE, the Regulatory Authority for Energy, for gas grid operator DESFA, power grid operator IPTO, as well as the country’s gas distributors EDA Attiki, EDA Thess, DEDA and their parent company DEPA, the gas utility, has unsettled the administrations of all these companies.

Though RAE has not yet reached a decision on the matter, the aforementioned energy companies understand the authority is working to soon lower their WACC levels as a follow-up adjustment to the government’s business tax rate reduction, from 29 to 24 percent.

RAE has endorsed the current WACC levels for a four-year period. A revision at this point would cancel out this endorsement.

The energy companies will push for a delay of any WACC rate revisions until the four-year period has expired, it is believed.

DESFA officials have already pointed out a need for stability and predictability, also stressing the company has invested heavily in the operator during a difficult period for the country.

DEPA’s gas distribution companies fear a WACC revision may negatively impact an ongoing privatization procedure for DEPA Infrastructure, a new DEPA entity established for the privatization.

DEPA and its associated firms have warned DEPA Infrastructure would become a less attractive prospect for nine candidates who have expressed first-round interest, while a revision before the WACC level’s four-year period has been completed could be interpreted as a signal of uncertainty by investors.

DEPA Infrastructure yield, 8.2% + 1.5%, a drawcard for bidders

Though not yet officially announced, a new annual regulated yield for distribution network operators, now set, represents one of the strongest drawcards for the sale of DEPA Infrastructure, a new entity established by gas utility DEPA for privatization.

Prospective bidders engaged in preliminary contact with authorities linked to the DEPA Infrastructure sale ahead of a February 14 deadline for non-binding expression of interest have been told the WACC figure has been set at 8.2 percent plus a 1.5 percent premium if certain investment objectives are achieved.

These objectives include swift network development in areas covered by gas distributor EDA, achievement of pipeline addition goals, specified in kilometers, as well as the development of projects not included in DEPA Infrastructure’s initial development plan.

Prospective participants, including funds, will enter this privatization procedure knowing their investment’s potential yield can reach 9.7 percent, far higher than WACC performances enjoyed by network operators in central Europe.

This higher yield offering has generated all-round optimism for a solid turnout by participants Friday week.

Potential bidders, so far, are believed to include Greek gas grid operator DESFA, France’s Engie, Italy’s Italgas and Germany’s Eon.

Besides European operators, the privatization is also expected to attract a number of funds, seen partnering with operators for the sale’s second round of binding bids.

DEPA Infrastructure has taken under its wings DEPA’s interests in the distribution networks of wider Athens (EDA Attiki), Thessaloniki and Thessalia (EDA Thess) and the rest of Greece (DEDA).

 

ND, if elected, wants 65% DEPA sale, not split and sale

The main opposition New Democracy party, if victorious in the July 7 snap elections, intends to privatize gas utility DEPA as one corporate entity, through the sale of a 65 percent stake, rather than through a split-and-sale procedure offering separate trading and infrastructure entities, as has been promoted by the ruling Syriza government, currently well behind in polls.

The role of Hellenic Petroleum (ELPE), holding a 35 percent share of DEPA, will be influential when the time comes to make decisions.

Up until now, ELPE has indicated it would be interested in acquiring a 65 percent stake of DEPA Trade – one of the two DEPA entities envisioned by the government for the utility’s split and sale – either alone or with Italy’s Edison, ELPE’s strategic partner.

However, ELPE’s main shareholder, the Latsis group’s Paneuropean Oil, holding a 45.5 percent share, could revise its stance if DEPA’s new sale procedure is redrafted from scratch, as would most probably be the case with a conservative ND election victory.

During a parliamentary debate in March, ND party representatives clearly opposed Syriza’s plan for a DEPA split, describing it as an unnecessary, excessive and complicated approach that would ultimately suppress DEPA’s market value.

The DEPA split, forged by the energy ministry, is not listed as a bailout term, but the country did commit itself to a reduced retail gas market presence for DEPA. This demand was met some time ago when DEPA withdrew from gas supply firm EPA Thessaloniki-Thessaly and acquired Shell’s stakes in EPA Attiki and EDA Attiki, respective supply and distribution firms covering the wider Athens area.

 

 

RAE decisions on network fees, industrial sector hike in June

RAE, the Regulatory Authority for Energy, is expected to decide on the levels of regulated charges for gas distribution networks in the wider Athens area, Thessaloniki and the rest of Greece within June, sources have informed.

It is believed that these charges will essentially remain unchanged. A minor reduction could be made.

A decision on a 4-euro per MWh distribution charge set for the industrial sector in the summer of 2015 will be a key a factor in setting the new regulated charges. Action taken by EVIKEN, the Association of Industrial Energy Consumers, against this charge at a European Commission level was successful.

This charge increase was implemented across the board for all industrial consumers, regardless of profile.

RAE is expected to reach a decision this summer on a five-year development plan covering 2019 to 2023 for gas distribution companies. It is waiting for related data from the DEDA and EDA Attikis distributors.

