Relaunched PPC lignite sale planned for completion May 5-8

The main power utility PPC’s follow-up sale attempt offering lignite units, planned to move ahead swiftly with the aim of producing a preferred bidder between May 5 and 8, ahead of European Parliament and local elections, is being relaunched today with investor-friendly terms intact following the initial sale’s failure to excite candidates.

Besides three bidding teams that took part in the first sale attempt, the relaunched sale is expected to include new entries.

PPC’s chief executive Manolis Panagiotakis has returned from a brief trip to China having secured the participation of two Chinese entries, China Energy and CMEC, while two more firms, Russian and American, have also decided to bid for the PPC units, according to the PPC boss.

Last-minute revisions were needed following intervention by the European Commission’s Directorate-General for Competition. Panagiotakis is scheduled to visit Brussels next week for further talks.

According to the revised terms, PPC holds the right to commission a new evaluation of the assets included in the disinvestment, a bailout requirement.

The previous evaluation, projecting an IRR figure of 10.7% and lignite costs at 28.5 euros per ton, was not to blame for the initial sale effort’s failure, the PPC chief has insisted.

Extremely unfavorable market conditions at the time of the sale, including investor insecurity over CO2 emission right costs, as well as serious pending issues such as the need for an improved lignite supply agreement with the operator of the Ahlada mine feeding the Meliti power station, one of the units up for sale, were key reasons behind the failure, Panagiotakis has supported.

A voluntary exit plan for employee reductions at units included in the sale package, Brussels pre-notification for CAT remuneration eligibility of units, and the result of ongoing negotiations with the Ahlada mine’s operator all offer improved potential for a successful sale procedure, the PPC boss has highlighted.

Interested bidders will need to express interest by the end of next week. The re-registration procedure for bidders who took part in the initial sale attempt will be limited to an official statement noting that no changes have been made.

Consultation for the sale and purchase agreement (SPA) will be held over a period of 20 days to one month. Its finalized terms will be announced a week later. Contenders will then have one week to submit their binding offers before a preferred bidder is declared between May 5 and 8. An extraordinary PPC shareholders’ meeting and a parliamentary session will follow to approve the transfer of units to new owners.

 

 

 

Swift procedure planned for renewed PPC lignite sale effort

The revised framework for a follow-up sale attempt of main power utility PPC lignite units, included in an energy ministry draft bill to be submitted to parliament today, is expected to be driven by a fast-moving schedule aiming for the procedure’s completion by early May.

Sources have not ruled out a relaunch of the bailout-required sale midway through next week, offers ahead of Orthodox Easter (April 28), and an endorsement of the result at a PPC shareholders’ meeting on May 8.

Besides the procedure’s short time span, which could end up subduing investor offers, revised terms agreed to by the energy ministry and the European Commission’s Directorate-General for Competition for the renewed sale attempt include a profit-and-loss sharing arrangement between PPC and investors for two years.

The Megalopoli and Meliti lignite-fired facilities included in the sale package are believed to have been loss-incurring in the lead-up to the sale.

Evaluation procedures have also been revised for the new sale attempt, sources noted.

Ministry, DG Comp talks on PPC sale terms not over yet

Negotiations between the energy ministry and the European Commission’s Directorate-General for Competition for an agreement on the revised terms of the main power utility PPC’s follow-up effort to sell lignite units will continue this week but are not expected to exceed it as a crucial Eurogroup meeting of eurozone finance ministers is scheduled for next Monday, March 11.

PPC’s lignite disinvestment is a pending bailout requirement. It is one of the key commitments for the release, by the country’s lenders, of a one-billion euro tranche.

Throughout the previous week, the talks between the energy ministry and the DG Comp were said to be nearing a deal. The fundamentals of the new sale’s revised terms, to feature improved conditions for investors following the initial effort’s failure, have been set but participation details concerning new entrants still need to be clarified, sources explained.

“The main objective of the two sides is to resolve whatever pending issues remain in a way that will maximize the sale’s chances of success this time around,” one source informed.

PPC is also making a committed effort for a successful follow-up sale. Last week, the utility’s chief executive Manolis Panagiotakis provided the European Commission with a letter listing a series of factors he sees as crucial to the disinvestment’s success.

Panagiotakis drew attention to an EU law limiting investment activity of non-EU investors, which he views as an obstacle for the sale. Russian, Chinese and American players of repute are interested in the PPC sale, according to the PPC boss, currently in Beijing for talks with Chinese firms.

PPC chief informs Brussels of crucial factors in lignite units sale

The main power utility PPC’s chief executive Manolis Panagiotakis has provided the European Commission with a series of a factors he sees as crucial to the success of the utility’s follow-up sale attempt of lignite units following a failed initial effort.

EU law limiting investment activity of non-EU investors is indirectly yet quite clearly presented as an obstacle that should not restrict the PPC sale, the utility’s chief official pointed out in his letter, forwarded to Brussels competition and energy authorities.

According to Panagiotakis, Russian, Chinese and American players of repute have obtained the sale’s necessary data and are considering participating in the sale. The relaunch of the sale, a bailout requirement, is expected to feature improved terms for investors.

The PPC boss also lists CAT remuneration eligibility for the lignite-fired power stations included in the sale package as pivotal.

Staff reductions at the Megalopoli and Meliti power stations, both believed to be loss-incurring, are also crucial for the sale, according to the PPC chief. A voluntary exit plan offered by PPC is currently in progress and leading to payroll cost reductions, he informed. Savings at the Megalopoli plant are expected to reach approximately 25 million euros a year, Panagiotakis noted in his letter.

An existing lignite supply agreement between PPC and the license holder of Ahlada, a mine feeding PPC’s nearby Meliti lignite-fired power station in northern Greece, remains a problem as it does not secure price and quantity stability, the utility boss also pointed out, adding that legal pressure is being applied on the license holder.

The lack of a clear-cut national energy plan, or, more specifically, the ambiguity surrounding the future of the country’s lignite-fired power stations, is another issue that troubled investors in the previous sale effort, Panagiotakis noted.

Greek energy planning studies indicate the need for lignite-related output in the medium term, but at levels clearly below current levels, the PPC boss supported.

