PPC near deals with industrial customers after Aluminium of Greece agreement

Power utility PPC, which officially reached a supply agreement last week with Aluminium of Greece, a member of the Mytilineos group, is close to finalizing agreements with all other industrial consumers. Announcements of new deals could be imminent.

PPC and the industrial consumers still need to agree on the extent of a tariff increase, expected to be set at approximately 20 percent. The new agreements are not expected to offer consumers discounts for punctual payments.

Other details being discussed between the two sides include how the respective profiles of industrial consumers will influence tariff agreements. Take-or-pay clause details are also still being negotiated.

This round of deals between PPC and industrial consumers will be the last involving fixed tariff agreements.

From 2023 onwards, industrial consumers establishing supply agreements with PPC will be subject to floating rates pegged to wholesale market costs.

Industrial tariffs will fluctuate in accordance with monthly clearing prices at the energy exchange’s day-ahead market.

PPC’s recent agreement with Aluminium of Greece, covering July 1, 2021 to December 31, 2023, is the last following a 60-year association between the two companies. The Mytilineos group has set eco-friendly objectives for aluminium production.

Beyond 2023, Aluminium of Greece will receive electricity from the Mytilineos group’s new natural gas-fired power plant being developed in the Agios Nikolaos industrial zone in Viotia’s Agios Nikolaos area, northwest of Athens, to be direct cable-linked to the Aluminium of Greece facility, as well as through RES production.

PPC eyes foreign investors with 7-year bond issue for €350m

Power utility PPC, Greece’s biggest electricity producer and supplier, has announced a 7-year, sustainability-linked bond issue intended to raise 350 million euros.

The decision was prompted by a current favorable climate surrounding the company as well as its need to partially cover existing loans and reduce the average borrowing cost to less than 5 percent as soon as possible. The offer’s roadshow begins today.

PPC is aiming for an interest rate of close to 3.5 percent, according to banking and finance sector sources, which would be slightly below a 3.875 percent interest rate of a preceding SLB-linked issue in March.

The utility intends to list the bonds on the Dublin Stock Exchange for trading on its Global Exchange Market, or, possibly, another EU trading platform.

A domestic bond issue would probably secure PPC a lower interest rate of roughly 2.5 percent, but the company’s administration is determined to further expose the utility to foreign institutional and real-time investors, a strategy seen lowering future borrowing rates to levels that could be achieved locally.

Also, borrowing from abroad is expected to offer further support for the company’s market share, whose price was 8.75 euros at the end of trading last Friday.

PPC, at the forefront of Greece’s energy market for more than 70 years, fully owns the country’s electricity distribution network, operated by DEDDIE/HEDNO, a fully owned subsidiary.

Power cut proposal for consumers owing two successive bills

Energy firms would be entitled to order electricity supply disconnections for customers who have failed to pay two successive electricity bills, regardless of the amount, according to a new proposal made by RAE, the Regulatory Authority for Energy, in a third round of public consultation concerning a new framework for power disconnection and consumer supplier switching rights.

RAE has also recommended giving suppliers the right to disconnect electricity supply for consumers switching suppliers and leaving behind two successive unpaid electricity bills, even if new contracts with a new supplier have already been signed.

Wholesale electricity price ascent a major concern for industry

Wholesale electricity market prices have made further increases in recent times, driven by rising carbon emission right prices, which have exceeded 50 euros per ton.

Over the past few days, not including Sunday, the wholesale market’s day-ahead price rose well above 60 euros per MWh on energy exchange, reaching as high as over 72 euros per MWh last Thursday.

Besides the impact of increased carbon emission right prices, the energy market is also being pressured by higher gas prices, driven by greater usage of natural gas-fueled power stations being anticipated.

Natural gas prices have risen from 16 to 23 euros per MWh over the past few days.

This increase in wholesale electricity prices is directly impacting the retail electricity market, energy-intensive industrial consumers, both in the medium and high-voltage categories, already feeling the effects.

Given the energy market’s current uncertainty, suppliers are limiting the duration of contracts offered to three months.

The industrial sector is voicing concern about ambiguity ahead and rising energy costs that threaten to severely undermine the competitiveness of producers.

The activation, by suppliers, of carbon emission cost clauses included in agreements have increased industrial electricity prices by as much as 20 euros per MWh in recent times.

Though the industrial sector is compensated for this additional cost, compensation calculations are based on the previous year’s price levels, meaning industrial enterprises will end up covering a large percentage of the recent electricity cost increase.

Based on latest calculations, industrial enterprises will be compensated just 9 euros per MWh for the recent 20 euro per MWh hike.

HEDNO VDR opening Tuesday, bidders in partnership talks

Power utility PPC plans to open a virtual data room concerning the sale of a 49 percent stake in subsidiary firm DEDDIE/HEDNO, the distribution network operator, on Tuesday, once confidentiality agreements with nine second-round qualifiers, and other documents, have been approved by the utility’s board, expected a day earlier.

