Just Transition Fund excludes support for all gas projects

The EU’s Just Transition Fund, takings its cue from the European Investment Bank, has left natural gas projects of its funding list, noting it will not provide financial support for any investments concerning production, processing, distribution, storage or consumption of fossil fuels.

This exclusion creates issues for all the country’s natural gas projects, big or small, which authorities would have wanted to be supported by the Just Transition Fund.

They include a power utility PPC plan for a combined gas-fueled cooling, heat and power plant in Kardia, northern Greece, for coverage of the west Macedonia region’s telethermal needs, announced by the energy minister Costis Hatzidakis just days ago.

Other Greek project plans such as the Alexandroupoli FSRU and the development of an underground natural gas storage (UGS) facility at a virtually depleted offshore gas field south of Kavala have already been rejected by the EIB, unless hydrogen is incorporated into their plans to convert them into eco-friendly projects.

Natural gas, emitting approximately half the amount of CO2 produced by coal, also spills out methane, an undesired greenhouse gas.

Climate protection advocates insist new natural gas units could end up operating for decades, which would threaten the EU objective for zero emissions by 2050.

Hydrogen factor needed for financing of South Kavala UGS

Development of an underground natural gas storage facility (UGS) in the almost depleted South Kavala offshore natural gas field will require a solution incorporating hydrogen into the investment, estimated between 300 and 400 million euros, which would categorize the project as eco-friendly and facilitate European Investment Bank financing.

As has been made clear by the energy ministry, Greek privatization fund TAIPED, currently conducting a cost-benefit analysis, will need to consider this prospect and plan for a storage facility holding hydrogen or a mix of this fuel with natural gas. Installation of carbon-capture and storage technology may also be helpful.

The EIB will stop financing conventional natural gas projects as of 2022. The bank may exempt from this rule projects limiting their emissions to 250 grams per KWh of energy produced.

This emission limit can only be achieved if natural gas is mixed with hydrogen, a prospect requiring higher-cost technologies but aligning the UGS with EU policies for full decarbonization in Europe by 2050.

The privatization fund has just launched an international tender for the South Kavala UGS in an effort to achieve EU funding for the project before a crucial EU funding deadline expires.

As a Project of Common Interest, this UGS is eligible for funding through the EU’s Connecting Europe Facility, vital for the investment’s sustainability. However, investors behind the project will need to submit their CEF application by the end of 2020.

The UGS South Kavala is intended to serve as energy infrastructure that will enhance supply security in the Greek market as well as  southeastern Europe.

 

DEPA signs EIB loan agreement to build LNG supply tanker

Gas utility DEPA has signed a loan agreement with the European Investment Bank for the construction of an LNG supply tanker with a 3,000 cubic-meter capacity, sources have informed.

This loan agreement follows a funding agreement reached between DEPA and the Innovation and Networks Executive Agency (INEA) for EU co-financing – through the new BlueHUBS program – of the LNG tanker to be built by the utility.

Planned to adopt new environmentally friendly shipping fuels,  the LNG tanker promises to be the first of its kind in Greece and the east Mediterranean. It will be designed to meet LNG supply needs at Piraeus port and also transport LNG to other major ports around the country.

DEPA, a wide supporter of LNG usage in shipping, is coordinating the BlueHUBS program (2019-2022), aiming for the development of LNG supply carriers.

Jointly supported by Greece and Cyprus, BlueHUBS represents the continuation of the Poseidon Med II program and has a total budget of approximately 66 million euros, of which 30 percent is being provided by the EU.

Gas project financing limited by Brussels green energy policy

The government faces a major struggle to secure EU funding for prospective natural gas projects as a result of the European Commission’s green energy policy, seeking to restrict, even end, support for investments concerning fossil fuels.

The energy and environment ministry’s secretary-general Alexandra Sdoukou, speaking last Friday at a National Conference on Growth, warned that the EU Partnership Agreement for 2021 to 2027 excludes, to a great extent, natural gas infrastructure from European Structural and Investment Funds.

Greece has planned a series of major gas infrastructure projects, including the Alexandroupoli FSRU, or floating LNG terminal in the northeast, as well as an underground gas storage facility at a depleted gas field in offshore South Kavala.

As for the transboundary East Med gas pipeline, energy minister Costis Hatzidakis, in a newspaper article published yesterday, noted that the project’s EU funding prospects would be improved if the pipeline acquired a greener profile by carrying  hydrogen mixed with natural gas from Egypt and Israel to Europe.