 

 

PPC share price up on news of nearing lignite unit sale terms

A sharp 10.22 percent increase of the main power utility PPC’s share price yesterday, which lifted the share to 1.51 euros, over the 1.50-euro level for the first time since September, 2018, has been attributed to abounding reports of a nearing deal between the energy ministry and the European Commission’s Directorate-General for Competition on the new and more investor-friendly terms to apply for the power utility’s follow-up sale of lignite units. A relaunch is needed as the first sale attempt failed to excite investors.

Besides the reports of a PPC lignite units sale deal in the making between Athens and Brussels, the deescalation of CO2 emission right costs over the past few days, to levels below 19 euros per ton, well under the levels of more than 25 euros at the end of January, has also been cited as a key factor behind the rise in value of PPC’s share.

Certain pundits contend that more could be at play than the two aforementioned factors. An energy ministry approval of the state-controlled power utility’s request for a reduction of its 15 percent discount offered to consumers paying their electricity bills on time, which would boost PPC’s revenues, has been cited as another possible factor behind the higher share price.

Minister, DG Comp close to deal on new PPC lignite terms

The energy ministry and the European Commission’s Directorate-General for Competition appear to be just days away from  finalizing terms of the main power utility PPC’s new sale of lignite units, to feature improved conditions for investors, following the initial effort’s failure.

A profit-and-loss sharing mechanism, which had been requested by a bidding team comprised of Seven Energy and Gek Terna, will most likely be included in the disinvestment’s revised sales and purchase agreement and given a two-year duration.

It is believed the matter was discussed by energy minister Giorgos Stathakis in a high-level teleconference early yesterday with Margrethe Vestager, the European Commissioner for Competition, which highlights the energy ministry’s urgency for a finalized PPC sale plan ahead of an imminent Eurogroup meeting of eurozone finance ministers, scheduled for March 11.

A follow-up session between the two officials would have taken place in the evening had the energy minister not rushed off for Crete on an emergency visit following extensive weather-related damages on the island.

PPC’s lignite disinvestment is a pending bailout requirement. It is one of the key commitments if the country’s lenders are to release a one-billion euro tranche for Greece.

The Directorate-General for Competition has yet to present a position on whether the PPC lignite units up for sale will be eligible for CAT remuneration.

 

PPC units sale to be relaunched with profit-loss sharing system

The main power utility PPC’s recently failed bailout-required sale of lignite units will be relaunched rather than extended to enable entries of new candidates, while a temporary profit-and-loss sharing mechanism concerning the buyers and seller will be introduced.

Ongoing negotiations between the energy ministry and the European Commission’s Directorate-General for Competition for the sale’s new terms and conditions are now well in progress.

The profit-and-loss sharing mechanism had been requested by some of the prospective buyers who emerged for the sale’s initial effort but its finalized version was rejected by Brussels after a series of revisions were made. This mechanism’s duration and details, such as limits, still remain unclear.

CAT remuneration eligibility for the lignite units included in PPC’s sale package is another crucial factor for the effort’s outcome. Brussels has yet to offer its approval for CAT eligibility.

The energy ministry is striving for a finalized sale plan ahead of an imminent Eurogroup meeting of eurozone finance ministers, scheduled for March 11.

 

Ministry, PPC, fearing changes, want fast lignite sale relaunch

The energy ministry and state-controlled PPC are keen to relaunch the power utility’s failed bailout-required disinvestment of lignite units as soon as possible hoping this swiftness will prevent demands for major changes to the overall offering, the worst fear being the inclusion of hydropower units into an upgraded sale package.

The energy ministry is expected to forward, early today, an update to the European Commission’s Directorate-General for Competition informing of the lignite unit sale package’s failure to produce a result last week, when the deadline for binding bids expired. Brussels should offer its initial response just as swiftly, possibly within the day, it is anticipated. Decisions are not expected at this stage. Instead, Brussels, as a first step, will seek to identify the causes of the sale’s debacle.

The DG Comp terms for PPC’s sale of lignite units, ratified as law, stipulate that the scope of action is currently restricted to lignite, the aim being to reduce imbalances between PPC and its competitors caused by the power utility’s exclusive access to the country’s lignite resources, which it utilizes for electricity production. Hydropower units are not mentioned in the existing sale terms. This explains the eagerness of PPC and the energy ministry to push ahead with a renewed sale attempt.

PPC has declared it will be ready for a sale relaunch by May. Earlier reports claiming fast-track procedures would lead to a March relaunch have remained unconfirmed.

 

Brussels questions PPC over market manipulation suspicions

The main power utility PPC, suspected by the European Commission’s Directorate-General for Competition of abusing its dominant position and manipulating Greece’s energy market through its hydropower units, has been asked to provide thorough responses to a list of questions forwarded by Brussels, investigating the utility’s practices.

The DG-Comp, which has delivered an initial report, began investigating the Greek power utility two years ago after invading its headquarters in Athens, as well as those of the power grid operator IPTO in February, 2017, for information concerning the probe. Brussels officials already possessed some PPC-related information prior to their walk-in and also accumulated further details following the invasion.

The probe has been an underlying threat for PPC ever since the DG-Comp invasion. The effort’s initial report has emerged at a bad time for the power utility, hot on the heels of its failed attempt to sell lignite units, a bailout requirement.

Speculation has already begun as to what the follow-up demands on PPC could be. The energy ministry, doing its utmost to keep intact as much of the state-controlled power utility’s corporate make-up as possible, fears Brussels may start applying pressure for the inclusion of PPC’s hydropower plants into an upgraded sale package.

The set of questions forwarded by the DG-Comp, a procedure required once initial reports have been completed, could represent the first step in a process leading to EU law infringement charges against PPC and Greece.

Though not confirmed, the data collected by the Brussels officials from the PPC and IPTO Athens offices is believed to include details suggesting wholesale price manipulation by the power utility through overstated capacities concerning its hydropower units, as well as overstated unit capacities of other PPC units not actually available at the time, the objective being to sideline facilities operated by rival electricity producers.

On a recent visit to Greece, as part of a post-bailout review, lender representatives, hinting at what the DG-Comp had in store, adamantly questioned whether market- abuse restrictive measures have been enforced.