All documents necessary for the sale procedure will be forwarded to the nine bidders for observations.

The VDR will offer bidders access to technical and financial data concerning DEDDIE/HEDNO.

As of next week, PPC and each of the nine second-round qualifiers, preparing to make binding bids, will begin separate talks, correspondence and negotiations that are expected to run for months, for the finalization of a shareholders agreement.

Given the width of second-round qualifiers, this privatization’s completion is anticipated towards the end of autumn.

The buyer’s board representation will reflect the minority 49 percent stake to be acquired, with 5 members on an eleven-member board, or 4 members if a nine-member board is chosen.

Some board members will be given reinforced managerial roles for the PPC subsidiary. Proposals for the chief financial officer and chief operating officer posts will be made by the buyer, according to sources.

Though the road ahead towards the DEDDIE/HEDNO sale’s completion is long, the nine second-round qualifiers have already begun talks for possible partnerships, between themselves and beyond.

One of the nine qualifiers, the US fund CVC Capital Partners – whose Greek portfolio is continuously growing, investments including three hospitals, Metropolitan, Iaso General and Ygeia, as well as imminent deal completions for food production conglomerate Vivartia, dairy company Dodoni, and insurance company Ethniki Asfalistiki – is engaged in talks with fellow US fund KKR and Australia’s Macquarie for the establishment of a consortium that would bid as one for a 49 percent stake in DEDDIE/HEDNO. KKR and Macquarie are among the nine second-round qualifiers in the DEDDIE/HEDNO sale.

HEDNO sale bids to be delayed by 2 months, for September

The privatization plan for distribution network operator DEDDIE/HEDNO, whose sale is offering investors a 49 percent stake, is expected to be delayed by approximately two months as a result of the need for greater preparation time prompted by the large buyer turnout.

The operator’s parent company, PPC, the power utility, will now aim for a binding-bids deadline and finalization of the sale around September.

According to the sale’s original schedule, candidates were set a July deadline for binding bids.

Nine funds have qualified for the second, and final, round. They could be joined by energy market operators ahead of their binding bids.

PPC chief executive Giorgos Stassis plans to table the distribution network operator’s privatization at the parent company’s next board meeting.

Stassis will, yet again, inform the PPC board on the level of suitability of second-round qualifiers in terms of their energy infrastructure track records and, even more crucially, ability to meet the demands of DEDDIE/HEDNO’s investment plan, requiring 3 billion euros until 2028.

Separate talks are currently being held by the seller with representatives of each of the nine funds, in the process of signing confidentiality agreements for access to the operator’s virtual data room, containing technical and financial data.

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.

 

RAE launches inquiry into ‘western corridor’ grid delay

RAE, the Regulatory Authority for Energy, has launched an enquiry into the delay of Greece’s “western corridor” power grid project, now behind schedule and posing a serious threat to the national grid’s overall operating ability.

The corridor’s delayed delivery has been linked to objections raised by a small group of nuns at a monastery in the northern Peloponnese’s Kalavryta area, opposing the installation of several  remaining pylons needed for the project’s completion.

Power grid operator IPTO has provided RAE with an extensive report, hundreds of pages long, detailing the project’s entire course, following a request made by the regulatory authority.

The “western corridor” is now behind schedule as envisaged in the operator’s 10-year development plan.

RAE has also requested an explanation from IPTO as to why it did not promptly inform the regulatory authority on the project’s delay, given that it was full aware of the nearby monastery’s stance, so that possible alternative solutions could be explored.

IPTO contends all its actions, from the moment the monastery-related problem arose, have been carried out in accordance with energy ministry instructions, as is the case with all matters of strategic importance.

 

Consumer switching remained strong in 2020, over 500,000 shifts

Over 500,000 consumers switched electricity suppliers in 2020, according to RAE, the Regulatory Authority for Energy, a level maintained for a second consecutive year, highlighting the momentum bringing about change in the retail electricity market.

Latest RAE data showed that 530,064 consumers in the low and medium-voltage categories, of 6,796,034 in total, switched consumers in 2020.

The greatest rate of mobility was registered by low-voltage consumers in the business and industrial categories. A total of 103,382 consumers belonging to these categories, or 8.83 percent of 1,170,250, overall, switched suppliers.

Low-voltage household consumers followed with 8.69 percent, or 423,141 of 4,871,122 in total, switching suppliers, the RAE data showed.

Power utility PPC remained the main supplier in 2020, representing 77.8 percent of the total number of low and medium-voltage connections and 63.2 percent of total electricity consumption, RAE reported, noting, however, that these figures fell by 6 and 8 percent, respectively, compared to 2019.

HEDNO suitors all real-money investors with long-term views

All nine qualifiers through to the second round of a tender offering a 49 percent stake of distribution network operator DEDDIE/HEDNO possess extensive experience in infrastructure management around the world and are long-term, real-money investors.

