electricity network

HEDNO investments up 17% in 2020, binding offers for 49% in 3Q

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Distribution network operator DEDDIE/HEDNO has reversed its trend of declining investments in recent years, increasing investments to a level of 175 million euros in 2020, a 17 percent increase compared to a year earlier, parent company PPC informed analysts yesterday during a virtual-conference presentation of the group’s 2020 results.

Part of these investments concerned the network’s expansion, whose total length increased by 808 km for medium-voltage networks and 661 km for low-voltage networks. Also, a further 538 low and medium-voltage transformers were installed.

As a result, the medium-voltage network’s length totaled 113,358 km at the end of 2020, the low-voltage network’s length totaled 128,211 km, while the network’s total number of installed transformers reached 165,290.

The network’s active users totaled 7,593,412 at the end of 2020, 12,668 of these in the medium-voltage category.

According to PPC’s group results, DEDDIE/HEDNO’s net profit fell to 20.3 million euros in 2020 from 70 million euros a year earlier.

Binding offers for PPC’s sale of a 49 percent share in DEDDIE/HEDNO are planned for the third quarter this year, PPC’s administration informed analysts during yesterday’s session.

Guaranteed revenues for operators ‘must not breed complacency’

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

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

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

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

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

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

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

HEDNO bidders to next stage of sale with regulatory ambiguities

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Second-round qualifiers of a privatization offering a 49 percent stake of distribution network operator DEDDIE/HEDNO, a subsidiary of power utility PPC, are entering the procedure’s next stage without a clear picture on the company’s regulatory framework, still not established, despite a March 31 deadline.

Though related talks began well in advance, RAE, the Regulatory Authority for Energy, is still awaiting all the details it requires from the operator on its regulated earnings and network development plan before the authority can reach a decision on the regulatory framework.

The operator’s regulatory framework is crucial for the privatization as it concerns pivotal matters such as extra wacc for certain projects, as well as Opex, Capex settings, amongst other details.

Once established, DEDDIE/HEDNO’s new regulatory framework will be applied retroactively, as of January 1, 2021.

Though its delivery date still remains unclear, it will include two periods, covering 2021 to 2024 and 2025 to 2028, which will give potential buyers a long-term perspective on the returns to be offered by the investment.

RAE has already decided on a formula calculating required earnings from the distribution network as well as the wacc level.

Second-round qualifiers are expected to be given access to DEDDIE/HEDNO’s virtual data room within the next few days for an assessment of the operator’s financial standing as part of due diligence.

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

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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.

Crete-Athens grid link omitted from Greek RRF proposal

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A grid interconnection to link Crete with Athens has been omitted from a national plan containing 112 projects for which financial support will be sought through the European Commission’s Recovery and Resilience Facility.

It was the energy sector’s only surprise omission from the government’s plan for RRF support, to be submitted to Greek Parliament within the next few days for ratification before being forwarded to the European Commission.

Even so, progress of the Crete-Athens grid interconnection project, vital for Crete’s energy sufficiency without reliance on high-cost local power stations, will not be affected by the decision as a number of other financing options remain available, authorities have stressed.

These include the National Strategic Reference Framework and the Just Transition Fund.

The national RRF plan was discussed at a cabinet meeting yesterday ahead of its presentation, planned for tomorrow.

A proposal for a 200 million-euro injection into the RES special account, facing deficit territory, has been included in the national plan.

Other key features of the plans are: the country’s energy efficiency upgrade program for homes, businesses and public buildings; the decarbonization plan; installation of smart meters; upgrade and undergrounding of transmission lines; as well as development of electric vehicle recharging infrastructure.

New network expansion model to support PV investments

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A new formula just introduced by the distribution network operator DEDDIE/HEDNO for the expansion of medium-voltage transmission lines promises to restart the development of small-to-medium scale solar energy projects by providing a viable way for investors to cover the cost of network projects.

This new approach comes as an effort to end investment stagnancy in the RES sector by enabling RES producers to overcome local network saturation issues that have prevented the development of their project plans.

