Suppliers also given lignite access by DG-Comp agreement

The Greek government and European Commission’s Directorate-General for Competition appear close to reaching an agreement that would give the country’s independent electricity suppliers access to state-controlled power utility PPC’s lignite-based production through a transitional mechanism running until 2023, when most of the utility’s lignite units are expected to cease operating.

This prospect comes hot on the heels of an agreement between Athens and Brussels enabling extensions of Greece’s demand response mechanism and transitory flexibility remuneration mechanism (TFRM).

PPC has monopolized Greece’s lignite sources and generation, but an agreement offering lignite access for all would open the door for independent suppliers as well as industry.

For quite some time, the DG-Comp has criticized PPC for not complying with a European Court decision requiring lignite access to third parties.

Settlement of the lignite dispute would leave just one pending energy-sector matter, the target model’s implementation.

Talks between Athens and Brussels on Greece’s energy sector matters have dragged on for at least seven months.

Athens and Brussels also appear to have drawn closer for an agreement on how lignite-based electricity will be priced.

COVID-19 crisis creates new base for energy negotiations

The European Commission’s pause on tough fiscal rules, officially announced yesterday as a result of the coronavirus impact on economies, sets a new negotiating base for a range of unresolved matters, including energy issues.

Though Brussels’ temporary suspension of the Stability and Growth Pact purely concerns budgetary discipline, it is estimated that this decision will temporarily increase the EU’s tolerance of member-state demands on schedules and other issues such as energy.

Even if the DG Comp’s hardliners insist that a loosening of fiscal rules does not change member state obligations to individual funds, it is still estimated that the new landscape offers space for Greek officials to explore new possibilities.

The government, if it is deemed feasible, could seek greater flexibility on proposals that have been flatly rejected until now by the Directorate-General for Competition, including ideas tabled for power utility PPC’s lignite monopoly, which Brussels wants ended.

Brussels has insisted that Greece has not complied with a European Court decision ordering lignite access for third parties. Brussels has directly linked this demand to PPC’s binding target for an electricity market share contraction to less than 50 percent in 2020.

Brussels is not convinced the Greek government will manage to swiftly decarbonize, as the administration has announced. This lack of faith, combined with the government’s recent unilateral decision to abandon NOME auctions and the previous administration’s failed sale effort of lignite units has led to a call, by Brussels, for alternative restructuring measures between now and 2023.

A team of energy ministry officials is scheduled to be in Brussels this Thursday for an official presentation of a recent proposal entailing the participation of electricity suppliers in PPC’s lignite production.

Work still needed for demand response, flexibility approvals

European Commission officials of the Directorate-General for Competition have questioned various aspects of a Greek proposal seeking a two-year extension of the country’s existing demand response mechanism, a key energy-saving tool, as well as a proposal for a transitional mechanism rewarding flexibility.

Despite the hesitation, a series of meetings held Wednesday between the energy and environment ministry’s secretary-general Alexandra Sdoukou and DG Comp officials have been described as constructive.

Brussels officials appear to be gradually overcoming reservations stemming from Greece’s failure to meet previous commitments.

The energy ministry plans to address the DG Comp’s concerns on the demand response and flexibility mechanisms in a response to be forwarded today.

Sdoukou is scheduled to travel to Brussels in about two weeks for further talks.

Industry experts believe Greece’s demand response mechanism proposal stands a solid chance of being approved as it is based on a power grid operator IPTO study determining that a real need exists for the mechanism.

However, any chance of an approval by February 6, the expiry date of the existing demand response mechanism, has been ruled out. The industrial sector will be left without a demand response mechanism for a period of at least two months, it is estimated.

European Commission approval of the flexibility mechanism is seen as a less likely prospect as units offering flexibility to the grid face less of a financial strain and, moreover, flexibility will soon be rewarded within the framework of the target model.

Negotiations on PPC lignite monopoly at crucial stage

Energy ministry officials and European Commission technocrats from the Directorate-General for Competition are negotiating for an agreement on a transitional mechanism to limit power utility PPC’s monopoly in lignite-fired electricity generation until its coal generators are gradually withdrawn from Greece’s energy system.

The transitional mechanism would operate until 2023, when the government plans to have withdrawn all of PPC’s existing lignite units, offering third parties access to lower-cost lignite-fired electricity.

In other words, PPC will need to sell lignite-fired electricity. However, the negotiating sides are at odds as to who will be able to buy. The Greek proposal limits the purchasing eligibility of lignite-fired electricity – through a mechanism, or an SPV – to energy-intensive industrial producers. Brussels also wants independent power  suppliers included.

Negotiations began soon after the festive season. The Brussels technocrats may also meet with Greek energy minister Costis Hatzidakis this week, possibly on January 23.