Ministry’s DEPA hiring plan raises privatization concerns

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

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

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

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

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

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

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

Ministry preparing 200 hirings at privatization-bound DEPA

The energy ministry is maneuvering to clear bailout-related employment restrictions imposed on public sector enterprises and facilitate the recruitment at privatization-destined gas utility DEPA of the majority of 200 workers currently subcontracted as external associates.

The ministry’s leadership appears to have bowed to worker union pressure, ensuring the hirings will go ahead, sources informed. If so, they would bypass ASEP (Supreme Council for Civil Personnel Selection) restrictions.

As a result, 150 workers subcontracted by DEPA would be distributed to three gas utility subsidiaries: the wider Athens area gas supplier EPA Attiki; distributor EDA Attiki, also covering the wider Athens area; and DEDA, responsible for gas network development in regions not covered by the parent company. All three can hire personnel without conforming to ASEP restrictions. A further 23 workers are currently subcontracted with DEDA and between 30 and 35 with CNG refueling stations.

New employees are expected to be offered individual work agreements. The duration of these agreements remains unclear.

An energy ministry DEPA draft bill scheduled to be submitted to parliament on February 28 and designed to split the gas utility into two entities, DEPA Trade and DEPA Infrastructure, ahead of its privatization, is not expected to include extensive details on personnel matters, including the ministry’s recruitment plan.

In addition, pay cuts are also planned for DEPA’s current staff on the payroll.

 

 

Gas firm unions start strikes fearing privatization effects

Workers at the country’s state-run gas companies, especially gas utility DEPA, are gearing up for widespread strike action as union representatives remain unconvinced various labor right demands will be settled following meetings with energy minister Giorgos Stathakis.

Union members want worker right assurances ahead of DEPA’s approaching privatization plan. These include a call for official hirings, on DEPA and gas grid operator DESFA company payrolls, of numerous staff members currently either maintaining sub-contracting associations with these gas companies or paid as freelancers through invoice booklets.

The unions also want authorities to drop a plan to offer investors a majority stake of DEPA’s commercial interests as part of the privatization.

According to the DEPA sale plan, the gas utility will be split into two companies, DEPA Trade and DEPA Infrastructure. Prospective buyers will be offered a majority stake in DEPA Trade, while, at a latter stage of the sale procedure, investors will be offered a minority stake of DEPA Infrastructure.

Panhellenic Energy Organization (POE) has called a 24-hour strike for today over the futures of DEPA’s external associates, numbering 150, whom they want added to company payrolls.

Union leaders also want salary protection measures for EPA and EDA supply and distribution subsidiary employees. Their remuneration arrangements are currently based on private-sector labor market rules. DEPA has agreed to acquire a 49 percent share of its EPA Attiki supply venture shared with Shell. According to sources, the rights of these employees will be protected for a period of at least one or two years following the company’s restructuring.

 

Country’s gas distributors striving to meet terms to secure licenses

The country’s three gas distribution companies exclusively covering the Greek market are preparing dossiers including investment plans to be submitted to RAE, the Regulatory Authority for Energy, in efforts to secure operating licenses, yet to be officially granted.

The three natural gas distributors are EDA Attiki, covering the wider Athens area, EDA Thess, serving the Thessaloniki area, and DEDA, covering the rest of Greece.

The three companies, undergoing separate licencing procedures, each need to prove that they are capable of developing investment plans previously submitted.

The authority wants to avoid any overambitious – and ultimately unachievable – network planning by the three distributors to prevent obstructing other investors who could be interested in developing networks.

Distribution companies will risk losing their regional licenses if they do not develop networks as planned.

EDA Thess, sporting a reliable track record, is believed to have made the most progress of the three distributors in its preparation of a five-year plan. EDA Attiki, according to statements made by company officials, is reworking its five-year investment plan, while DEDA, operating in a far wider area, has catching up to do.

DEPA set for more ambitious Athens network growth plan

The gas utility DEPA appears determined to adopt a more ambitious development and investment plan for its Athens networks now that the local Competition Committee has approved its agreement with Shell for an acquisition of the latter’s 49 percent share in their EPA Attiki supply and EDA Attiki distribution ventures, both covering the wider Athens region. DEPA already holds majority 51 percent stakes in both.

The leadership at DEPA considers the existing EDA Attiki development plan as being too weak, sources informed. The upgraded plan is expected to feature more ambitious projects in areas already covered as well as new projects in new territory.

The current five-year plan for EDA Attiki limits the distribution network’s development to 35.5 kilometers by 2022, an average of 7.1 kilometers per year. It primarily concerns network construction in areas where networks already exist, for increased density, and neglects expansions into new areas.

Two options most probable in DEPA restructuring plan

Consultants working on Greek gas utility DEPA’s split plan, entailing a division of the firm’s commercial interests and infrastructure, have arrived at two most probable proposals, energypress sources have informed.

One of the two options being considered would split the utility’s commercial activity from DEPA, as the corporation currently stands, and incorporate it into greater Athens area gas supplier EPA Attiki, a fully operational enterprise with an existing customer base.