 

 

 

 

 

Government, PPC, Brussels examining lignite sale options if effort fails

The main power utility PPC’s ongoing effort to sell its Megalopoli and Meliti power stations as part of a bailout-required disinvestment of lignite units seems headed for failure, as suggested by the lack of interest of investors in a teleconference staged by the utility last Friday.

Possible buyers either did not take part or emerged expressing disappointment following the session, held just days ahead of this week’s extended February 6 deadline for binding bids.

Only a further deadline extension, seen as highly unlikely, could save or delay the sale effort from a seemingly inevitable debacle.

The government, state-controlled PPC and the European Commission are believed to be working on alternatives given the subdued mood of participants.

In Athens, officials are making an effort to avoid any undesirable developments such as a new call from Brussels for the inclusion of hydropower units into the sale.

Government officials are also seeking to gain as much time as possible in the hope that the forthcoming European Parliamentary elections, to be held May 23-26, will intervene.

PPC’s sale of lignite units was agreed to with the European Commission following a European Court decision setting measures aimed at ending the power utility’s exclusive access to the country’s lignite deposits.

The government is clearly banking on the presumption that it will not be held accountable for a disinterest or obstruction of the PPC disinvestment package, should the current procedure fail. In this case, new talks for new plans will be needed.

Not to be neglected, the European Commission’s Directorate-General for Competition is currently conducting a study examining Greece’s utilization of hydropower reserves and units. DG Comp officials invaded PPC and power grid operator IPTO offices in Athens over a year ago.

 

Energy ministry, DG Comp discussing new incentives for PPC units sale

Energy ministry officials and the European Commission’s Directorate-General for Competition are negotiating a new incentive plan for investors considering the main power utility PPC’s sale of its Meliti and Megalopoli power stations, part of a bailout-required disinvestment of lignite units, energypress sources have informed.

The two sides are distancing themselves from a previous Greek proposal offering prospective buyers a profit-and-loss sharing arrangement for the units and focusing on a new incentive model, the sources added.

The Meliti and Megalopoli power stations are loss-incurring, possible buyers have determined through due diligence.

Officials closely monitoring the negotiations informed the new model’s objective is to restrict expenses and increase revenues.

It is believed negotiations could conclude tomorrow, if all goes well, otherwise talks will continue into next week.

PPC is scheduled to stage a board meeting on December 20 to endorse the corporate group’s nine-month results and the sale and purchase agreement (SPA) terms, including incentives.

Binding offers by investors for the Meliti and Megalopoli units are scheduled to be submitted on January 7. If improved bids are requested, these will need to be submitted on January 10. Offers are planned to be appraised by PPC’s board a day later and, on January 15, the energy ministry will inform the European Commission’s Directorate-General for Competition on the disinvestment procedure’s results.

This is the official schedule. It remains to be seen if the plan will be adhered to. All will depend on whether investors will embrace the incentives now being discussed.

 

 

Ministry, discussing PPC lignite sale SPA terms, to seek deadline extension

Energy ministry sources are cautiously optimistic negotiations with the European Commission’s Directorate-General for Competition on sale and purchase agreement terms to be signed by the main power utility PPC and potential buyers of its lignite units offered as a bailout-required disinvestment will soon be finalized, possibly within the current week.

The sources added the SPA terms to be established will help make the units sustainable, attractive prospects for buyers.

Barring unexpected developments, the SPA terms should be ready to be approved at a PPC board meeting on December 20.

Greece is expected to request a new deadline extension for an international tender concerning PPC’s disinvestment of lignite units beyond the current December 21 date. However, the additional time to be requested will be less than the period sought by PPC, energy ministry officials informed.

Completion of the tender between January 15 and 21 is feasible, the ministry officials noted. This would require interested parties to submit binding offers in early January followed by the declaration of a preferred bidder several days later.

The European Commission has rejected the inclusion of a Greek SPA term proposal entailing a 50-50 share of profits or losses by PPC and buyers of lignite units for a two-year period, up to a 10 percent limit of a bid’s value. Brussels also disagrees with a Greek proposal calling for PPC’s entitlement to a 30 percent share of remuneration to be received through the CAT mechanism.

Brussels rejects profit-loss sharing term in PPC units sale

The European Commission has rejected a sale and purchase agreement (SPA) term entailing a 50-50 share of profits or losses with buyers of lignite units included in the main power utility PPC’s bailout-required disinvestment of lignite units, noting the arrangement does not comply with Greece’s commitments and European Commission Directorate-General for Competition regulations.

PPC’s board was set to stage an extraordinary meeting yesterday to approve the disinvestment’s SPA terms but needed to cancel the session as a result of the rejection by Brussels of the profit and loss sharing proposal.

The European Commission has now given Greece’s energy ministry a few more days, until November 30, to find a solution. The PPC board was notified of the news in a letter delivered yesterday by energy minister Giorgos Stathakis, who requested the planned session’s postponement until the matter is resolved with the Directorate-General for Competition.

The profit and loss sharing plan, envisaged for a six-year period following the sale of lignite units, was incorporated into the sale package as an incentive for higher prices by bidders.

RAE starts DESFA sale inspection process with auditor still at work

A dossier submitted by the winning bidding team of an international tender offering a 66 percent stake of DESFA, Greece’s natural gas grid operator, to the Court of Auditors may still be undergoing inspection but RAE, the Regulatory Authority for Energy, has already begun preliminary work concerning its own certification for the new owners.

RAE will examine the winning team’s portfolio for any complications, but the certification process should be swift as the investment team is comprised entirely of EU firms – Italy’s Snam, Spain’s Enagás Internacional and Belgium’s Fluxys. Authorities are already confident all three meet the sale’s requirements.

The certification process was more complicated in the recent sale of a 24 percent of IPTO, the power grid operator, to China’s SGCC, as the incoming strategic investor was a non-EU firm.

As soon as the Court of Auditors has completed its work, the investment trio’s dossier will be transferred to RAE for inspection. It will also be forwarded to the European Commission’s Directorate General for Competition for a concurrent approval procedure, the aim being to complete the sale’s overall inspection process as swiftly as possible.