A recent European Investment Bank decision ending financing for all fossil fuel-related projects, including natural gas projects, as of 2021, was eventually revised to offer limited financing access to projects included on the European Commission’s latest PCI list.

 

EIB funding extension for PCI gas projects crucial for Greece

The energy ministry’s leadership is hastening efforts to shape financing models for Greek PCI-classified natural gas projects as the European Investment Bank is expected to stop funding fossil-fuel projects beyond 2021.

The EIB had initially decided to stop funding all fossil fuel projects, including gas projects, as of 2020 before deciding to extend the period.

Greece, preparing major gas projects, had opposed the EIB decision. As part of this challenge, deputy energy minister Gerassimos Thomas held talks with the financial institution’s board of directors.

The revision now enables EIB funding for certain PCI-classified fossil fuel projects until the end of 2021. Thereafter, criteria will be applied to determine whether financial support can continue to be provided for projects on an individual basis.

Significant Greek natural gas projects are expected to be mature for financing and development around or beyond 2021.

The country is preparing to co-develop the East Med pipeline with Cyprus and Israel and also develop an FSRU in Alexandroupoli, northeastern Greece and an underground gas storage facility at a depleted natural gas field in the offshore South Kavala region.

The availability of EIB financing promises to prove crucial in determining the commercial viability of these projects.

 

 

IGB bilateral agreement for construction start to be signed in Sofia

A Greek-Bulgarian bilateral agreement enabling the commencement of construction work on the IGB gas grid interconnector is set to signed in Sofia during a two-day meeting scheduled for October 9 and 10.

Complementary agreements concerning the project, the most significant of these being a shareholders’ agreement and a loan agreement with the European Investment Bank (EIB), will also be signed by officials over the two days.

The Greek-Bulgarian pipeline project, measuring 182 kilometers, will link Komotini, in Greece’s northeast, with Stara Zagora. It will serve as a second interconnection point for the Greek and Bulgarian gas systems, in addition to an existing station in nearby Sidirokastro.

The new project, to offer an annual capacity of 5 billion cubic meters, will commence operating at a lower level of 3 billion cubic meters.

The IGB pipeline is planned to be linked with TAP, running across northern Greece. Combined with the Bulgaria-Romania and Bulgaria-Serbia interconnections, the IGB will contribute to the establishment of the vertical corridor through the Balkans and connect central Balkan countries with Caspian gas and the TAP pipeline.

IGB’s planning, construction and operation has been taken on by ICGB, the project’s Sofia-based consortium, a 50-50 joint venture representing the state-controlled Bulgarian Energy Holding (BEH) and IGI Poseidon, involving Greek gas utility DEPA and Edison.

TAP completes successful €3.9 billion project financing

TAP, one of Europe’s most strategic projects, has successfully completed financial close in December 2018, securing 3.9 billion euros, the largest project finance agreed for a European infrastructure project in 2018, the TAP consortium has announced in a statement.

TAP will transport natural gas from the giant Shah Deniz II field in Azerbaijan to Europe. The 878 km long pipeline will connect with the Trans Anatolian Pipeline (TANAP) at the Turkish-Greek border at Kipoi, cross Greece and Albania and the Adriatic Sea, before coming ashore in Southern Italy.

Luca Schieppati, TAP’s Managing Director, noted: “With the financial close now achieved, TAP has reached another major milestone of the project’s progress. TAP has voluntarily committed to comply with environmental and social standards required by the international financial institutions. As such, all necessary assessments to substantiate this commitment have been undertaken and met by TAP. This also included a thorough environmental and social assessment. With project financing now concluded, TAP can progress to the final completion of the project and delivery of Shah Deniz II gas in 2020.”

Andrew McDowell, European Investment Bank Vice President responsible for energy, commented: “As the EU Bank, the European Investment Bank recognizes the important contribution to improving security of energy supply in Europe that the Trans Adriatic Pipeline will bring and has provided 700 million euros for this, the largest energy project in Europe currently being built. The EIB is pleased to have been an anchor lender to the project, alongside the EBRD and other leading financial institutions, to successfully finance this complex and ambitious project and welcomes the continued close cooperation between all project partners to ensure that environmental, social and technical best practice is followed.”

Nandita Parshad, EBRD Managing Director Sustainable Infrastructure, remarked: “The Trans-Adriatic Pipeline will set the foundation for an integrated gas market across south-eastern Europe and enhance the region’s strategic status as an energy hub. We believe that gas remains an important transition fuel in this region that can help displace coal and facilitate penetration of renewables.”