The tender’s shortlist, announced yesterday, includes Blackrock, the world’s biggest investment fund, back in the Greek picture after subscribing to a bond issue staged last month by the operator’s parent company PPC, the power grid operator.

Blackrock has based these investment decisions on Greece’s economic prospects beyond the pandemic as well as common business principles shared with PPC.

The capital managed by the nine qualifiers is worth 10.2 trillion euros. More importantly, the qualifiers are backed by formidable profiles, their portfolios carrying investments in utilities, infrastructure and energy companies.

France’s Ardian, managing assets worth over 100 billion euros, Canadian investment corporation British Columbia Investments (BCI), handling a 100 billion-euro portfolio, the American funds Blackrock, managing assets worth 9 trillion dollars, CVC Capital Partners (120 bn), KKR (250 bn) and Oak Hill (50 bn), Italy’s infrastructure fund F21, as well as Australia’s Macquarie (420 bn) and First Sentier (180 bn) are all long-term investors.

BCI and Macquarie have jointly engaged in a series of takeovers, beginning in 2012 with German networks company Open Grids Europe, and following up, in 2014, with US electricity firm Cleco, and networks company Endeavour Energy in 2017. BCI also controls Chilean power distributor Transelec as well as Canada’s Corix.

Blackrock controls US corporation Hearthstone Utilities and the UK’s Kelas Midtream and Calisen PLC, active in smart meters.

America’s KKR acquired New Jersey water management company Bayonne Water and Wastewater Concession in 2012 and Middletown Water in 2014.

Macquarie’s portfolio includes Spain’s Viesgo, Germany’s Open Grid Europe, and the portfolio of First Sentier (previously First State) includes the UK’s Electricity North West and Anglian Water.

PPC’s 2020 results, out April 20, to reflect company ascent

Power utility PPC, planning to announce its financial results for 2020 on April 20, is expected to release robust figures confirming its positive course, including, according to analysts, an EBITDA level of approximately 900 million euros.

Given the corporation’s 618 percent EBITDA surge in this year’s nine-month period, up to 696 million euros from 96.9 million euros a year earlier, PPC should register operating profit well above the 2019 level, when its recurring EBITDA ended the year at 333.6 million euros.

Sharply declined fuel costs and wholesale electricity prices during the first three quarters, as well as the continual limitation of PPC’s lignite-fired power stations, now loss-incurring as a result of higher CO2 emission rights, have been the driving forces behind the 2020 EBITDA forecast of about 900 million euros.

An EBITDA objective of one billion euros by 2024 now appears achievable sooner, possibly as early as next year.

The company’s capitalization is currently at 2.11 billion euros.

PPC, needing to push ahead with RES investments, will require capital for the effort. An ongoing privatization offering a 49 percent stake in distribution network operator DEDDIE/HEDNO, a subsidiary, is expected to raise capital for PPC’s investment plans, including in renewable energy, and also lower the company’s debt level.

The shortlist of qualifiers into the second round of the DEDDIE/HEDNO sale is expected to be announced today.

Power & Gas Supply Forum returns for second edition

Returning after a successful inaugural staging last year, the Power & Gas Supply Forum, organized by the energypress team, is taking place today as an online event.

Free access to livestreaming of the forum is available through the energypress.gr website.

Members of the public who tune in will be able to participate interactively by forwarding questions to the forum’s speakers, making observations and providing comments.

The event will be opened by energy minister Kostas Skrekas through a live interview.

Elpedison launches tender for Thessaloniki power station

Energy company Elpedison has launched an international tender for procurement of mechanical equipment concerning its 826-MW gas-fueled power station project in northern city Thessaloniki’s Diavata area, sources have informed.

The company, also moving ahead with the project’s environmental permit procedure, is expected to soon finalize its investment decision.

Besides Elpedison, a number of other energy firms are also moving ahead with gas-fueled power station plans.

GEK-TERNA is planning a 665-MW facility in Komotini, northeastern Greece; power utility PPC recently secured a license for a 665-MW unit, also in Komotini; Elvalhalkor is pursuing plans for a 566-MW unit in Thisvi; the Copelouzos group is moving ahead with a 662-MW project in the industrial area of Alexandroupoli, in the northeast; and the Karatzis group is planning a 660-MW power station in Larissa, in the mid-north.

The Mytilineos group has already begun constructing an 826-MW gas-fueled power station in Viotia’s Agios Nikolaos area, northwest of Athens, a project expected to be launched late this year or early next year.

The establishment of a permanent CAT mechanism, anticipated by the investors behind these projects, promising grid flexibility, is crucial for the investment plans.

Electricity demand levels in the Greek market as well as the course of Greece’s decarbonization effort, expected to create openings for new power stations, are also vital factors.

 

Barriers, restrictions affecting power, gas market liberalization

Greece’s retail electricity and gas markets are moving towards full liberalization, but, in the course, needing to overcome major barriers and restrictions, a European Commission report for 2020 has highlighted.