Snam officials were in Athens last week for a first-hand update on the progress being made. Officials of the Italian enterprise met with  TAIPED (state privatization fund) and other authorities involved in the sale’s ownership transfer process.

An important first step was made last month when shareholders at ELPE (Hellenic Petroleum) approved the petroleum firm’s 35 percent sale of the overall 66 percent DESFA stake offered to investors through the international tender. The privatization fund contributed the other 31 percent of DESFA on behalf of the Greek State.

The signing of a share purchase agreement (SPA) will represent the next step once the Court of Auditors, RAE and the Directorate General for Competition in Brussels have completed their inspections.

TAIPED and the winning investment team are then expected to sign a finalized sale agreement for the transfer of DESFA’s 66 percent to the buying trio for a price of 535 million euros.

The deal’s finalization is expected by the end of December. Until then, the current DESFA board is not permitted to maintain any contact with the new buyers for provision of any information concerning the Greek natural gas grid operator.

 

 

 

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DEPA sale to spill over into 2019, many steps still needed

Revisions presented to a parliamentary committee last week for a complete ownership split of DEPA, the public gas corporation, and DESFA, the natural gas grid operator, promise to settle a pending bailout-related issue concerning distribution network ownership but many steps still lie ahead before the DEPA privatization, another bailout demand, is completed.

Although the government has included this sale’s proceeds in the 2018 national budget, the privatization is not expected to be finalized until 2019. Pending issues include the need to split of the gas utility’s commercial and distribution network divisions into two companies.

The energy ministry and country’s lenders agreed on a DEPA privatization model during recent fourth-review bailout negotiations but its specifics still need to be determined. The precise DEPA stake to remain with the Greek State and the sale’s time frame both remain undetermined.

Government officials have already unofficially admitted that it will be extremely difficult to announce two DEPA tenders offering investors stakes in the company’s trading and distribution network divisions within 2018, let alone collect the sale’s budgeted amount within the current year.

Negotiations between DEPA and Italy’s Eni for the latter’s full acquisition of the EPA Thessaloniki-Thessaly gas supply company, commercially dubbed Zenith, have been completed. DEPA previously held a 51 percent stake in this venture and Eni the other 49 percent.

However, DEPA has yet to finalize an agreement with Shell concerning the utility’s acquisition of the Dutch firm’s 49 percent share of the EPA Attiki gas supply and EDA Attiki gas distribution companies covering the wider Athens area. DEPA currently holds 51 percent shares in these ventures.

DEPA’s agreements with Eni and Shell both need to be completed to clear the way for the privatization. Furthermore, both agreements will require approval from related supervisory bodies, including the European Commission’s Directorate General for Competition. It is estimated the required approvals cannot be completed sooner than autumn.

The ongoing bailout-required sale of a 50.5 percent stake of ELPE (Hellenic Petroleum), which holds a 35 percent share of DEPA, is another crucial pending issue.

Also, related legislation will need to be ratified before DEPA’s tenders offering investors stakes in the prospective commercial and distribution network companies are announced.

Given all these pending steps, the DEPA tender for the commercial division could  be launched within 2018 but, realistically, the sale concerning the distribution network cannot be announced any sooner than early 2019.

 

 

 

 

TAIPED pushing for swift ELPE sale action, binding bids by July

TAIPED, the state privatization fund, is pressuring all officials involved with ELPE’s (Hellenic Petroleum) bailout-required sale of a 50.5 percent stake to push ahead with fast-track procedures, the objective being to have a finalized and signed agreement with the new owner by the end of the year.

The privatization fund has ordered the sale’s advisers and all bureaucratic departments involved to move ahead with all necessary approvals concurrently rather than as a step-by-step process. TAIPED wants binding bids by prospective buyers in by the end of July.

Each step of the overall procedure will need to take no longer than an average of ten days if the sale is to move along at the pace demanded by TAIPED.

Expressions of Interest submitted by five investment schemes earlier this week will need to be appraised by next week.

Expressions of Interest were submitted by two of the world’s biggest commodity traders, Dutch firm Vitol and Switzerland’s Glencore; Alrai Group Holdings Limited; a consortium comprised of Carbon Asset Management DWC-LLC and Alshaheen Group S.A.; and Gupta Family Group Alliance.

Their dossiers will need to be appraised by next week and a shortlist of second-round qualifiers must be announced two weeks later. At this stage, qualifiers will also need to be granted immediate access to ELPE’s data room.

Then, a deadline for binding bids, within July, will need to be announced to keep the sale on schedule, as demanded by TAIPED.  Follow-up bids, already anticipated, will need to ensue swiftly. This would enable the privatization fund to announce a preferred bidder within the summer.

If all runs smoothly and this time frame is achieved, then the buyer’s dossier could be submitted to the Court of Auditors for approval in early autumn and followed by the signing of a share purchase agreement.

The agreement’s documents will then need to be submitted to the European Commission’s Directorate General for Competition for its approval. Once this step is completed, TAIPED and the buyer will be clear to sign a finalized agreement. Pundits believe this overall time frame can be achieved, even if it may seem too good to be true.

The ELPE privatization represents a complex procedure and the dossiers of prospective investors could require considerable appraisal time, as was the case with DESFA, the natural gas grid operator. This would delay the sale’s overall schedule. However, a greater number of final-round qualifiers would increase the likelihood of higher bids.

ELPE may be a formidable local force, but the refinery is not an industry powerhouse on a global scale. A greater number of final-round bidders would therefore increase the likelihood of a satisfactory sale price.

Six steps to DESFA sale completion, expected towards end of year

The sale agreement for DESFA, the natural gas grid operator, is expected to be completed towards the end of the year, pundits believe, enabling the international tender’s winning bidder – a consortium comprised of Italy’s Snam, Spain’s Enagás Internacional and Belgium’s Fluxys – to take control of a 66 percent stake acquired for 535 million euros.

Until then, six steps are needed. The first of these was taken yesterday at an ELPE (Hellenic Petroleum) meeting, during which company shareholders approved the firm’s 35 percent stake of DESFA contributed to the sale. TAIPED, the state privatization fund, offered the other 31 percent on behalf of the Greek State.