The new formula entails the issuance of connection terms for clusters of independent PV units, for which the operator will temporarily cover the cost of network expansion projects concerning units that will not pay immediately.

The plan was introduced by the operator last Friday, beginning with the issuance of connection terms for a first batch of three PV clusters.

It comes at a time when, according to data processed by SPEF, the Hellenic Association of Photovoltaic Energy Producers, the percentage of RES applications rejected by DEDDIE/HEDNO has reached a level of 80 percent.

This heightened level of rejections has, more recently, prompted the intervention of sector agencies, highlighting the fact that investor interest in RES investments, especially small-and-medium sized photovoltaics, has come to a standstill.

 

DEDDIE network expansion plan held up by internal dispute

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Though the distribution network operator DEDDIE/HEDNO, encouraged by the energy ministry, appears to have decided to move ahead with plans for an expansion of its medium-voltage network, the decision is not being implemented as a result of disagreements, within the company’s ranks, on the plan.

According to sources, rival factions have been formed at the operator over the project, holding it back. Officially, the operator’s regional services, which have completed all required preliminary work, have yet to be given the green light.

Clarity on the network expansion plan is crucial for certain investors, especially solar energy investors, facing a March 22 deadline set by RAE, the Regulatory Authority for Energy, for a forthcoming RES auction in May.

The energy ministry has been informed of the deadlock at the operator and is expected to intervene to settle the dispute.

RES spatial plan to be delivered within 2021, Action Plan notes

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The completion of a RES sector spatial plan within the current year has been included in an energy ministry Action Plan for 2021, just published along with the respective action plans of all other ministries.

The energy ministry’s action plan lists interventions planned for 2021 in nine areas under its authority, including energy-sector privatizations, energy market reforms, support for decarbonization and recycling, adoption of circular economic principles, greenhouse gas emission reduction, the tackling of climate change effects, as well as green energy transition.

RES sector measures this year will help cut down the time needed by new RES projects for licensing procedures to two years, the ministry anticipates in its action plan.

It also expects the installation, by the end of the year, of at least 2,000 recharging units for electric vehicles in public areas, including along highways, and at private properties, including domestic and commercial.

On the privatization front, the energy ministry expects all seven energy privatization plans to have been completed or reached an advanced stage by the end of the year.

On energy market reforms, the adoption of a remuneration mechanism for grid sufficiency, to replace a transitional mechanism remunerating flexibility, is a standout feature.

The energy ministry also intends to adopt, as Greek law, an EU directive promoting energy storage and demand response systems.

The ministry’s action plan also anticipates the signing of agreements this year for distribution network development and RES penetration support. It also expects DEDDIE/HEDNO, the distribution network operator, to announce a tender for the installation of smart power meters within the current year.

Taking into account plans by DEDDIE/HEDNO and power grid operator IPTO, the ministry expects investments in distribution and transmission networks to reach one billion euros this year.

Investments for gas network upgrades and expansion are expected to reach at least 300 million euros, primarily driven by projects planned by gas distributor DEDA, covering all areas around the country except for the wider Athens, Thessaloniki and Thessaly areas.

On international projects, the action plan notes that a Greek-Bulgarian gas pipeline project, the IGB, promising to significantly diversify Greece’s gas sources, will be completed by the end of 2021.

A latest edition of the Saving at Home program subsidizing energy efficiency upgrades of properties, budgeted at one billion euros, will stimulate work on 80,000 buildings in 2021, according the energy ministry’s action plan.

This activity will contribute to a National Energy and Climate Plan objective for an improvement, by 2030, of energy efficiency at buildings by 38 percent, reducing energy consumption to levels below those registered in 2007, the action plan notes.

 

Talks continue for EU recovery fund energy projects package

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Electricity network upgrades, including restricted underground cable installations – due to limited funds – at areas presenting serious energy security problems; decarbonization; as well as spatial planning and redevelopment for carbon-neutral cities feature as plans in an initial energy-projects package, worth over one billion euros, linked to the EU’s recovery fund, Brussels sources have informed.

