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.

 

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).

 

Italgas eyeing Eni’s 49% stake in EDA Thess, DEPA networks

Italgas, Italy’s biggest natural gas distributor, appears to have reached a preliminary agreement to acquire fellow Italian company Eni gas e luce’s 49 percent stake and management rights in EDA Thess, covering the Thessaloniki and Thessaly areas.

Though Eni maintains a favorable view of its business interests in EDA Thess, the retail-focused company’s involvement in networks is not its main international activity. EDA Thess is the sole gas distribution company in Eni’s portfolio.

Privatization procedures at Greek gas utility DEPA appear to have hastened the development. DEPA’s 51 percent stake in EDA Thess is set to be transferred to DEPA Infrastructure, one of two new entities, along with DEPA Trade, to emerge from a DEPA split ahead of the gas utility’s privatization.

The government is moving to privatize the Greek State’s prospective 65 percent in DEPA Infrastructure. The entire company may be sold if Hellenic Petroleum (ELPE), a 35 percent shareholder, joins this privatization.

Italgas is preparing to participate in the DEPA Infrastructure tender once it has acquired – if all goes well – Eni’s stake in EDA Thess, sources informed.

Eni gas e luce is awaiting Greek market developments and will then examine its options concerning the EDA Thess stake, including a possible sale, company officials have responded to media questions, without confirming any finalized deal.

Speaking to Reuters last week, Italgas chief Paolo Gallo informed the company intends to finalize a merger and acquisition agreement by the end of the year, or, possibly, in the first quarter of 2020.

 

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, Eni to sign deal today, Shell selling its stake for €150m

Months-long negotiations between DEPA, the public gas corporation, and Italy’s Eni for the latter’s full acquisition of the EPA Thessaloniki-Thessaly gas supply company, commercially dubbed Zenith, are expected to be completed today with the signing of a finalized agreement.

Until now, DEPA has held a 51 percent stake in this venture and Eni the other 49 percent. No changes are expected to be made to the EDA Thessaloniki-Thessaly gas distribution company. DEPA and Eni will retain their respective 51 and 49 percent stakes in this venture.

Not unintentionally, the timing of the deal’s anticipated completion coincides with a meeting in Athens today between energy minister Giorgos Stathakis and the country’s lender representatives. Greek officials are keen to send a signal to the troika that pending bailout issues at the energy ministry are being settled.

DEPA also appears to have been reached an agreement with Shell to acquire the latter’s 49 percent share of the EPA Attiki gas supply and EDA Attiki gas distribution companies covering the wider Athens area. DEPA currently holds 51 percent shares in these ventures. The two sides held marathon talks yesterday. Pending issues appear to have been settled while, according to sources, the agreement is worth 150 million euros.

The government and lenders still need to agree on the resulting market structure following these rearrangements before a DEPA-Shell deal can be officially announced. DEPA would fully control EPA and EDA Attiki and hold a majority stake in EDA Thessaloniki-Thessaly.

The finalization of DEPA’s future roles in all the aforementioned ventures will enable officials to begin discussing and implementing the gas utility’s privatization model. This sale is planned to offer investors a 65 percent stake.

A meeting today to involve Stathakis, the energy minister, finance minister Euclid Tsakalotos and the lenders will indicate whether a Greek proposal for the DEPA privatization stands a chance of being accepted.

An alternative DEPA privatization plan prepared by the energy minister entails the establishment of a holding company to serve as an umbrella for three new subsidiaries respectively covering commercial, distribution and international projects divisions.

A number of local officials have questioned whether this plan can raise the privatization funds expected from DEPA as the proposal, restricting investors to a minority stake of DEPA’s networks, is seen as unattractive.

A second idea has also been tabled. It entails the establishment of two subsidiaries, one representing DEPA’s networks and the other the firm’s commercial division, without a holding company. Each subsidiary would be sold separately to represent a 65 percent privatization. This proposal recognizes that the gas networks and commerce are two different markets. Some investors may focus on the networks and others on the commercial side.

Apart from the privatization model that needs to be adopted for DEPA, ELPE (Hellenic Petroleum), which holds a 35 percent stake of this gas utility, also needs to make its position clear.

ELPE officials have told energypress that retaining a minority role in DEPA is pointless for the enterprise, while suggesting ELPE would withdraw from its DEPA interests if the price is right.

ELPE is interested in the natural gas market but only as a majority shareholder with managerial control, the officials explained.

 

 

 

Record numbers of households switching to natural gas

The number of new gas supply contracts has surged to unanticipated levels amid a widening field of players looking forward to the Greek gas market’s full liberalization as of January 1.

At EDA Attiki, distributing to the wider Athens area, new household supply contracts from the beginning of the year until last week, prior to the completion of a ten-month period, exceeded 18,800, up from 17,500 for the nine-month period. The market data suggests this gas supplier’s growth rate for new household contracts is increasing at a rate of 1,000 per month, meaning EDA Attiki’s latest target of 20,000 new contracts, following an upward revision, could be exceeded.