Despite the progress made, obstacles in four key areas continue to obstruct the entry of new players in the country’s electricity and gas markets, the report noted.

Disincentives of regulatory nature, market inequalities, entrepreneurial and procedural barriers, as well as customer inaction were identified as the four key areas that need to be dealt with if full liberalization of the electricity and gas markets is to be achieved, the report found.

On the regulatory front, proposals offered by the European Commission focus on the need for a consistent framework offering long-term stability and security for market players.

Market surveillance and monitoring by authorities needs to be effective and accurate to prevent unfair competition behavior by market players, it added.

On market entry, the report recommends actions that would enhance the procedure’s reliability and uniformity.

As for customer immobility, signifying a market still not fully mature, the European Commission report proposes the provision of improved information to customers before supply agreements are signed, greater transparency, better price-comparing ability, as well as mechanisms protecting consumers against unprincipled actions by suppliers.

PPC awaiting right time for €500bn Sustainability-Linked Bond

Power utility PPC is all set and waiting for the right time to issue a 500 million-euro Sustainability-Linked Bond, through which it would commit, to investors, to a specified carbon emission reduction.

According to sources, PPC, keeping details on the issue under wraps, has not planned to market an SLB in March, but could, theoretically, do so at any given moment from here on if it deems market conditions are ripe.

An SLB issue by PPC promises to make the company the country’s first to issue a bond incorporating sustainability terms.

Companies that issue SLBs promising carbon emission reductions over an extended period of time represent lower-risk propositions for investors, enabling issuers to achieve better borrowing terms.

PPC does not necessarily expect any great interest rate improvement through an SLB issue, financing officials have pointed out, but, looking further ahead, a solid performance by the utility’s SLB in secondary-market trading would enable the corporation to borrow at a lower cost should it return to capital markets at a future date.

The company’s profile has greatly improved in the eyes of investors. PPC’s share price climbed to €9.05, its highest level since October, 2014, last Thursday, on the eve of the first-round deadline for bids in the sale of a 49 percent stake in subsidiary firm DEDDIE/HEDNO, the distribution network operator.

Day-ahead market prices unusually low despite crisis conditions

Though the balancing market and its various problems since November’s launch of new target model markets may have been the focus of attention of late, irregularities have also troubled the day-ahead market, necessitating a closer look, officials have stressed.

This need was first pointed out by Alex Papalexopoulos, one of the architects of the country’s electricity system, who observed that the day-ahead market has shown signs of offers being systematically submitted at levels below actual cost. He said market dumping was taking place, referring to offers submitted by lignite-fired units.

These concerns have now also been raised by Dinos Benroubi, head of energy supplier Protergia’s electricity and gas divisions, as well as Antonis Kontoleon, the chief official at EVIKEN, Greece’s Association of Industrial Energy Consumers.

At a time of crisis, high electricity demand and calls on industrial producers to hold back on energy consumption, day-ahead market prices remain very low and full-scale electricity exports are taking place towards Italy, Kontoleon noted during a panel discussion at Athens Energy Dialogues, a conference held yesterday.

Protergia’s Benroubi took the issue a step further by noting that RAE, the Regulatory Authority for Energy, must implement a monitoring mechanism for the day-ahead market, as, despite serving as a base for the target model’s functioning, it is displaying irregularities.

DEDDIE bidders shaping teams as first-round deadline nears

Investors preparing to participate in the 49 percent sale of power utility PPC’s subsidiary DEDDIE/HEDNO, the distribution network operator, a procedure whose deadline for non-binding expressions of interest expires on February 19, are busy negotiating the details of their partnerships.

Between five and seven existing formations involving European system operators and funds, all appearing extremely interested in the sale, are seen reshaping into approximately three investment teams ahead of this week’s deadline, according to sources.

The investment interest is serious and lives up to the operator’s investment plan, estimated at 2.3 billion euros, for the next five-year period, sources said.

Meanwhile, sources at PPC have confirmed that investors will be offered a one-off 49 percent stake in the distribution operator following thoughts of a two-stage sale resulting in this stake.

The managerial rights to be attached to the minority 49 percent stake will be bolstered to give potential buyers equal powers with PPC over the operator’s new business plan and company expenses, PPC sources informed.

DEDDIE/HEDNO possesses a regulated asset base worth over 3 billion euros, networks totaling 242,000 km in length, 240 high-voltage substations, 163 low-voltage substations, a 5,800-member workforce, and a client base numbering 7.5 million.

The company caters to annual demand of 43.194 TWh and 57,752 RES units with a total capacity of 3,926 MW.

 

 

Four teams, backed by funds, display strong DEDDIE interest

Prospective bidders considering power utility PPC’s sale of a 49 percent stake in subsidiary firm DEDDIE/HEDNO, the distribution network operator, have flooded the seller with a stream of enquiries ahead of a February 19 deadline for non-binding expressions of interest.

Interested parties had until February 5 to make enquiries before they can officially express interest in the sale later this month.