Brussels authorities are currently appraising these projects, a procedure expected to be completed by the end of March. The Greek government will then need to immediately incorporate approved plans into a National Recovery and Resilience Plan and submit it to Brussels by early April.

Energy minister Kostas Skrekas and European Commission officials discussed the ministry’s proposals during a virtual conference yesterday.

Besides decarbonization, energy efficiency upgrades of buildings, as well as energy-related town and spatial planning, the government is also addressing the need to modernize infrastructure, especially networks, as was highlighted by problems encountered in many parts of Greece during recent snowstorms.

The installation of underground transmission cables will be restricted to between 2,000 and 2,500 kilometers of medium and low-voltage networks, given the amount of recovery funds available for this project, estimated at 200 million euros, according to energypress sources.

The cost of installing underground medium-voltage power lines is estimated at 100,000 euros per kilometer, compared to 30,000 euros for overhead lines. Installation costs for low-voltage power lines are estimated at 70,000 euros per kilometer, compared to 25,000 for overhead lines.

The overall effort is also expected to include an upgrade of ageing overhead transmission lines around Greece, dating back to the 70s and 80s.

Operator DEDDIE 49% sale first-round bids submitted today

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State-controlled power utility PPC and the government will be hoping today’s first-round, non-binding deadline for expression of interest in the 49 percent sale of the utility’s subsidiary DEDDIE/HEDNO, the distribution network operator, can attract a solid turnout of formidable bidders.

An onslaught of criticism against DEDDIE/HEDNO over the past few days following widespread power outages caused by Medea, as the extreme weather system was dubbed, certainly has not been good for the operator’s reputation.

On the other hand, the network’s deficiencies, exposed by extensive weather-related damages in the wider Athens area, lends tremendous support to the need of a powerful investor ready to finance the network’s badly needed upgrade, expected to cost 3.5 billion euros.

Expectations of a solid investor turnout have been high in the lead-up to today’s first-round deadline. PPC plans to announce this sale’s first round participants during the day.

Many prominent funds have shown interest in the sale but the identities of those that will follow through and participate have remained unclear. It also remains unclear if any of these funds will establish partnerships – for the DEDDDIE/HEDNO sale – with European network operators.

A market test staged in December, as well as contact with interested parties, has indicated that the American funds KKR and Blackrock, Australia’s Macquarie Group, and France’s Ardian, could participate in the sale.

The managerial rights to be attached to the minority 49 percent stake will be bolstered to not block potential buyers from crucial decisions.

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.

Network repairs almost done, 60,000 reconnections made

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Repairs to medium-voltage power line networks in the wider Athens area, damaged during the heavy snowstorm earlier in the week, especially in the capital’s north, have almost been completed, with just small sections remaining, distribution network operator DEDDIE/HEDNO updated this morning.

Operator crews have needed to work overtime, focusing their efforts on the capital’s northern areas Ekali, Dionysos, Agios Stefanos, Kryoneri, Anixi, Drosia and Kalamos, all hit especially hard by Medea, as the snowstorm was dubbed.

Some 60,000 households and businesses of 70,000 that were disconnected from the network during the extreme weather conditions have had their electricity supply restored, the operator informed last night.

DEDDIE/HEDNO, in its updates, has urged the public to stay away from any fallen power lines or utility poles.

The operator has also requested households still disconnected from the network to contact the operator through any of the following: 11500, 2111900500, MyDEDDiE app (Android), iOS (mobiles), or www.deddie.gr.

DEDDIE/HEDNO has reinforced its Athens crews with a further 60 technicians brought in from the Peloponnese, Epirus and central Greece areas, where repair work has been completed.

Network damages remind of need for system upgrade

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Power outages in many parts of Greece, including hard-hit Athens, as a result of collapsing trees that damaged overhead power lines during heavy snowfall earlier this week, have triggered discussion about the need for underground distribution networks and the network’s overall reinforcement and improvement.