The 18,800 new household gas supply contracts established at EDA Attiki so far this year represent more than double last year’s amount and are 57 percent higher than the initial target set for the year. Quite impressively, 8,100, or 43 percent of these new supply contracts were established during the less active summer period, from June through August.

Likewise, the growth rate for new gas supply contracts established at EDA Thes, established to serve the wider Thessaloniki and Thessaly regions, has been just as robust. This supplier’s number of contracts exceeded 9,200 by early September, 3,350 of these established during the summer.

The first-half results at EDA Thess, announced prior to these latest figures, showed that the firm’s new gas supply connections grew to 5,837, up from 3,642 last year, a 60 percent increase. The total number of contracts grew to 300,587 from 285,992 last year.

Though, until recent years, higher heating fuel prices were the main driving force behind new household gas supply contracts, a legal framework revision enabling flat owners to break away from collective apartment block heating system agreements without the majority’s consent is the key factor behind the more recent household shifts from heating fuel to natural gas.

EDA Attiki estimates that it has amassed over 10,000 new gas supply contracts as a result of this legal revision.

A decision by market authorities to lift surcharge fees previously imposed on new gas supply connections, as well as the availability of subsidy programs, have also provided impetus to the shift.

Of course, the lower cost of natural gas compared to heating fuel has remained a factor. Data for early October showed natural gas is 37.5 percent cheaper than heating fuel, while its cost can reach as much as 50 percent less for household cooking and hot water needs.

 

EDA THESS placing emphasis on CNG for market growth

The recently formed gas distribution company EDA THESS, established to serve the wider Thessaloniki and Thessaly regions, is placing emphasis on CNG (compressed natural gas) development to initially cover areas detached from the grid, general manager Leonidas Bakouras noted yesterday in his presentation of the enterprise’s five-year development plan, covering 2017 to 2021, at the Athens Energy Gas Forum, organized by TEE, the Technical Chamber of Greece.

These areas, in Greece’s midlands and north, may be supplied CNG through the development of networks beyond compressor stations, Bakouras informed.

A supply capacity of between 70,000 and 100,000 cubic meters will be aimed for during the first few years and could grow to 500,000 to 600,000 cubic meters, annually, as a result of local network development.

EDA THESS aims to supply CNG to these detached areas as a means of facilitating a natural gas penetration plan before developing networks, if sustainability is assured.

 

 

 

 

EDA THESS gains praise for impressive impact on gas market

The recently formed gas distribution company EDA THESS, established to serve the wider Thessaloniki and Thessaly regions, is swiftly emerging as a formidable market player providing the most attractive offers and enjoying rapid growth and robust financial results. Business and political figures, including local authorities, visiting the company’s booth at the ongoing Thessaloniki International Fair all agreed that the company has made an impressive market entry.

Aiming to increase natural gas’s market penetration, EDA THESS was launched as a fully independent natural gas network operator for the wider Thessaloniki and Thessaly regions on December 30, 2016.

The company’s impressive strategic planning promises to ensure sustained growth in the future, pundits believe.

Since the launch of their development 16 years ago, the natural gas networks of Thessaloniki and Thessaly have attracted 54 percent of the total population in these regions, well above levels reached by other European countries. In France and Germany, for example, the gas market’s penetration has not yet reached 50 percent.

EDA THESS aims to increase this gas market penetration level to 58 percent by 2021.

Despite having to deal with adjusting to a new market framework, EDA THESS managed to increase its new connections by 60.3 percent in the first half of 2017, compared to the equivalent period a year earlier. Also in the first half this year, the company registered a 28 percent increase in the amount of natural gas distributed.

The company, according to its development strategy, plans to invest 97 million euros on network and infrastructure development between 2017 and 2021, the objective being to increase the network’s coverage by 20 percent through extensions of existing lines as well as development of new ones. The initiave aims to attract a further 61,000 households to the gas network operated by EDA THESS.

New gas distributor EDA THESS planning network expansion in north

The newly formed EDA THESS gas distribution company, to serve the wider Thessaloniki and Thessaly regions, plans to invest roughly 90.7 million euros over the five-year period covering 2017 to 2021 in order to develop infrastructure facilitating natural gas supply to all the cities and towns in both regions, a leading company official has told energypress.

EDA THESS was established following the required division of distribution and supply activities at Greece’s three exisiting EPA gas supply companies.

Leonidas Bakouras, the deputy general manager at EDA THESS, told energypress that new natural gas networks measuring over 438 kilometers in length and budgeted at more than 90.7 million euros will be constructed in new and existing regions of Thessaloniki and Thessaly.

The Thessaloniki wider region’s network is planned to measure 254 kilometers and worth 58.6 million euros. The Thessaly gas network project, budgeted at 32.1 million euros, is planned to measure a total of 184 kilometers.

EDA THESS plans to supply remote areas located beyond networks with CNG (compressed natural gas). Compressor stations have already been installed for the Thessaloniki and Thessaly networks by DEPA (Public Gas Corporation), which holds 51 percent stakes in the EPA companies, as well as private-sector suppliers.

EDA THESS plans to soon submit its investment plan to RAE, the Regulatory Authority for Energy, for approval and licensing.