The second step will entail the submission of the sale’s dossier to Greece’s Court of Auditors with all documents translated into Greek. This step is expected to be taken within May, sources informed. The Court of Auditors should offer its approval in June or July, which would enable the deal to be finalized by the end of December.

Then, for the third step, a share purchase agreement (SPA) needs to be signed by the buying consortium and TAIPED. This will be immediately followed by RAE (Regulatory Authority for Energy) certification of DESFA with the new owners on board. The certification process will essentially provide RAE with the opportunity to inspect the incoming consortium’s members for any irregularities.

This part of the overall process should be completed swiftly. It proved more complicated in the recent sale of a 24 percent of IPTO, the power grid operator, to China’s SGCC, as the incoming strategic investor was a non-EU firm.

The fifth step, once the new-look DESFA has been certified by RAE, will involve submitting the sale’s dossier to the European Commission’s Directorate General for Competition and Directorate General for Energy. The former will need to endorse the sale and the latter must provide certification.

Once these five steps have been taken, TAIPED and the three-member consortium will be able to sign a finalized agreement for the transfer of a 66 percent stake of DESFA to the strategic investors and a concurrent payment of 535 million euros to TAIPED.

As all three consortium members are European firms, the overall process is expected to proceed swiftly, pundits anticipate.

The DESFA board will not be permitted to contact the buyers and inform on any company activities until the sale has been completed.

 

 

 

 

Meticulous processing delaying DESFA offer disclosures

TAIPED, the state privatization fund is paying particular attention to detail in its processing and inspection of bids submitted by two consortiums to an international tender offering a 66 percent stake of DESFA, Greece’s natural gas grid operator, a key concern being the need to single out the lead players in each of these two consortiums and the terms they intend to set for their partners.

Though this meticulous inspection process has significantly delayed the disclosure of binding bids, submitted over a month ago, TAIPED is determined to avoid mistakes following an unsuccessful previous effort, not too long ago, to sell a 66 percent stake of DESFA.

The European Commission had expressed concerns that that sale effort’s preferred bidder, Azerbaijan’s Socar, would block rivals from operating in the Greek natural gas market. Brussels had also raised issues as to whether the tender’s outcome breached EU regulations.

The relaunched sale’s local authorities want to avoid any negative reaction from the European Directorate for Competition in this latest effort.

Italy’s Snam, Spain’s Enagás Internacional and Belgium’s Fluxys formed a consortium to submit a joint bid for the follow-up DESFA tender. Another Spanish entry, Regasificadora del Noroeste (Reganosa Asset Investments) joined forces with Romania’s Transgaz and the EBRD, the European Bank for Reconstruction and Development, for the other offer.

The privatization fund has demanded various details from the participants over the past month or so.

The bids made by the two consortiums now appear likely to be opened next week, which would take the procedure deeper into the month. Recent reports had suggested the offers would be opened late this week.

For some time now, pundits have contended the new sale effort could generate offers in excess of 500 million euros, or 25 percent over the 400 million euros offered by Socar in the preceding unfinished attempt.

The natural gas market’s prospects in the wider southeast European region, as a result of new pipeline projects; steady yields promised by DESFA’s tariff level; and the operator’s strong cash reserves have been cited as three main reasons nurturing these high hopes.

 

 

 

TAIPED pushing ahead with DEPA sale, much work needed

TAIPED, the state privatization fund, is keen to push ahead with the privatization of gas utility DEPA, but the sale’s timely launch, expected in March, according to the latest bailout terms, will not only depend on the fund’s intentions.

In essence, this privatization’s punctual progress is dependent on Shell and DEPA, currently engaged in advanced talks for the Dutch firm’s sale of its 49 percent stake in retail gas supplier EPA Attiki. DEPA holds a 51 percent stake in this venture and wants to increase its hold.

The DEPA privatization, to offer 65 percent stake of the gas utility, cannot proceed unless the Shell and DEPA dealings over EPA Attiki have been finalized. Also, the European Directorate for Competition will need to endorse any EPA Attiki changes.

A well informed source has informed that Shell and DEPA are close to agreeing on a price for EPA Attiki’s 49 percent. The price gap is believed to have narrowed significantly. For quite some time now, it has been rumoured that Shell has requested a sum of around 150 million euros.

Rothschild, acting as DEPA’s consultant, and Lazard, representing Shell, are expected to appoint a common evaluator for an official price estimate. The evaluation process is expected to take at least one month to complete. Then, the two sides will still need to agree on a price before competition authorities in Athens and Brussels decide whether DEPA’s continued presence in the retail gas market raises any obstacles.

Given all these requirements, the DEPA privatization’s launch date, scheduled for March, should prove to be an extremely difficult target date.

The Greek government is eagerly anticipating a finalized deal between Shell and DEPA as a reinforced retail and distribution role for DEPA through EPA Attiki would undoubtedly heighten the interest of investors once the gas utility’s privatization is launched.

The government and country’s lenders appear to have reached a compromise deal on DEPA’s reinforced role in EPA Attiki in exchange for DEPA’s sale of its 51 percent stake in EPA Thessaloniki-Thessaly to Eni.

If so, DEPA will remain a powerful enterprise commanding three major fronts. Besides gaining a retail and distribution monopoly in the wider Athens market, the utility will also stand as a key gas importer and control gas distribution in all parts of Greece not covered by the EPA firms, through DEDA.

If the European Directorate for Competition does not endorse DEPA’s anticipated new role, then TAIPED, the privatization fund, will need to reexamine the utility’s privatization or postpone it.

The lenders are pressuring by excluding the possibility of any futher extensions.

TAIPED announced a tender yesterday for a legal consultant to work on the DEPA privatization. Interested parties face a February 26 deadline.

It remains unclear whether ELPE (Hellenic Petroleum) will offer its 35 percent stake of DEPA along with the Greek State’s 65 percent. ELPE has repeatedly expressed an interest in the natural gas market.

 

 

Fifteen local, foreign players interested in PPC lignite units

Greek and foreign electricity production firms, mixed teams, as well as local industrial energy consumers make up fifteen enterprises which, according to the energy ministry, have expressed an interest, through a recent market test, to acquire main power utility PPC lignite units in Megalopoli and Meliti, being offered in a bailout-required sale package.