Also, the installation of 7.4 million smart power meters, a project budgeted at 800 million euros, is a priority, distribution network operator DEDDIE/HEDNO officials stressed in the wake of network damages inflicted by the snowstorms.

Distribution network investments have fallen behind over the past eight years, sliding from approximately 280 million euros in 2012 to 123 million euros in 2017 and 2018 before slightly rebounding to 135 million euros in 2019 and an unconfirmed 178 million euros in 2020.

This reduction in network investments by DEDDIE/HEDNO has stemmed from poor financial performances by parent company PPC, the power utility, during the aforementioned period.

“Ten years of economic crisis in Greece has led to slight infrastructure regression,” the recently appointed energy minister Kostas Skrekas noted late last night, while crews were working overtime to restore damages caused by Medea, as the extreme weather system was dubbed. “We have allotted 200 million euros of recovery fund money for underground cable investments,” the minister added.

Speaking at an energy conference yesterday, the ministry’s secretary-general Alexandra Sdoukou said government plans for an upgrade of the country’s power distribution network would result in investments anticipated to total 3.5 billion euros over the next decade.

Two funds submit DEDDIE interest ahead of sale’s preliminary deadline

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Two undisclosed funds have jumped the gun to submit non-binding, first-round expressions of interest for the sale of a 49 percent stake in distribution network operator DEDDIE/HEDNO three days before a February 19 deadline, highlighting the heightened level of buyer interest that surrounds this privatization.

European and US investment teams, more so than network operators, have shown particular interest in the DEDDIE/HEDNO sale during its lead-up.

A market test in December revealed that 19 potential bidders include New York-based Blackrock, the world’ biggest investment fund, managing capital worth 7.8 trillion dollars; American giant KKR, handling 220 billion dollars; as well as French fund Ardian, one of Europe’s most dynamic, with involvement in over 150 enterprises and capital management worth more than 100 billion dollars.

Though it remains unknown if any of the aforementioned players were early birds, it has become very clear that funds will play a big role in this sale.

In an effort to add to the sale’s appeal, power utility PPC, DEDDIE/HEDNO’s parent company, has decided to bolster the 49 percent minority rights by offering potential buyers equal powers with PPC over crucial network operator decisions.

Between four and seven investment teams have displayed the greatest level of interest in the DEDDIE/HEDNO sale. Some of these teams are believed to be engaged in negotiations to establish new formations for this sale.

PPC, backed by positive news, on standby for bond issue

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The Greek State’s recent bond-market outing for an unprecedented, in the country’s history, borrowing cost of less than 1 percent paves the way for power utility PPC to follow suit.

This low yield and strong attraction of institutional investors, who ended up with over 95 percent of the Greek State’s bond issue, combined with a steady interest by foreign investors in PPC’s portfolio are believed to be pushing the power corporation towards a more aggressive financing policy for a return to bond markets following a six-year absence.

However, PPC has yet to decide on when to make its move. The corporation has not planned a bond issue for this month or next, sources have informed energypress. Even so, a sudden decision cannot be ruled out, they added.

PPC has been contemplating a bond-market outing since late December, when Fitch Ratings delivered a positive credit rating. The US firm included, for the first time, PPC on the list of enterprises it rates and offered a BB ranking, two times better than a preceding B ranking delivered by S&P in November.

At the time, despite the good news, company sources insisted PPC’s objective to head to capital markets in the first half of 2021 remained unchanged.

But a wave of favorable news, which, besides the BB rating from Fitch Ratings, includes PPC’s securitization packages for unpaid receivables; the achievement of profit figures for a fourth successive quarter; a new business plan; the launch of a privatization procedure for distribution network operator DEDDIE/HEDNO; and an upcoming partnership agreement with Germany’s RWE for RES investments in Greece; has generated momentum for PPC.

A bond issue would help finance many of the company’s project plans, primarily in the RES sector, as well as distribution network investments. It will also enable PPC to restructure older debt for lower-cost borrowing terms.

China’s SGCC lodges complaint over DEDDIE sale exclusion

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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.