The financing is provided by a group of 17 commercial banks, alongside the EBRD and the European Investment Bank (EIB). Part of the financing is covered by the export credit agencies – bpifrance, Euler Hermes and Sace. The project raised EUR 3765 million in third party senior debt with a door-to-door tenor of 16.5 years, combining commercial debt along with development financial institutions (DFI) and export credit agencies (ECA) related financing:

  • EIB Direct Facility, benefitting from a guarantee from the European Union under the European Fund for Strategic Investments EFSI: EUR 700 million
  • EBRD A-Loan: EUR 500 million
  • EBRD B-Loan: EUR 500 million funded by commercial banks
  • ECA facilities, benefiting from comprehensive cover by:
    • Bpifrance Facility, EUR 450 million Euler Hermes Facility, EUR 280 million
    • A SACE Facility, EUR 700 million;
  • Commercial term loan facility: EUR 635 million directly provided by commercial banks without any ECA or multilateral involvement.

Costs have previously been funded in full by TAP’s shareholders: BP (20%), SOCAR (20%), Snam (20%), Fluxys (19%), Enagás (16%) and Axpo (5%).

TAP was advised by Société Générale (SG) as Financial Advisor and Allen & Overy as Legal Advisor; lenders were advised by Clifford Chance.

France’s Enedis wants role in derailed smart meters project

French electricity distribution network operator ENEDIS has expressed an interest to take part in an entrepreneurial team for the replacement of Greece’s conventional power meters with digital-technology systems.

An older pilot plan concerning the installation of 200,000 digital power meters as a lead up to the full-scale project has been severely bogged down by issues, including appeals and legal disputes between bidders, prompting the need for a new business model.

According to the original plan, the entire project was scheduled to be completed by 2020. DEDDIE/HEDNO, Greece’s Electricity Distribution Network Operator, is now aiming to launch the project’s development, based on a new business model, within the current year, if possible.

Just days ago, a team of leading ENEDIS officials, joined by French energy regulatory authority officials, travelled to Athens to offer a detailed presentation of their proposal to DEDDIE/HEDNO, RAE (Regulatory Authority for Energy) and energy ministry officials. Based on a model already implemented in France, the plan would bring together the public and private sectors for a joint venture.

DEDDIE/HEDNO would hold a stake of no less than 51 percent in this venture, while the rest of the team would be comprised of private-sector firms selected through an international tender and banks. ENEDIS is striving to be included in this framework. The European Investment Bank (EIB), which has previously supported other DEDDIE/HEDNO infrastructure projects, is believed to also be interested.

The French model, initially discussed by French President Emmanuel Macron during an official visit to Athens last September, appears to have convinced the heads at Greece’s energy ministry and RAE. However, final decisions have yet to be reached. The main power utility PPC has expressed reservations, if not objections.

According to the French proposal, a business team, joined by the operator – DEDDIE/HEDNO in Greece’s case – would take on financing, procurement and installation of the digital power meters. Also, consumer repayment of the part of the project’s cost not covered by EU development fund subsidies would be delayed by a few years in exchange for a predetermined interest rate. Once consumers eventually begin servicing the repayment process, a reduction of overall consumer energy costs can be anticipated as a result of energy savings promised by the smart meters. Network surcharge increases, it is estimated, will be offset by electricity bill amount reductions, according to the French proposal.

The project’s total cost is currently estimated at 1.2 billion euros but this figure is expected to fall to a level of around 800 million euros as the technology to be used matures and related purchase prices deescalate.

The installation of digital power meters in Greece is both a necessity and obligation promising to radically change how the electricity market operates. The country’s lenders have demanded a clear-cut development time frame in the bailout agreement.

 

 

 

DEDA starts gas network links in Serres, Halkida, Lamia

The response to a pilot program staged by the recently established gas distributor DEDA, offering gas network connections to consumers in the provincial cities of Serres, Halkida and Lami, has proven positive.

According to energypress sources, at least 1,200 applications have already been submitted and DEDA, a wholly-owned subsidiary of DEPA, the public gas corporation, is now proceeding with connections.

Contractors tasked with maintaining the network are handling these initial connections while a tender offering the task to additional sub-contractors is expected to be held within the next three months.

DEDA is also working on developing the gas networks in central Greece, central Macedonia and eastern Macedonia-Thrace.

A loan from the European Bank, DEDA company capital worth 19.6 million euros, as well as EU funds, through the National Strategic Reference Framework (NSRF), will finance these network development projects.

They are planned to cover a total distance of 1,215 kilometers, offer an annual gas transmission capacity of 6.2 TWh, and serve the natural gas needs of 124,000 buildings.