Interest in the distribution network operator is definitely strong. Questions received at PPC indicate that four investment teams, with the involvement of major funds, are maintaining the strongest interest in the DEDDIE/HEDNO sale.

Prospective buyers lodged enquiries on a range of issues, including the sale’s rules for funds, whether participating funds will need to submit their equity line-ups in full detail, and if supporting documents can be submitted in languages other than English.

A market test for the upcoming partial privatization staged by Goldman Sachs in December disclosed that interested parties include New York-based Blackrock, the world’s biggest investment fund managing capital worth 7.8 trillion dollars, US giant KKR, backed by capital worth 220 billion euros, as well as French fund Ardian, one of Europe’s strongest, linked with over 150 enterprises and capital management worth more than 100 billion dollars.

In an attempt to strengthen the sale’s appeal, PPC will guarantee the strategic investor holding a 49 percent stake in DEDDIE/HEDNO no obstacles in decisions concerning crucial matters.

However, the minority rights for DEDDIE/HEDNO’s prospective 49 percent stakeholder will not be as strong as they are for power grid operator IPTO’s Chinese strategic partner SGCC. DEDDIE/HEDNO will retain the operator’s managerial control.

Authorities had considered a two-stage sale of DEDDIE/HEDNO’s 49 percent, beginning with a stake of about 30 percent and a further 19 percent at a latter date, when market conditions may have improved, before opting for a one-off procedure.

PPC, Genop union nearing new collective labor agreement

Power utility PPC and the corporation’s main union group Genop are believed to be within a few weeks of a deal for a new collective labor agreement, talks on which had begun late last year.

According to sources, the new agreement, to cover a three-year term, could be signed by the two sides within February, otherwise no later than March.

PPC and Genop want to have signed a new collective labor agreement before the existing deal expires in May.

The negotiating parties are believed to have agreed on terms that will ensure smooth labor relations and also offer workers a share of PPC’s favorable results.

Benefits for employees stationed at PPC facilities are expected to include improved daily food allowances, sources informed.

Genop also appears to have successfully demanded retroactive payment of supplementary allowances for front-line workers stationed at power stations and mines. These retroactive allowances, covering January 1, 2019 to June 1, 2020, are expected to be paid to workers over three installments.

Matters that still need to be resolved by PPC and Genop include the lifting of a wage freeze on salaries that was imposed as part of the country’s bailout agreement.

China’s SGCC lodges complaint over DEDDIE sale exclusion

State Grid Corporation of China (SGCC) has filed a complaint with the European Commission after being barred by Greek power utility PPC from the sale of a 49 percent stake in its subsidiary DEDDIE/HEDNO, the distribution network operator, over conflict-of-interest concerns.

The Chinese firm, a strategic partner of Greek power grid operator IPTO with a 24 percent stake, has forwarded a letter to Brussels claiming PPC’s block breaches EU law.

According to the sale’s terms and conditions, any company with direct or indirect control of IPTO or any of its subsidiaries cannot participate in the DEDDIE/HEDNO sale because of conflict-of-interest issues.

SGCC’s Brussels initiative highlights the Chinese company’s strong interest in acquiring a stake and role in the distribution operator’s network. The prospective installation of 7.5 million digital power meters at private properties around the country is the major draw for SGCC, sources noted. DEDDIE/HEDNO also plans to digitize and upgrade its outdated network.

PPC has extended its first-round expression of interest deadline to February 19. A considerable number of companies seem intent to participate.

 

Brussels forwards new PCI list, to be finalized late this year

The European Commission’s fifth PCI (Projects of Common Interest) list in the electricity and natural gas sectors, being forwarded for public consultation, features, for now, a number of project additions and removals, compared to the previous edition.

Market officials and state authorities will have the opportunity to offer their views and observations over the consultation procedure’s twelve-week period before the European Commission adopts a finalized version of the fifth PCI list towards the end of 2021, based on an existing Trans-European Networks for Energy (TEN-E) framework, focused on linking the energy infrastructure of EU countries.

PCI projects are entitled to EU funding support. Brussels authorities introduced selection criteria revisions in December, ascertaining, however, that the impact of all projects, especially on CO2 emissions, will be appraised when finalizing the PCI list’s fifth edition.

The provisional list includes a number of electricity and gas sector projects concerning Greece.

Electricity-sector projects involving Greece include: a Bulgarian-Greek grid interconnection, expected to be completed in 2023; an Egyptian-Greek-Libyan grid interconnection headed by Green Power 2020 and scheduled for delivery in 2025; as well as three Egypt-Greece interconnections, two of these featuring Kykladika Meltemia SA as project promoter and expected to be respectively completed in 2025 and 2028, and a third headed by Elica SA and scheduled for completion in 2028.

An energy storage project planned by Eunice for Ptolemaida, northern Greece, and scheduled for completion in 2022 is a new entry on the PCI list.