According to the other scenario, the company’s commercial activity would remain a part of DEPA while the utility’s networks and international projects would be split and transferred to prospective firm DEPA Infrastructure along with gas distribution venture DEDA, a wholly-owned subsidiary of DEPA, and Athens network operator EDA Attiki.

Financial criteria, taxation issues and personnel concerns will be taken into account before a finalized plan is shaped. It is believed that a limited voluntary retirement scheme is being examined.

Work on a draft bill concerning DEPA’s restructuring plan and the commitments of the resulting firms will commence as soon as the consultants, DEPA’s administration and the energy ministry have agreed on the details. According to the original plan, the draft bill was scheduled for delivery in October.

 

DEPA sale schedule now rests with Competition Committee

An on-schedule launch of the DEPA gas utility’s privatization procedure will depend on the time it will take the Competition Committee to approve a recent local takeover agreement between DEPA and Shell concerning the Greek gas utility’s acquisition of the Dutch firm’s 49 percent share of the EPA Attiki gas supply and EDA Attiki gas distribution ventures covering the wider Athens area.

DEPA went into the negotiations with Shell already holding 51 percent stakes in these joint ventures. The deal was reached for a price of 150 million euros.

If the Competition Committee approves the DEPA-Shell agreement by September, then the DEPA privatization could begin on schedule, in September or October, with the gas utility’s split into two firms, DEPA Infrastructure and DEPA Trade, as agreed to by the government and the country’s lenders for the privatization.

According to the plan, a 50.1 percent stake of the trading firm is expected to be offered to investors while 14.9 percent, including veto rights, will be maintained by the Greek State. As a second stage of the privatization, the Greek State’s offering to investors of DEPA Infrastructure will be limited to a minority stake of no less than 14 percent. The Greek State is expected to retain a 51 percent stake in DEPA Infrastructure.

The gas utility’s privatization procedure will most likely be delayed until 2019 if the Competition Committee requires an extended period to examine the DEPA-Shell agreement.

Pundits closely following the developments have not ruled out delays in the DEPA privatization procedure.

Greek petroleum group Motor Oil Hellas lodged an official complaint to the Competition Committee over the DEPA-Shell agreement while it was still in the making, noting it would enable DEPA to dominate natural gas supply in the wider Athens area. Motor Oil plans to soon enter Greece’s natural gas retail market through its subsidiary Coral (Shell).

DEPA, whose repositioning in Greece’s natural gas retail market was included as a bailout term, has also reached a deal with Italy’s Eni. DEPA agreed to withdraw from the Zenith gas supply company covering the country’s north by selling its 51 percent stake in this venture to the Italian firm, previously a minority partner with a 49 percent share.

At least three key players, Mytilineos, the Copelouzos group and ELPE, which already holds a 35 percent stake in DEPA, have expressed an unofficial interest for DEPA Trade.

These players, as well as others who have yet to disclose their interest, all see DEPA Trade as an enterprise that is ready for robust business given DEPA’s experience, existing customer base and foreign deals. More crucially, the investors also see a company that is soon expected to wholly own the EPA and EDA supply and distribution firms which, until recently, monopolized the retail gas market in the wider Athens area.

 

DEPA, Shell talks for Dutch firm’s local market exit still not over

Long-running negotiations between DEPA, the public gas corporation, and Shell concerning the former’s acquisition of the Dutch firm’s 49 percent share of the EPA Attiki gas supply and EDA Attiki gas distribution ventures covering the wider Athens area, have yet to be finalized but could be successfully completed within the next few days, DEPA sources have informed.

DEPA holds a 51 percent stake in these ventures and is negotiating to buy out Shell for a reported sum of 150 million euros.

The two sides are believed to have agreed on most matters but are still working on fine details concerning Shell’s full market withdrawal. DEPA is pushing for an agreement that would rule out any possibility of Shell’s eventual reentry into this market.

Sources explained it would be pointless for DEPA to pay 150 million euros now only to see the Dutch firm reemerge at some point in the future as part of a rival team.

Tax and environmental issues, concerning the existing DEPA-Shell ventures, that could arise in the future are also being closely examined.

An agreement between the two sides is expected no later than June 6. DEPA’s bailout-required privatization plan, to offer investors a 65 percent stake, is expected to be shaped immediately following the utility’s agreement with Shell.

DEPA is expected to be split into two enterprises – one to handle the networks and the other commercial matters – to be sold separately, energy minister Giorgos Stathakis and the country’s lenders appear to have agreed. This model, still unclear, needs to be fine tuned.

The Greek State is expected to keep a majority stake in the firm controlling the networks and a minority stake for the commercial firm, according to Stathakis. He has not elaborated on specific stakes.

This plan was tabled by TAIPED, the state privatization fund, not the energy minister, who proposed a far more elaborate model entailing the establishment of a listed holding company comprised of three subsidiaries to respectively handle the networks, commercial matters and international projects, including gas pipeline projects such as the IGB and IGI Poseidon. Investors would have been offered a minority stake for the first and a majority stake for the second, while the third would have remained under the holding company’s control.

The country’s lenders expressed doubts over this proposal’s feasibility and opted for the two-firm solution.