DEDA also plans to follow up with network development work in the west Macedonia region. The gas supplier will seek European Investment Bank (EIB) funding for this stage.

Development of the west Macedonian region’s gas network has been made possible following negotiations with the TAP consortium, which led to an agreement offering DEDA gas supply via three points along the Trans Adriatic Pipeline, now being developed and planned to run across northern Greece. Two of these supply points will cover needs in the west Macedonia, Ptolemaida and Kastoria regions.

DEDA was founded at the beginning of 2017 and charged with operating most of the country’s natural gas network, except for the wider Athens area, Thessaly and Thessaloniki.

 

 

 

 

Smart meters delay prompts private-public sector model

HEDNO, the Hellenic Electricity Distribution Network Operator SA, locally acroymed DEDDIE, has worked on a new business model to bring together the private and public sectors for supply and replacement of the country’s conventional power meters with new-tech digital versions.

The need for a new business model was sparked by inefficiencies and major delays encountered through a competitive bidding process used for the project’s pilot program, entailing supply and installation of 200,000 smart meters.

A tender for this pilot stage was launched in 2014 and has since been bogged down by seven legal cases filed by three participating teams – ΟΤΕ, Intrakat-Intrasoft International; Intracom Telecom and a Microdata – SMEC partnership.

The new approach was forged through collaboration between HEDNO and French network operator Enedis. It has already been presented to the main power utility PPC. A presentation was offered to energy minister Giorgos Stathakis on Friday.

The project’s original schedule, which had envisioned the installation of smart meters for the entire country by 2020, is no longer feasible. HEDNO is now aiming to launch the project, based on the new business model, within the current year. A total of 7.5 million smart meters will eventually be installed.

HEDNO is expected to take part in the private-public sector venture with a stake of no less than 51 percent. Private-sector firms, to be selected through a competitive process, as well as banks, are expected to be on board. The involvement of the European Investment Bank (EIB), which has financed other infrastructure projects developed by HEDNO, is seen as a certainty.

The project’s budget is currently estimated at 1.2 billion euros. However, a drop to 800 million euros is expected as a result of an anticipated decline in prices for smart meter technology during the time it will take to develop the project.

The installation of smart meters, both a need and bailout obligation for the country, promises to change the electricity market’s operating nature and offer benefits to consumers.

 

 

EIB officials to visit Athens to discuss PPC finance concerns

European Investment Bank (EIB) officials have planned a two-day visit to Athens, beginning tomorrow, to focus on debt concerns surrounding the main power utility PPC.

Meetings with PPC officials as well as the country’s main banks, the utility’s main creditors, are scheduled to take place during the visit.

PPC’s solvency and looming loan refinancing needs are expected to be a top priority for the EIB officials on this visit.

The EIB and Greek banks are keeping a close watch on PPC-related developments. The Greek power utility’s credit rating downgrade made by Standard and Poor’s at the beginning of this year and maintained in a recently updated report has raised the concerns of creditors.

PPC’s high debt level and difficulties faced as a result of its deteriorated cash flow, revised regulatory framework and Greek bailout terms, requiring the utility’s retail electricity market share contraction and sale of production units, are troubling both the corporation and its creditors.

The split and sale of power grid operator IPTO, a PPC subsidiary, which owns a considerable amount of fixed assets on which mortgages have been subscribed, will also be discussed by the visiting EIB officials and Greek banks.

The latest Standard and Poor’s report noted that: in 2017, PPC requires 300 million euros for loan repayments, primarily in the fourth quarter; in 2018, PPC  loans worth 400 million euros, whose refinancing will be limited to 40 million euros, are set to mature; and, in 2019, PPC will need to refinance loans worth 2 billion euros, of which 1.2 billion euros concerns a bond held by the main Greek banks and 500 million euros concerns a second bond maturing in May of 2019.

 

 

PPC must sit out 60-day waiting period for IPTO sale

The main power utility PPC will need to wait until early April, the latest, as a result of an agreement reached between the government and banks, before it can further pursue its split-and-sale plan for subsidiary firm IPTO, the power grid operator.

A waiting period of 60 days – from the January 17 PPC shareholders meeting during which the IPTO sale was approved – needs to expire in case PPC creditors and suppliers raise objections to the IPTO sale plan.

Though there are no signs of creditor objections for the time being, the European Investment Bank (EIB), PPC’s biggest foreign creditor, as well as a range of suppliers owed both small and major amounts have yet to offer finalized opinions on the IPTO sale plan. Besides the banks, suppliers, too, have the right to raise objections to the sale.