In the natural gas sector, the PCI list includes: the Alexandroupoli FSRU (2022); a subsea pipeline between Greece and Italy, known as the Poseidon Pipeline (2025); EastMed, a pipeline planned to carry natural gas from the east Mediterranean to European markets, via Crete (2025); a compressor station in Thessaloniki’s Nea Mesimvria area (2022); a metering and regulating station in Megalopoli, Peloponnese (2025); a compressor station in Abelia, in Greece’s mid-north (2023); a compressor station in Kipoi, northeastern Greece (2024); a pipeline link for the Alexandroupoli FSRU (2022); a TAP pipeline capacity increase (2025); and the development of an underground gas storage facility (UGS) in the almost depleted natural gas field of “South Kavala” in northern Greece (2023).

Operators disagree on Crete network responsibility shift

Power grid operator IPTO and distribution network operator DEDDIE are locked in a dispute over the point in time at which management responsibility of Crete’s small-scale grid interconnection, to reach the Peloponnese, should be transferred from DEDDIE, currently responsible for Crete’s network as the island is classified as a non-interconnected island, to IPTO.

DEDDIE contends that IPTO must take on the responsibility of managing the island’s network with the launch of the small-scale interconnection, anticipated in March, and not in 2023, when Crete’s full-scale interconnection, all the way to Athens, is expected to begin operating.

Crete should be considered an interconnected island as soon as the small-scale grid interconnection to the Peloponnese is launched, even though this infrastructure’s capacity will be able to cover about 30 percent of the island’s energy needs, DEDDIE contends.

Normally, the grid status of islands is automatically revised from non-interconnected to interconnected when grid interconnections serving their energy needs are launched. However, Crete, Greece’s biggest and most populous island, represents a much bigger interconnection project that is being developed over two stages.

DEDDIE, backing its case, has cited an older opinion forwarded by RAE, the Regulatory Authority for Energy, to the energy ministry, through which the authority supported that Crete’s network must be considered a part of the national grid, ending its non-interconnected island status, once the small-scale interconnection begins operating.

Also citing technical reasons to support its view, DEDDIE has pointed out that IPTO will be responsible for the operation and maintenance of the small-scale grid link, infrastructure directly influencing the Cretan network’s performance. Therefore, the island’s high-voltage network and the Crete-Peloponnese interconnection must be managed by the one operator, DEDDIE contends.

IPTO does not reject the prospect of eventually becoming responsible for Crete’s network, but the power grid operator does oppose the idea of assuming responsibility for a fixed asset that does not belong to the company. Crete’s high-voltage network is owned by power utility PPC.

At present, PPC does not appear ready to sell. As a result, IPTO believes DEDDIE must be responsible for the network’s management until this asset is transferred to the power grid operator.

North Macedonia involvement in key Alexandroupoli projects

North Macedonia plans to help cover its energy needs through an involvement in two Greek-based projects, the prospective FSRU in Alexandroupoli, northeastern Greece, and, in the same region, a gas-fueled power station to run on LNG stemming from the floating LNG terminal.

Much progress has been made on the neighboring country’s interest in these two projects since a meeting in Athens last September between Greek Prime Minister Kyriakos Mitsotakis and his North Macedonian counterpart Zoran Zaev. The partnership also represents a strategic decision for the Greek government.

It is considered certain that a state-owned North Macedonian company will soon enter the Alexandroupoli FSRU project’s equity pool with a 10 percent stake, energypress sources have informed.

This project’s five current partners – Copelouzos group, Gaslog, Greek gas utility DEPA, Greek gas grid operator DESFA and Bulgartransgaz – are expected to each offer small portions of their respective 20 percent stakes to make available a 10 percent stake for the state-owned North Macedonian company in the Alexandroupoli FSRU.

The project’s development is not expected to be impacted by any equity reshuffles.

Two international tenders staged by Gastrade, a company established by the Copelouzos group for the development and operation of the Alexandroupoli FSRU, have been successfully completed. One of the two tender concerns the FSRU’s construction. The other concerns the installation of pipelines linking this facility to the national gas grid.

The Alexandroupoli FSRU consortium is expected to make a final investment decision in late February, sources informed.

On the other front, ESM, North Macedonia’s state electricity company, is expected to acquire a 25 percent stake in a gas-fueled power station to be developed by Damco Energy, a Copelouzos group subsidiary, in Alexandroupoli’s industrial zone.

The initiative will secure 200 MW of the facility’s 800-MW capacity for North Macedonia. The country currently has an electricity deficit of approximately 2 GWh.

Bulgarian state-owned electricity company NEK EAD also appears interested in acquiring a stake in the Alexandroupoli power station. Bulgaria has projected an electricity deficit a few years from now as the country must phase out major lignite-fired power stations. European Commission exemptions extending the lifespans of these units are expiring.