The European Commission technocrats are not yet convinced of the Greek  decarbonization plan’s adequacy. Greek officials are attributing the tough Brussels stance to the previous government’s failed sale effort of lignite units. An attempt is now being made to restore credibility, energy ministry officials noted.

Brussels pressuring for wider access to PPC lignite power

The European Commission’s Directorate-General for Competition has proposed wider participation in a Special Purpose Vehicle plan tabled by the energy ministry that would effectively also take on board independent electricity suppliers, not just energy-intensive industrial enterprises, for purchases of lower-cost lignite-generated electricity produced by power utility PPC.

Energy ministry officials began talks aiming for further electricity market liberalization in Greece in the lead-up to the Christmas break. These are expected to continue following the festive season and end by mid-January.

The energy ministry officials went into the talks having proposed the establishment of an SPV that would exclusively facilitate lignite-generated electricity purchases made by energy-intensive industrial enterprises.

This is seen as a plan that could contribute to the power utility’s market share contraction in the high-voltage category and also support emission cost savings.

Greece’s pledge for a thorough plan promising to fully liberalize the electricity market and break PPC’s ongoing dominance has been under the spotlight during these talks.

Going into the negotiations, Brussels made note of Greece’s non-compliance with a European Court ruling on PPC’s lignite monopoly.

The European Commission has remained relentless in its demand for corrective anti-monopoly measures on lignite, including, according to sources, the establishment of auctions along the lines of the NOME auctions recently abolished by the Greek government.

Brussels insists the SPV would need to be supplied electricity by PPC through auctions. Greek officials have sought to avoid discussing such a prospect given the government’s recent decision to end NOME auctions, arguing these have cost PPC plenty without delivering results in terms of market share contraction at the utility.

A proposal entailing hydropower sourced electricity supply to the SPV, in addition to lignite-generated electricity, has also been tabled at these talks. This would help limit emission costs if suppliers also enter the SPV.

The European Commission may have applauded the government’s recent decision for a swifter decarbonization process, but it has remained adamant on the necessity for third-party access to lignite – until 2023, when all of PPC’s existing lignite units are planned to have been withdrawn – as well as hydropower  if full market liberalization is to be achieved.

 

Ministry officials questioned by DG Comp on electricity market

The European Commission’s Directorate-General for Competition has expressed satisfaction over Greece’s pledge for decarbonization by 2028 as well as a privatization plan for distribution network operator DEDDIE/HEDNO, but the Brussels authority is demanding clarification on both procedures as details of an upcoming draft bill for power utility PPC concerning its planned coal generator withdrawals.

An energy ministry team headed by secretary-general Alexandra Sdoukou was summoned by the DG Comp for a meeting in Brussels yesterday. The DG Comp is looking for a clear picture of Greece’s new-look electricity market, still in the making.

An older case taking state-controlled PPC to European Court over the non-access of third parties to Greece’s lignite sources, monopolized by PPC, remains open following July’s derailing of an effort by PPC to sell lignite-fired power stations.

Brussels remains apprehensive and wants full details on the lignite sector as PPC will continue to control it for nearly a decade, until 2028, when every single coal generator in Greece is expected to have ceased operating, according to the decarbonization plan, announced recently by Prime Minister Kyriakos Mitsotakis.

It is feared that a new aggressive pricing policy expected to be announced by PPC early in 2020 could end up increasing the power utility’s retail electricity market share, reported at 71.77 percent in September.

DG Comp summons ministry officials over PPC dominance

A team of energy ministry officials has been summoned by the DG Comp for a meeting in Brussels this week to be dominated by power utility PPC’s ongoing electricity market dominance as well as the state-controlled corporation’s intended position in the new-look electricity market being shaped as part of the target model.

PPC’s role remains a concern in Brussels following last July’s collapse of a sale effort that had been intended to offer investors lignite-fired power stations belonging to the utility.

Greece’s next Enhanced Surveillance Report is expected late in November.

In Brussels, the energy ministry officials will be looking to ease a PPC retail electricity market share contraction target of 50 percent, included in the country’s third bailout agreement, to 65 percent, seen as feasible.

The DG Comp is expected to remain firm on the original target unless the Greek officials table an offsetting measure of equivalent worth.

Brussels officials also want further information on the forward market, including the duration and technical details of contracts, planned to be launched in February, 2020.

The energy ministry is seeking to convince concerned independent electricity suppliers that the forward market will compensate for a planned termination of NOME auctions.

The DG Comp’s position on the country’s hydropower market is also eagerly anticipated. Early in 2017, Brussels officials had raided the headquarters of PPC and power grid operator IPTO as part of an alleged market-abuse investigation. Findings have yet to be reported.