Despite the EIB’s silence on the issue so far, it is generally believed that this institution will opt to not obstruct the IPTO sale process as the loans it has extended to PPC are state-guaranteed.

Plenty of work is also still required to overcome legal and technical issues. A large number of IPTO’s high and medium-voltage power supply agreements need to be processed.

The Single Supervisory Mechanism (SSM), which gives the European Central Bank certain supervisory tasks over the EU financial system, also has a say in the IPTO matter. The SSM will need to endorse the agreement reached between the Greek State and banks on loans extended to PPC and the IPTO sale plan. SSM approval is also needed for PPC to secure a new 200 million-euro EU loan.

The next few weeks will be crucial as responses on the IPTO sale plan are expected from SSM, the European Commission’s Directorate-General for Energy, the EIB and the scores of PPC supplier-creditors.

PPC will face major bond refinancing challenges over the next few months. The aforementioned issues will need to have been resolved by then.

 

 

 

 

Foreign bank, SGCC positions unclear in IPTO sale plan scare

A threat that came close to derailing the government’s split-and-sale plan for IPTO, the power grid operator, a subsidiary of PPC, the main power utility, last Friday night, following concerns raised by the country’s four main banks over financial guarantees, now appears to be under control, but questions still linger.

The four banks reached an agreement with the government after deeming that the fulfillment of three guarantees set on Friday would not require the banks to block the IPTO split-and-sale procedure.

According to energypress sources, the four banks will be granted PPC contracts that promise to generate future cash flow; PPC loans will be transferred to IPTO’s SPV (Special Purpose Vehicle); and amounts owed by the Greek State to PPC will be swiftly settled in order to enable the utility to service its bank loans.

It is not yet clear whether other PPC creditors, including the European Investment Bank and funds, are satisfied with the agreement reached between the government and the country’s four main banks.

It is also unclear to what degree these guarantees set by the four main banks impact the 320 million-euro price tag of SGCC’s (State Grid Corporation of China) agreement with PPC for the acquisition of a 24 percent stake of IPTO.

The interest will now focus to PPC’s general shareholders meeting scheduled for tomorrow. Facing a tight schedule, set as part of the bailout, the government’s IPTO split-and-sale plan has developed into a more complicated project than originally anticipated.

The government’s plan entails keeping 51 percent of IPTO under the Greek State’s control. If the country’s creditors deem that the procedure is not progressing as planned, PPC will be forced to sell IPTO in its entirety.

 

 

 

EIB signs €285m in loan deals with PPC, DESFA and IPTO

The European Investment Bank (EIB) has signed loan agreements worth 285 million euros with PPC, the main power utility, DESFA, the natural gas grid operator, and IPTO, the power grid operator, to improve electricity transmission and the interconnection network across the country.

The ageements between the three Greek energy companies and the EIB concern the development of power stations on 18 islands in the north and east Aegean, the Cyclades, Dodecanese, and the Diapontia Islands, a complex of islets northwest of Corfu, all of which will be backed by 110 million euros of EIB funds. As part of the deal, network projects in the Peloponnese and Evia will receive 70 billion euros in loans, interconnection projects for the Cyclades a further 65 million euros, and the LNG terminal in Revythoussa, an islet in the Saronic Gulf, close to Athens, will receive financing of 40 million euros to increase the facility’s storage capacity.

EIB president Werner Hoyer, the country’s Finance Minister Euclid Tsakalotos, Economy, Development & Tourism Minister Giorgos Stathakis, Environment & Energy Minister Panos Skourletis, PPC’s chief executive Manolis Panagiotakis, and the head officials of IPTO, Yiannis Blanas, and DESFA, Konstantinos Xifaras, all attended the signing ceremony in Athens.

Skourletis, Greece’s energy minister, stressed the state can make crucial investments in the energy sector, while also noting talks with the TAP (Trans Adriatic Pipeline) consortium on local issues for the development of gas infrastructure through northern Greece were at an advanced stage. Minor TAP-related issues will soon be overcome, the minister said.  The TAP project will carry Azeri natural gas to Europe, through Greece, Albania and Italy.

The energy minister also noted the DESFA plan to increase storage capacity at the Revythoussa LNG terminal is a significant step as this type of energy source promises to play a greater role in Greece. Skourletis reminded Greece is planning to develop a second LNG station in Alexandroupoli, northeast Greece.

Hoyer noted the EIB will continue to support Greece and expand its banking activities in the country, while, responding to a question on Greece’s risk of a eurozone exit, reiterated European unification represents an irreversible course.