Though the sale procedure has yet to reach a binding stage, certain players, responding to a market test question asking respondents if they intend to participate in the upcoming tender, provided positive answers, while noting  that their current interest remains conditional.

According to energypress sources, these firms include GEK-Terna, the Copelouzos Group, joined by China’s Shenhua for the PPC units sale, industrial energy consumers such as Viohalco, as well as electricity producers from eastern Europe, where lignite-fired electricity generation remains widespread.

Other players, including local industrial giant Mytilineos, have opted to keep their intentions under wraps for the time being.

The results produced by the market test, staged by the European Directorate for Competition to get a feel of investor intentions, will not necessarily be followed up later on in the sale, meaning that any interpretations of indications at this stage are premature.

Minimum sale prices to be set by an independent evaluator will be crucial. They will remain sealed and disclosed once first-round offers have been opened to determine qualifiers of the sale, scheduled to take place in June. PPC may request improved offers if these are below evaluation levels. Many market officials believe evaluation levels will be reasonable.

“If the evaluation levels are reasonable then many players may participate in the sale, including ones who did not express an interest in the market test. However, if these evaluation levels are deemed to be too high, then the number of participants could be restricted to a single-digit figure,” noted a highly-ranked official at one company.

This official added that certain negative market test responses could end up becoming positive as the sale procedure’s conditions are clarified over time. The content of a draft bill currently being prepared by the energy ministry will also be crucial factor, the official noted.

PPC’s commitment to share unit withdrawal costs with investors, once the time comes, is seen as a positive factor by prospective investors.

The European Commission will maintain full control of the sale procedure through a monitoring trustee, according to Greek daily Kathimerini.

 

 

 

 

DG Comp updates on PPC staff, mine licenses, facility sharing

Issues concerning main power utilty PPC lignite unit personnel, mining licenses, the inclusion of  the Vevi mine to the utility’s bailout-required sale package, as well as the ability of PPC and prospective buyers to share facilities associated with units being placed for sale dominated teleconference talks yesterday between energy ministry officials and the European Directorate for Competition.

The session was essentially held so that DG Comp officials could further update the energy ministry on comments provided by prospective investors during December’s market test. It was staged by the Brussels authority to enable investor feedback ahead of the PPC lignite units sale. A brief update had been delivered to the Greek ministry last week.

No surprise developments, or, more specifically, any demands concerning the inclusion of PPC hydropower faclities to the sale package, emerged during yesterday’s session, energypress sources informed. However, in their market test responses, certain participants did note that the package would represent a more enticing prospect if it were more balanced.

In their market test responses, participants are believed to have expressed concerns over mine licenses. Some licences are due to expire between 2019 and 2022. PPC faces lignite supply issues at its Meliti power plant in the Florina area, northern Greece, because neighboring mines, including Vevi, remain closed.

Energy ministry officials assured the DG Comp that PPC would take all needed action to settle mine license issues. The Vevi mine will also be included in the sale package, the energy ministry officials assured.

Teleconference participants agreed that prospective buyers and PPC will be able to share facilities supporting the Megalopoli III and IV power plants included in the package. These include a waste treatment plant serving these two units as well as Megalopoli V, a natural gas-fueled power plant not included in the sale package. Contracts are expected to be signed setting prices for the access to facilities to be provided by PPC.

The DG Comp officials also raised questions over the 1,100 employees currently stationed at Megalopoli III and IV, associated lignite mines, as well as Megalopoli V. A proportion of the personnel at these facilities, some of which are believed to be overstaffed, could be transferred by PPC to other units. The DG Comp wants to ensure qualified personnel remains at the Megalopoli units up for sale. The Brussels authority also called for no more personnel additions to these units.

All these issues will be incorporated into a PPC draft bill being prepared by the energy ministry. Greek officials will need to deliver a final commitment to the DG Comp before the PPC bill is ratified in Greek parliament, expected next month. The launch of the sale’s tender is being planned for early summer.

The PPC lignite units sale has been divided into two packages, a northern package including Meliti I and a license for Meliti II, as well as a southern package including Megalopoli III and IV. The PPC draft bill will offer a description of the sale procedure, permitted buying combinations, a date for the tender, probably in June, and plans concerning employment, facility and license issues.

 

 

PPC market test concerns to be worked into unit sale draft bill

The concerns of investors considering taking part in the main power utility PPC’s bailout-required sale of lignite units are focused on two issues, one being the utility’s Megalopoli III and IV units, especially staff numbers, believed to be excessive, and the other, pending license issues linked to mines intended to supply Meliti I and, later on, Meliti II, once this latter facility is developed.

These concerns were highlighted by the results of a market test conducted by the European Directorate for Competition and delivered to Greece’s energy ministry late last week.

The DG Comp comments do not go into great detail but represent a basis for further discussion, according to energypress sources. A teleconference to involve energy ministry and DG Comp officials is being planned for this week, the sources informed.

Prospective investors are believed to have also expressed concern over the future of lignite, noting PPC’s sale package would be more atttactive if hydropower plants were included.

As for the overstaffing issue at PPC’s Megalopoli III and IV units, the market test participants are seeking details on the legislation to be drafted for 1,100 staff members currently employed at the power station.

Prospective investors also enquired about the current state of PPC’s transmission network.

Following this week’s teleconference between energy ministry and DG Comp officials, the Greek government will need to incorporate any required revisions into a draft bill concerning the PPC lignite units sell-off.

Then, Greek authorities will need to deliver a final commitment to the DG Comp before ratifying the bill in parliament. This is expected to take place next month ahead of an announcement of a tender early next summer.

Greek authorities have already begun working on the PPC sale’s draft bill, whose articles offer a description of PPC lignite assets to be placed for sale as well as details on the sale procedure.

Two sale packages, a northern and southern package, will be offered to investors. The northern package will include Meliti I and the Meliti II license. The southern package will include Megalopoli III and IV.

The draft bill’s article on labor issues is expected to include previous conditions set for an older but unexecuted 17 percent sale plan for PPC, locally dubbed “Little PPC”. These terms included conditions requiring buyers to maintain a large majority of jobs at any units sold for at least five years.