 

 

DG Comp lists Greek electricity market issues needing action

Greece has been handed a list of pending electricity market issues, old and recent, requiring urgent government action at a meeting between the country’s finance minister Hristos Staikouras and European Commissioner for Competition Margrethe Vestager in Athens just over a week ago, sources informed.

The delay of a market coupling plan for the Greek and Bulgarian electricity markets, as well as uncertainty surrounding Greece’s operating schedule for lignite-fired power stations this coming winter and, by extension, its impact on natural gas-fueled units and the market’s liberalization, are among the urgent matters listed by Vestager.

The Danish politician will continue to head the DG Comp following last May’s European Parliament election.

In February, 2017, DG Comp officials had ambushed the Athens headquarters of power utility PPC and power grid operator IPTO to collect data for a market abuse investigation.

Brussels officials are continuing their probe with further questioning, it is believed. No findings have been released, but these will undoubtedly be published once Brussels deems the time is right.

The DG Comp moves methodically when dealing with such matters. In France, for example, the authority last week ordered Paris to open up the country’s hydropower production to competition after launching an investigation into French energy utility EDF’s market dominance back in 2015.

 

New government indicates swift, radical measures for PPC

The newly elected center-right New Democracy government plans to take swift and radical action that will aim to remedy the financially pressured power utility PPC and ensure its sustainability and prospects, it became apparent following a meeting yesterday between Prime Minister-elect Kyriakos Mitsotakis and his energy minister Costis Hatzidakis.

The meeting, held to discuss matters at PPC, was Mitsotakis’ first with any of his cabinet members at his Prime Minister’s office, which highlights the emphasis he intends to place on the troubled power utility.

The rescue plan for PPC will benefit consumers as well as workers and offer new potential for the company, Hatzidakis, the new energy minister, stressed at the ministry’s handover ceremony.

The ND government will need to update the PPC rescue plan it had shaped as the main opposition party as the power utility’s condition appears to have deteriorated further in recent times.

An attempt to lure a strategic investor to PPC can only begin as a second stage   once the utility’s financial ambiguities and weaknesses have been improved.

PPC’s situation is complicated and does not only concern the government. The European Commission and its Directorate-General for Competition are also involved, while the privatization fund holds the power to appoint its administration.

Early measures to be taken by the new government will need to focus on improving the power utility’s ability to function.

 

EU’s new CAT rules launched, no sign of aid for Ptolemaida V

A new European Commission regulation concerning CATs came into effect a few days ago, on July 4, without any sign of support for the main power utility PPC’s prospective Ptolemaida V power station, now being developed but in danger of an unsustainable future.

The outgoing Syriza government’s energy ministry recently ratified a related bill believing this could ensure CAT eligibility for Ptolemaida V. But Brussels did not endorse the Greek CAT plan by the crucial July 4 date, and even more importantly, has not delivered any comfort letter that could be seen as notification for eventual approval.

According to the European Commission’s clean energy package, EU support mechanism subsidies are reserved for units whose CO2 emissions do not exceed 550 grams per KWh. Units beginning their commercial operations any time after the July 4 date and which exceed this upper limit are not entitled to CAT mechanism remuneration, according to the EU regulation.

In a recent letter to Margrethe Vestager, the European Commissioner for Competition, PPC’s chief executive Manolis Panagiotakis stressed that CAT eligibility is crucial for the sustainability of Ptolemaida V, a 1.4 billion-euro investment. Otherwise, PPC would face catastrophic consequences with a knock-on effect for the Greek energy market and national economy, given the role and size of the corporation, he added.

 

‘No chance’ of Brussels approving CAT plan by July 4

Greece’s CAT remuneration mechanism proposal stands no chance of being granted European Commission approval by July 4, when new European regulations on the matter come into effect, nor should the country expect any comfort letter by this date on the proposal’s near-term prospects, well-informed sources have told energypress.

Speaking yesterday, power utility PPC’s chief executive Manolis Panagiotakis stressed this would be a crucial week for Greece’s CAT prospects at the European Commission’s Directorate-General for Competition.

However, there has been no indication of any extraordinary meeting this week between energy ministry and Brussels officials, the sources informed.

In a letter to Margrethe Vestager, the European Commissioner for Competition, the PPC boss has stressed that the sustainability of PPC’s Ptolemaida V power station, a 1.4 billion-euro investment now being developed and expected to be launched in 2022, will depend on CAT eligibility.

Panagiotakis yesterday expressed serious doubts as to whether a recent legislative revision endorsing Greece’s CAT plan in Parliament would suffice without EU approval.

 

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.