 

PPC’s new image a prelude to revised business plan, imminent

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Retail outlets to open for extended business hours, digital products and new services, swifter withdrawals of lignite-fired power stations, as well as an acceleration in the development of major-scale and smaller RES projects are among the factors contributing to power utility PPC’s new corporate image, showcased yesterday, during a 40-minute event, by chief executive Giorgos Stassis, who described the new image as a prelude to a revised business plan to be presented towards the end of the year.

The revised business plan, to have a three-year duration, will be a more ambitious and confident plan than last year’s version as, besides swifter lignite unit exits, it will feature bolder digitalization steps, a more aggressive retail market policy, aim for a RES portfolio well over 1 GW over the next three years, through a pool of prospective projects totaling 6 GW, and also feature network and personnel investments.

Next year, the company will aim to double 24 existing retail outlets – they begin operating for extended business hours as of today – as well as 75 service centers that may be visited by appointment only.

Yesterday’s announcements represent just part of the developments to be gradually announced by PPC, the most imminent being a new series of digital products, dubbed PPC myHome, to be launched within the next few days.

The new business plan’s level of ambition will also depend on external factors, Brussels being pivotal. Settlement of the country’s ten-year lignite dispute with the European Commission will offer state-controlled PPC greater leeway.

PPC is also hoping for a favorable Brussels response within November on a compensation request for 200 million euros, annually, for every year lignite-fired power stations in the west Macedonia and Megalopoli regions will need to keep operating.

Southeast Europe network coordination center working on launch

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The Southeast Electricity Network Coordination Center (SEleNe CC), established in Thessaloniki to support regional network security in southeast Europe, is currently recruiting personnel and installing technical equipment required for its operations.

All necessary equipment is expected to be installed at the center’s Thessaloniki headquarters by the end of September, energypress sources have informed. The objective is to have prepared the center as a fully operational unit by the end of the year.

The new regional center was established following years of efforts by the power grid operators of Greece (IPTO), Italy (TERNA SpA), Romania (Transelectrica), and Bulgaria (ESO-EAD), each holding equal shares.

It is managed by a four-member board comprising Ioannis Kabouris (IPTO), the chief executive, and three members, Angelin Tsachev (ESO-EAD), Enrico Maria Carlini (TERNA SpA), and Adrian Suta (Transelectrica).

The coupling of respective markets, expected soon, will represent a next step in the region’s harmonization and incorporation into Europe’s unified electricity market, promising major benefits for consumers, Kabouris, the chief executive, has noted.

IPTO launches tender for Athens area substation upgrade

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Power grid operator IPTO has announced a tender for the reconstruction and modernization of the 400-kV Koumoundourou substation serving the wider Athens area, a project budgeted at 46 million euros (57 million euros including VAT).

This facility was constructed in the 1970s, along with four other units, to transmit electricity to the wider Athens area.

The Koumoundourou substation upgrade, one of the projects included in the so-called Eastern Corridor, is expected to be completed in 2024. This corridor also includes the Megalopoli and Corinthos substations, both undergoing upgrades at present.

Interested parties face an August 10 deadline to submit their offers to IPTO, expecting turn-key, ready-to-use delivery.

Ministry, responding to Syriza MPs, lists reasons for further sale of IPTO

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A government decision to further privatize power grid operator IPTO is linked to the EU’s objective for carbon neutrality by 2050 as well as a national decarbonization target by 2028, efforts requiring big investments for greater emphasis on new and innovative technologies and systems; an upgrade of existing networks as smart networks; as well as the development of new business models, the energy ministry has noted in response to recent questioning, in Greek Parliament, by MPs of the main opposition leftist Syriza party.

Also, swift development of electricity transmission networks promises to significantly contribute to a speedy recovery of the pandemic-hit national economy, the ministry noted.

In addition, the sale of an additional stake in IPTO is a pre-election pledge made by the New Democracy party, the ministry response reminded. ND was elected into power one year ago.