Brussels raises concerns over competition in local energy market

Despite the bailout progress made in nearing the third review’s finalization, the European Commission has identified a series of problems and delays concerning competition in Greece’s energy market, according to energypress sources.

An existing natural gas supply agreement between PPC, the main power utility, and DEPA, the public gas corporation, is one of the issues troubling Brussels authorities as it is believed to contain favorable terms benefiting the power utility. This agreement, for instance, does not include any terms leading to additional costs for PPC should its gas consumption exceed contracted amounts.

As for the electricity supply market, European Commission officials believe a supplier surcharge imposed on suppliers by the Greek government has absorbed 70 percent of discounts gained by independent suppliers at auctions.

Brussels officials have also noted that discounts made available to electricity suppliers through NOME auctions cannot be capitalized on the islands, where markets are affected by additional obstacles and existing tariffs do not offer profit margins.

A delay of about year in establishing a new flexibility remuneration mechanism in Greece is another matter preoccupying Brussels officials. This delay has led to benefits for PPC estimated to be worth between 120 million and 170 million euros.

A 15 percent discount offered by PPC to customers paying their electricity bills on time has also drawn the attention of Brussels officials as this intiative has forced independent suppliers to take similar action in an effort to remain competitive despite not having the leeway to do so. Market newcomers face elevated network development costs and other investment expenses not burdening PPC, the perennially dominant power utility.

In the Greek electricity production market, Brussels officials have concluded lignite-fired power stations remain active even amid loss-incurring conditions with the aim of preventing independent plants from operating.

Questions have also been raised as to whether PPC is benefiting from IPTO (power grid operator) decisions concerning the level of RES production permitted into the country’s energy system.

On a more general scale, Brussels also fears energy sector reforms currently being implemented may not be completed by August, when the country’s bailout agreement concludes. As a result, a new mechanism ensuring the continued implementation of these reforms could be needed once the bailout agreement has concluded.

A team of European Directorate for Competition officials had raided the PPC and IPTO a year about a  year ago as part of their investigation.

 

Energy ministry preparing draft bill for PPC units sell-off

Energy ministry officials are currently busy preparing a draft bill for the bailout-required sale of main power utility PPC lignite units with the aim of submitting the document to parliament within February for ratification.

The sale process has just undergone a market test, staged by the European Commission’s Directorate-General for Competition to measure the level of investor interest and enable interested parties to settle queries. Interested parties were issued a related questionnaire.

Brussels is expected to provide market test feedback to the energy ministry within the current week, possibly today. The market test officially ended on December 22 but certain interested parties were given slight extensions after requesting additional time. The festive season also slowed down the process. Most interested parties are believed to have focused their concerns on the Greek electricity market’s long-term conditions covering at least the next 15 years.

Besides offering a rundown of the power utility’s lignite units up for sale – representing 40 percent of PPC’s lignite capacity – the ministry’s draft bill will also specify the sell-off procedure, the publication date of the international tender, expected in May, the timing of its launch, scheduled for June, as well as labor issues concerning overstaffed units included in the sale package.

The sale will offer two packages, one including PPC lignite assets in Greece’s north (Meliti I and a licence for the prospective Meliti II), and the other, units in the south (Megalopoli III and IV).

Though the ministry has yet to clarify the details to go into the draft bill’s section on labor rights, conditions that had been set for a previous unexecuted partial sale of PPC, locally dubbed “Little PPC”, are expected to apply for the new effort.

The older sale conditions committed the buyer, or buyers, to maintain the majority of jobs at units sold for a period of at least five years. All other employees would have been absorbed by PPC at other operations, according to the “Little PPC” sale plan’s labor conditions. Megalopoli employs 1,100 persons and Meliti a further 200.

Following the draft bill’s submission to Greek parliament in February, the planned legislation will need to be endorsed by the European Commission’s Directorate-General for Competition in March.

 

PPC market test respondents want clarity for at least 15 years

Local and foreign investors taking part in a market test staged by the European Commission’s Directorate-General for Competition for the main power utility PPC’s bailout-required sell-off of lignite units are demanding clarity in Greece’s electricity market conditions for a period covering at least 15 years if they are to submit binding offers to the sale, according to energypress sources.

“We made clear to the DG Comp that what matters most is not the individual character of each unit but the very functioning of the Greek market, which remains problematic,” a highly-ranked official at one Greek energy firm told energypress. “The ambiguity regarding the conditions to be encountered by investors who could possibly seek acquiring lignite assets will need to be clarified for a period covering at least the next 15 years,” the official added.

A number of factors continue to trouble prospective investors. The main concerns expressed by respondents in the ongoing market test include lignite’s level of participation in Greece’s energy mix in the years to come; whether lignite units will be entitled to CATs via the permanent flexibility remuneration mechanism; the future course of CO2 emission right costs; the timing of the target model’s implementation; the future of the Vevi mine, currently closed, as well as the futures of other mines in northern Greece’s Florina area.

The majority of comments were provided by Greek, east European and Asian firms, the energypress sources noted.

Concern was also expressed over the impact on the electricity market of a lifespan extension plan being prepared by PPC for its Amynteo lignite-fired power station through an environmental upgrade. The DG Comp rejected the unit’s inclusion on the sale list as a result of its limited lifespan.

Market test respondents were asked whether they believe investing in the sale procedure’s packages – one grouping units in Greece’s north (Meliti I, licence for Meliti II) and, the other, units in the south (Megalopoli III and IV) – promise sustainability, both in the short and long terms.

Responses to this question were both favorable and negative. Critics primarily cited future CO2 emission right costs as a concern. Others expressed concern as a result of a drastic reduction being planned for the role of lignite in Greece’s energy mix. PPC believes lignite’s energy mix presence should be maintained at the current level of around 25 to 27 percent.

Certain respondents noted that Megalopoli units barely offer worthwhile investment prospects as regional lignite deposits feeding these facilities are limited. The deposit supplying Megalopoli III is due to run out in 2025, while the deposit supporting Megalopoli IV should be depleted by 2032.

 

Various PPC unit sell-off issues holding back local players

As the market test held for the main power utility PPC’s bailout-required sell-off of lignite units, representing 40 percent of ts lignite capacity, gradually approaches completion, the reactions of major Greek energy groups should be interpreted as firm positions.