New minister, just appointed, has issues to resolve in 2021

Kostas Skrekas, just appointed new energy minister as part of the government’s cabinet reshuffle, in place of Costis Hatzidakis, who has headed the ministry for a constructive year and a half, faces a series of pending energy-sector matters that remained unresolved in 2020. They need to be addressed as soon as possible. Developments and conditions this year will be pivotal for these matters.

Skrekas was previously deputy minister for agricultural development and food.

Also in 2021, a year during which takeovers and mergers are seen occurring in the retail electricity and gas markets, rivals will continue battling for market share gains. The target model’s launch two months ago has brought about new conditions, strengthening the positions of vertically integrated suppliers.

The need for a normalization of the target model’s new markets stands as the energy ministry’s most pressing task at present. A sharp rise in wholesale electricity prices as a result of soaring balancing market costs has deeply unsettled the market, impacting the standings of non-vertically integrated suppliers, as well as industrial enterprises and consumers, who face rising bills.

Market coupling with Bulgaria’s day-ahead market, scheduled to take place within the first three months of the new year, is the next step of the target model, a procedure designed to harmonize EU energy markets and promote competition.

New energy-intensive industrial tariffs also need to be set soon. Though essentially a matter concerning state-controlled power utility PPC and Greece’s industrial players, the cost of industrial energy is crucial for Greek industry, carrying particular political and economic weight.

Also, Greece has little time left in its negotiations with Brussels for a framework to offer third parties access to PPC’s lignite-based generation. This issue is no longer as crucial as it once was because the country’s lignite output has been drastically reduced. Even so, it remains important for independent suppliers.

A number of energy-sector privatizations could be completed this year. Gas utility DEPA’s two new entities, DEPA Infrastructure and DEPA Commercial, electricity distribution network operator DEDDIE/HEDNO, and a tender for a tender for the development of an underground natural gas storage facility (UGS) in the almost depleted natural gas field of “South Kavala” in northern Greece are all on this year’s privatization list.

In renewable energy, the ministry needs to take decisions within the first few months to clarify terms regulating the sector. RES investment interest is currently high. Steps still need to be taken in an ongoing effort to simplify RES licensing procedures, while a legal framework must be established for energy storage, offshore wind farms and hydrogen use.

 

Target model decision needed in 2021, Elpedison chief points out

The new year will demand a decision from authorities and market participants on whether a true target model for the electricity market is desired, Nikos Zahariadis, chief executive at Elpedison, has pointed out in an article published by energypress as part of a feature on 2021 prospects.

The market was caught by surprise during the launch of the new electricity market in the final weeks of 2020, the official pointed out. Balancing market costs rose sharply during this period.

Most authorities and participants were expecting a different development, including a solution for the market’s chronic “missing money” problem, as well as a drop in retail electricity prices, Zahariadis noted, expressing belief that the new year will present an opportunity, even for the unprepared, to adjust to the new conditions that will ultimately enable the new energy market to operate without restrictions and showcase its advantages.

However, the new market, even when it has matured and stabilized, will still pose threats, especially for players seeking to keep distinctly separate retail and production portfolios, as protection against price manipulation has stopped functioning since the launch of the target model, he pointed out.

Looking towards the future, a gradual prevalence of the RES sector is discernible, as long as economically feasible energy storage technology is developed, Zahariadis projected. Until then, the grid will rely on natural gas-fueled power stations, the only flexible solution available at present, he added.

As for the natural gas sector, two unrelated events late in 2018, the first being an expansion at the Revythoussa LNG terminal facilities that enables bigger tankers to dock, and the second, a drop in LNG prices, have brought about permanent change in the Greek market, the Elpedison official noted.

Market players responded swiftly with LNG imports, prompting gas price reductions along with concurrent electricity price reductions. Also, the first steps were taken towards the establishment of a Balkan hub for transboundary LNG sales, Zahariadis noted.

More gas market opportunities will be offered in 2021 through the TAP project’s functioning, the company official pointed out.

Elpedison has played a leading role in sector developments, capitalizing on opportunities by importing significant LNG amounts and capturing a key position in the wholesale gas market, Zahariadis added.

The completion of equipment procurement tenders for a new 800-MW combined cycle power station, a project that will enable Elpedison to double its production as of 2023 and gradually increase sales to higher levels, stands as the company’s biggest challenge in the new year, he noted.

Solid Fitch Ratings grading for PPC paves way to bond issue

American credit rating agency Fitch Ratings has delivered a favorable review of power utility PPC that enhances the company’s credit image and takes it a step closer to capital markets.

The credit agency has not only added PPC to its catalogue of companies reviewed, but also given the utility a BB- rating, noting that a firm outlook lies ahead. This status is twice as good as a B rating offered by S&P in November.

It enables PPC to begin examining the prospect of borrowing through a bond issue for the first time in six years.

The Fitch Ratings grading has been embraced at PPC’s Athens headquarters, as it not only seals a perfectly successful year but also puts in place a solid foundation for an even better year in 2021.