IPTO’s initial privatization, shaped and carried out by the previous Syriza government, is unusual as the Greek State may have maintained a majority 51 percent stake but its powers for strategic decision-making are limited and require the approval of the minority partner, China’s SGCC, holding a 24 percent stake, the energy ministry pointed out.

SGCC has been given the right to block strategic decisions at IPTO and priority rights in any further privatization of the power grid operator.

PPC ups Megalopoli V output to full capacity of 811 MW

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Power utility PPC’s Megalopoli V power station in the Peloponnese has, for the first time,  begun operating at a full-capacity level of 811 MW following five years of production well below full potential, a restriction whose cost the utility has estimated at 200 million euros.

Power grid operator IPTO yesterday gave PPC the green light for full-scale production at Megalopoli V after an extended period of pressure applied by the power utility.

In the lead-up, PPC was forced to operate its Megalopoli V facility at 60 percent of its full capacity, 500 MW, following instructions from IPTO, noting the Peloponnese region’s existing network could not carry a greater amount.

Trial runs at Megalopoli V, a natural gas-fired combined-cycle unit, began in April, 2015 but PPC had never been given permission to boost generation at this power plant by 311 MW to reach full capacity.

Meanwhile, PPC’s Megalopoli III and IV units, both lignite-fired, were either shut or operated well below full capacity as a result of hefty CO2 emission right costs.

A swifter full-scale launch of Megalopoli V would have enabled the power utility to completely switch off the engines at loss-incurring Megalopoli III, a 250-MW unit, PPC has noted.

PPC picks Goldman Sachs as consultant for DEDDIE sale

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The board at power utility PPC has reached a decision to hire US financial services company Goldman Sachs as privatization consultant for the sale of a 49 percent stake in distribution network operator DEDDIE/HEDNO, a subsidiary, sources have informed.

This appointment is seen as the first step in preparations leading to the partial privatization, while the choice of a heavyweight consultant reflects the importance of the sale for both the government and state-controlled PPC.

The prospective entry of an investor with a 49 stake raises hopes for a major network upgrade, including digitization. Modernized infrastructure will help intensify competition in the domestic electricity market. However, enormous sums are needed.  A project entailing the installation of smart meters, alone, is budgeted at one billion euros.

European operators as well as foreign funds investing in energy networks and infrastructure expressed strong interest in DEDDIE prior to the outbreak of the coronavirus crisis.

The operator’s regulated earnings and steady yield serve as a safe and profitable haven for capital investment, while DEDDIE’s tremendous asset base expansion potential adds to the appeal for investors.

RAE, the Regulatory Authority for Energy, and DEDDIE are currently working together to further modernize the operator’s regulatory framework.

Also, DEDDIE is currently finalizing a new business plan, covering 2020 to 2028. It envisions a gradual increase of annual investments to 350 million euros, more-than-double the current level of 150 million euros.

 

DEDDIE investments boosted to reach €350m, annually

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Distribution network operator DEDDIE/HEDNO’s investment amounts concerning its business plan from 2020 to 2028 will be gradually boosted to reach annual levels of 300-350 million euros, up from 150-170 million euros, the operator has decided.

DEDDIE chief executive Anastassios Manos has presented the operator’s upgraded investment plan to board members.

It incorporates and fine tunes the distribution network strategy included in the business plan for power utility PPC, the operator’s parent company.

The upgraded DEDDIE business plan will be finalized once RAE, the Regulatory Authority for Energy, has cemented its regulatory framework.

DEDDIE’s investments have continuously dwindled in recent years.  Contrary to other EU operators, the company’s Regulatory Asset Base (RAB) value has subsequently diminished during this period of contraction as new investments each year have been outweighed by the depreciation levels of previous projects.

The operator’s new investments will focus on upgrading and expanding the network to facilitate the RES sector’s growing needs and broadened network presence, as well as ambitious electric vehicle targets.

The overall upgrade will include network digitization projects for advanced grid management and smart meter installations.

IPTO network upgrades to facilitate RES projects

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Power grid operator IPTO has planned upgrades for overloaded 150-kV networks, needed to facilitate new RES project connections in various mainland areas, where investment interest is high.