The market test, supervised by the European Commission’s Directorate-General for Competition, is intended to measure the level of investor interest and clarify queries.

Two major local players indicated they are considering taking part in the sale but are remaining cautious as a result of concerns.

A source at an independent electricity producer expressed concerns over mines and licenses of units included in the sale package, noting that, in the country’s north, three mines linked to the Meliti 1 power station and a construction permit for Meliti II, these being Vevi, Klidi and Lofi, are currently closed.

As for the Megalopoli III and IV units in the Peloponnese, prospective investors have expressed concerns over license issues at associated facilities.

Production capacities, existing payrolls and financial data concerning units included in the sale are also being closely examined by prospective investors.

Some market sources noted that investors are being called upon to make crucial entrepreneurial decisions despite a lack of clarity on the Greek electricity market’s future look.

 

DG Comp: Market test to shape next steps of PPC units sell-off

A market test launched just days ago by the European Commission’s Directorate-General for Competition for main power utility PPC’s bailout-required lignite units sell-off may represent the beginning of further developments, a DG Comp official has indicated in comments to energypress.

“We’ve begun with the market test, based on the proposals made, and will wait for its results before we decide on any further steps,” the DG Comp official told energypress.

The market test, now underway as a procedure intended to measure the level of investor interest and also provide interested parties with an opportunity to make enquiries, cannot be guaranteed to produce the results desired by PPC and the Greek government, which negotiated the content of the current sale package with the country’s lenders, the DG Comp official suggested.

Without a doubt, the DG Comp’s next steps will be determined by the outcome of the market test. The sale effort will go ahead only if the market test convinces Brussels that the existing sale package of state-controlled PPC lignite-fired power stations, lignite mines, and a construction permit for a new power station (Meliti II) can deliver the required results.

If not, the DG Comp maintains the right to intervene for sale package revisions as it sees fit.

The DG Comp source told energypress that a European Court rejection of a PPC appeal in 2016 means that European Commission decisions made in 2008 and 2009 regarding the utility’s market dominance must now be implemented.

PPC and Greek government officials are confident the market test will deliver positive results and enable the disinvestment process to proceed as planned. PPC and energy ministry officials have already approached prospective investors and claim that many of these, both local and foreign, have responded favorably. It will soon become apparent whether these upbeat Greek expectations are justified.

Given the future prospects of lignite, facing rising CO2 emission right costs in Europe, PPC will probably be glad to unload part of its lignite portfolio for a satisfactory price. This could improve the utility’s financial standing and help fund initiatives in other energy domains.

 

DG Comp launches market test for PPC lignite units package

The European Commission’s Directorate-General for Competition yesterday launched a market test for the main power utility PPC’s bailout-required sale of lignite units, inviting many companies from Greece and beyond to participate in this consultation process, intended to measure the level of interest and offer prospective investors the opportunity to raise and resolve queries.

The aim of the PPC disinvestment plan is to eliminate electricity market disortions caused by PPC’s perennial dominance and boost competition. Yesterday’s market test launch came a few days later than had been expected.

The market test process will run until the end of January. Additional bailout terms obligate the Greek government to revise the sale package should the market test’s results prove to be unsatisfactory.

At least 40 electricity and energy firms hailing from Greece, Poland, the Czech Republic, Japan, China, India and the USA will be invited to take part in the market test.

PPC’s Meliti I, Megalopoli III and IV, a construction permit for Meliti II, as well as lignite mines associated with these lignite-fired facilities have been included on the sale list.

These units will be offered as two separate packages, one covering the country’s north (Meliti 1 and II, as well as the Vevi and Klidi mines), and the other covering the south (Megalopoli III and IV, and two lignite mines in the area).

An international tender for the sale package is scheduled to be announced next May.

The response by local industrialists has so far been varied. Elpedison has made clear it will not participate under the current conditions. Terna and Mytilineos have adopted a wait-and-see approach, while others, including the Copelouzos group, have already declared an interest to participate.

PPC boss Manolis Panagiotakis recently called upon the industrial sector to participate in environmental upgrades of lignite-fired power stations not include in the sale package in exchange for favorably priced electricity supply deals. Talks are already believed to be underway with electricity producers and energy-intensive industrial units.

Emergency check in Feb may spark hydropower unit sales

The electricity market will be subject to a comprehensive emergency assessment in February, which could prompt the need for further “structural measures”, or, more specifically, a plan for the sale of additional state-controlled main power utility PPC units, according to a term included in the bailout agreement following its third review.

This emergency assessment, to be conducted as an extra measure in addition to inspections already agreed to for every six months, will examine whether NOME auction terms require revisions, the progress made with the target model – a process entailing the electricity wholesale market’s harmonization with EU law – as well as other matters.

In previous bailout-related matters, the term “structural measures” was applied as a soft, indirect reference to the possibility of PPC lignite units, a procedure now underway, and is being used again to imply the sale of PPC hydropower units, widely seen as a taboo subject by Greek government and PPC officials.

The Greek government firmly opposes any talk of prospective PPC hydropower unit sales.

However, PPC has fallen way behind in its bailout-required retail electricity market share contraction targets. The utility’s market share currently stands at around 84 percent, well above the 75.24 percent target level set for the end of 2017. In the longer term, PPC needs to reduce its market share to less than 50 percent by 2020.

These figures indicate the NOME auctions may have offered some support to keep independent electricity suppliers afloat but have failed to produce the required market share contraction results at PPC. The situation is expected to spark talks for more structural measures.

Electricity amounts offered through the NOME auctions, introduced slightly over a year ago to provide independent suppliers with access to PPC’s low-cost lignite and hydropower sources, are expected to be reduced as PPC’s lignite unit sale plan progresses. A market test is scheduled to take place in January ahead of the sale’s launch early in the summer.

On another crucial front, the European Commission’s Directorate-General for Competition’s is currently investigating whether PPC has abused its dominant market position. DG Comp officials raided the headquarters of PPC and IPTO, the power grid operator, a few months ago. A decision against PPC would entangle hydropower facilities, being monopolized by the utility.