Interpretations of the outcome by some analysts remain cautiously optimistic. These analysts believe consolidation of PPC’s improved standing must wait for the release of its financial results for the year. Favorable news on the forthcoming 49 percent privatization of subsidiary DEDDIE/HEDNO, the distribution network operator, will also further enhance PPC’s image, they pointed out.

PPC’s integrated business structure, dominant market position, long-term sustainability as a result of strategic repositioning, as well as favorable energy sector reforms from 2019 to the present were key factors in the favorable Fitch Ratings grading.

Industry opposes bilateral contract restrictions

EVIKEN, the Association of Industrial Energy Consumers, has expressed opposition to an energy exchange proposal, delivered through public consultation, calling for the imposition of restrictions on bilateral contracts reached by suppliers.

In its letter, EVIKEN notes that an upper limit restricting supplier bilateral contracts to 20 percent of total sales, if suppliers hold a retail electricity market share greater than 4 percent, ensures conditions of liquidity in the day-ahead market and prevents a squeeze on prices.

The association, in its letter, proposes that this regulatory measure be abolished in the day-ahead market given the extremely high price levels registered, noting its maintenance over an extended period threatens to create oligopolistic conditions in the market.

Legal action, even at an EU level, could be taken over the matter, crucially important for the industrial sector, EVIKEN indicated.

Strong market test turnout for DEDDIE sale, 18 players in all

A total of 18 prospective bidders have taken part in a market test staged by Goldman Sachs for power utility PPC’s forthcoming sale of a 49 percent stake in subsidiary firm DEDDIE/HEDNO, the distribution network operator.

The list, forwarded by Goldman Sachs to PPC, includes investors already familiar to the Greek market such as US firm Blackrock, specializing in transportation and energy infrastructure long-term investments; prominent infrastructure funds; as well as many European operators.

France’s Engie and Italy’s Enel, both often linked with the DEDDIE/HEDNO sale, were not among the 18 market test participants, sources informed.

Interestingly, no previous market test staged to gauge interest in the prospective sale of any Greek State asset has generated such a strong turnout.

Authorities behind DEDDIE/HEDNO’s partial privatization hope this more than promising response for the market test will result in intense bidding competition and a higher sale price.

A clear picture on the number and identity of the sale’s participants will become apparent on January 29, the deadline for the procedure’s first round official expressions of interest.

Officials have attributed the strong market test interest to five key factors: the operator’s new regulatory framework; an elevated WACC level of 6.7 percent for 2021 to 2024, well over levels of between 2.5 and 3 percent offered by other European operators; strong confidence in the governance of the country, pivotal for long-term investments; good timing, as, at present, no other network operator in Europe is up for sale; and a massive accumulation of global capital currently available for investment as a result of numerous lockdowns imposed in many parts of the world since March.

The Greek government will aim to complete DEDDIE/HEDNO’s partial privatization in the first half of 2021.

 

Brussels unveils electricity, hydrogen project conditions for PCI status

The European Commission has just unveiled new criteria that need to be met by energy infrastructure projects concerning the electricity, and now, also hydrogen, sectors for Project of Common Interest (PCI) status.

Brussels presented these details as part of its wider plan concerning the financing and development of energy infrastructure. The European Commission will commit annual investments of 50.5 billion euros in the effort to meet 2030 climate-agreement targets.

Electricity transmission projects will need to increase trans-boundary capacities between EU member states by at least 500 MW, according to one of Brussels’ new criteria for PCI status, enabling favorable EU funding.

In energy storage, projects will need to offer capacities of at least 225 MW to secure their PCI status.

Smart meter installations must involve transmission and/or distribution operators of at least two EU member states and represent at least 5,000 users either producing or consuming 300 GW per year, including at least 20 percent from renewable energy sources.

As for hydrogen, projects must facilitate trans-boundary transmission between EU member states or boost storage capacities at borders by at least 10 percent.

Investment funds targeted in operator DEDDIE’s 49% sale

Power utility PPC’s forthcoming sale of a 49 percent stake in subsidiary firm DEDDIE/HEDNO, the distribution network operator, will not be limited to potential buyers with energy-market backgrounds, according to the sale’s terms, published yesterday, suggesting the seller is aiming to attract investment funds.

DEDDIE/HEDNO’s investment plan for the next five years is worth 2.3 billion euros, including 850 million euros for a nationwide digital power meter upgrade, an amount the government will seek to draw from the EU recovery fund.

Three major infrastructure funds have already expressed unofficial interest in the operator’s sale through a market test staged by Goldman Sachs, sources informed.

The sale is planned to take place over two stages, beginning with expressions of interest by candidates until a January 29 deadline, followed by a second round of binding bids from second-round qualifiers.

They will be given access to a virtual data room for evaluations before binding offers are shaped and submitted.

The government will aim to complete DEDDIE/HEDNO’s partial privatization in the first half of 2021, energy minister Costis Hatzidakis noted during an online Capital Link Forum staged yesterday.