The upgrades, part of the operator’s ten-year development plan, promise to pave the way for new investments in the wind and solar energy park sectors.

The Peloponnese, Thrace, Kastoria, Florina, central Greece, Ionian islands of the south, Ioannina and northern Evia are among the areas experiencing 150-kv network overloads, the operator has noted. IPTO has planned upgrade projects for all these areas.

They included an interconnection to link the Megalopoli 400-kV network with the existing power grid of Acheloos River-Distomo, through Patras. This project is expected to be completed this year.

Greater transmission capacity is also planned for the Trizinia area, in the eastern Peloponnese. The upgrade, planned to be developed over the next three years, is expected to increase RES absorption capacity in the area to approximately 230 MW.

 

 

Small-scale PV investors must unite to skip network saturation obstacles

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Energy authorities are working on resolving network access problems encountered by small-scale PV investors as a result of saturation issues and appear headed towards promoting joint applications by investors that would avoid distribution network operator restrictions.

Small-scale PV investors, because of their limited size, are currently forced to design solar energy parks for network access through distribution network operator DEDDIE/HEDNO’s distribution network, not transmission networks controlled by IPTO, whose transmission networks, in most cases, are not saturated but demand higher capacities for connection eligibility.

The saturation problem of distribution networks concerns many parts of the country. In many cases, these saturated networks cannot be upgraded for capacity increases.

Some small-scale PV investors are already opting to team up and avoid the distribution network limitations imposed by DEDDIE. However, reaching consensus for a joint plan can be challenging.

The energy ministry is currently engaged in talks with DEDDIE/HEDNO, IPTO and RAE, the Regulatory Authority for Energy, officials, a leading ministry official has informed.

“We want to clear the way for interested parties currently being blocked by DEDDIE as a result of the saturated networks,” the energy ministry’s secretary-general Alexandra Sdoukou told a forum staged by SEF, the Hellenic Association of Photovoltaic Companies. “We’re thinking, for example, of bringing together many PV projects which, at present, cannot be connected to DEDDIE’s network as a result of saturation, for one united application to IPTO.”

DEDDIE preparing 10-year plan for longer-term approach

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Distribution network operator DEDDIE/HEDNO, headed for privatization, is preparing a new and ambitious 10-year business plan reflecting the lofty goals set of the National Energy and Climate Plan, energypress sources have informed.

The operator will seek a long-term WACC figure from RAE, the Regulatory Authority for Energy, the body responsible for approving this constituent.

The operator’s multi-billion ten-year plan will include urgently needed  network upgrade projects, network expansions, digitization, as well as electric vehicle sector initiatives.

A favorable revision of the regulatory framework and the WACC level, set by RAE on an annual basis, will be a crucial factor for the operator’s plan. DEDDIE’s current WACC level is at 7 percent.

WACC level clarity over a ten-year period will be sought for the operator’s prospective new shareholders, as is the case with many other European network operators. This is crucial for planning and execution of projects.

Until now, DEDDIE’s business plans have had a five-year duration. The most recent of these, worth 1.37 billion euros, was approved by RAE just last November. However, the lofty demands of the new NECP require a longer-term approach.

The operator’s new business plan is expected to be ready for presentation in two months, the energypress sources informed.

 

 

Utility poles stock level too low, emergency orders needed

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Distribution network operator DEDDIE/HEDNO, dreading repercussions for the network as a result of any new round of adverse weather, is preparing to acquire thousands of wooden utility poles through emergency procedures rather than a competitive process.

The current stock level of 21,318 poles is below the required security level. A tender would be too time consuming.

Top-ranked officials at the energy ministry have advised the operator’s administration to negotiate with all sector companies, local and foreign, so that the lowest possible procurement prices may be achieved.

This wider approach is expected to help contain price levels, which, otherwise, could be pushed up by the situation’s need for immediate supply.

DEDDIE/HEDNO, a subsidiary of state-controlled power utility PPC, is preparing to hold direct talks with all interested suppliers.

Greek supply of wooden utility poles would not suffice to cover the national network’s needs as just a handful of local firms operate in this sector.

Over the years, international tenders have been held. Local bidders have usually emerged victorious and made up for stock deficits with orders from Ukraine, Finland and Sweden.

Sale of DEDDIE majority stake not necessary, officials believe

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Power utility PPC’s administration and the energy ministry are having second thoughts as to whether the sale of a majority stake is necessary for electricity distribution network operator DEDDIE/HEDNO, a subsidiary of PPC, given the improved results expected at the power utility over the next few years.

Government officials have been contemplating offering a majority stake, including managerial rights, in DEDDIE/HEDNO, but the privatization could end up offering investors a minority stake.

PPC’s EBITDA is expected to reach between 650 and 700 million euros in 2020 before rising to one billion euros by 2024.

This upward trajectory has prompted energy minister Costis Hatzidakis and PPC chief executive to reconsider the extent of the DEDDIE/HEDNO sale.

PPC’s plan for a gradual withdrawal of all its existing lignite-fired power stations by 2023, currently prompting damages estimated at between 200 and 300 million euros a year, as well as the utility’s planned bond issue, are two additional factors contributing to the reassessment of the DEDDIE/HEDNO sale.

The government and PPC want a partner for DEDDIE/HEDNO to help develop a costly modernization plan entailing the digitization of electricity networks.

NECP lacks detail on network upgrade for RES penetration, producers note

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The new National Energy and Climate Plan (NECP), presented yesterday at an energy ministry event hosted by the Bank of Greece, is not clear enough on details concerning the development of networks and interconnections for further RES penetration, electricity producers have noted.

Network upgrades will be pivotal in the country’s effort to achieve RES targets concerning the replacement of conventional power stations with clean-energy units, producers have stressed.

More details on technical matters and scheduling for network upgrades are necessary, industry officials believe.

Giorgos Peristeris, the chief official at ESIAPE, the Greek Association of Renewable Energy Source Electricity Producers, and Dinos Benroubi, president of ESAI/HAIPP, the Hellenic Association of Independent Power Producers, both noted procedures concerning the development of electricity transmission projects, especially licensing, need to be accelerated.

Greece’s installed RES capacity in 2030 has been set at 15 GW, up from approximately 6 GW at present.

Power grid operator IPTO has repeatedly assured it is pushing ahead with studies assessing the needs of the grid based on the NECP’s ambitious RES targets, noting all required projects will be included in its ten-year investment plan covering 2021 to 2030.

IPTO possesses both the technical and financial requirements to develop projects needed, the operator’s administration has stressed.

Sale of regional HEDNO units tabled as third alternative

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Government officials are now also looking at a third alternative for a prospective sale of distribution network operator DEDDIE/HEDNO, this latest approach entailing a geographical division of the network followed by the privatization of some of the newly established companies to take on these regional networks, sources have informed.

The government is also looking at the possible sale of a minority stake of DEDDIE/HEDNO, the original plan, while, just days ago, news of a second, more aggressive procedure offering investors a majority stake of the operator, also emerged as a possibility.

The latest region-based proposal was brought forward by power utility PPC’s new chief executive Giorgos Stassis, the sources said. DEDDIE/HEDNO is a subsidiary of PPC.

This regional-based model reflects the systems of most European countries, where networks are managed by regional operators, not a single national operator.

In Germany, for example, a total of 896 network operators exist, just 75 of which control networks serving over 100,000 electricity consumers. Italy has 135 operators. Just two of these distribute electricity to over 100,000 consumers.

Greece, Cyprus and Ireland are Europe’s only countries with one or two distribution network operators.

Government officials are examining how swiftly a regional-based division and sale of DEDDIE/HEDNO units could progress.

The operator’s fixed assets are valued at 3.6 billion euros, according to an estimate provided by PPC’s previous administration.

DEDDIE/HEDNO faces an enormous investment program, including the installation of smart meters and telemetric systems, a projected budgeted at 1.5 billion euros. The operator, alone, cannot provide this amount.