PPC doubts €137m tax bill linked to IPTO split from utility

Posted on July 16, 2018July 16, 2018 by admin

The main power utility PPC plans to request the cancellation and recalculation of a 137 million-euro tax bill imposed on the power utility and due this year as it believes the sum, linked to the power grid operator IPTO’s split from the parent company, is excessively oversized.

By questioning this amount PPC is, in effect, also casting doubts over the procedure implemented for IPTO’s split from the utility.

The power utility needed to surrender its full ownership of the power grid operator but was only compensated for a 49 percent stake sold to the Greek State and China’s SGCC. The Chinese firm acquired a 24 percent stake in IPTO last year. The other 51 percent – factored into the tax equation – was transferred to shareholders for free, without any cash inflow, the power utility contends.

Despite only receiving an amount for the 49 percent share of IPTO sold to the Greek State and SGCC, the power utility was taxed for the full 100 percent value of the operator, the power utility contends.

PPC received 320 million euros from SGCC as well as three separate amounts from the Greek State, 330 million euros, 295.6 million euros, and a further 93 million euros as a return of capital.

PPC’s total tax bill for the current year is worth approximately 350 million euros, including the IPTO-related 137 million euros being disputed by the power utility, or nearly 40 percent of the utility’s total tax obligation for the year.

PPC, Greek State arrears deal to offer latter 25% discount

Posted on June 18, 2018June 18, 2018 by admin

The main power utility PPC has reached a deal with the Greek State for the settlement of electricity consumption arrears owed by the latter as well as reduced tariffs to be offered by the utility for civil sector electricity consumption in the current year.

According to sources, the Greek State has already paid PPC a sum of between 60 and 65 million euros, which covers roughly half the 120 million-euro total owed to the power utility.

The outstanding Greek State amount, concerning various public sector divisions, is expected to be delivered once details concerning each individual debtor have been inspected and verified.

The power utility and the finance ministry, representing the Greek State, also agreed on an advance payment for consumption in 2018 in exchange for reduced tariffs. This arrangement will also provide some cash flow relief to the power utility.

Besides a 15 percent discount offered by PPC to all punctual customers and a 6 percent discount offered to customers making advance payments, the Greek State will also benefit from a discount offered to industrial consumers for major-scale electricity consumption.

The arrangement agreed to will offer the Greek State a total discount of around 25 to 26 percent.

This means that the Greek State will be expected to make an advance payment of approximately 480 million euros for consumption in 2018, based on its consumption level in 2017.

NOME auction starting price set to rise to €36.30 euros per MWh

Posted on June 12, 2018June 12, 2018 by admin

A RAE (Regulatory Authority for Energy) study concerning the starting price of the country’s next NOME auction, scheduled for July, proposes an increase to 36.30 euros per MWh from the current level of 32.05 per MWh, according to sources.

Energy minister Giorgos Stathakis, who has already received the study, plans to soon sign a related joint ministerial decision before it is also endorsed by the finance ministry and the revised starting price is officially announced ahead of next month’s NOME auction.

NOME auctions were introduced in Greece nearly two years ago to offer third parties access to the main power utility PPC’s lower-cost lignite and hydropower sources.

The authority’s starting-price hike proposal resulted from an increase in the price of CO2 emission rights at the European energy exchange as well as PPC cost-related data concerning its lignite and hydropower-based output.

The new NOME starting price level is expected to apply for the forthcoming NOME auction, planned for July 18, and all ensuing sessions until the procedure is reviewed in June next year.

Officials agree the expected starting price increase will not impact the market as closing prices at previous NOME auctions rose well above starting price levels, and, most importantly, market data indicates wholesale electricity prices are on the rise, both locally and internationally.

The closing price at the most recent NOME auction reached 42.05 euros per MWh.

Various ELPE sale plans tabled as sale launch date approaches

Posted on March 12, 2018March 13, 2018 by admin

Various intentions concerning the price and schedule of ELPE’s (Hellenic Petroleum) imminent privatization, the biggest planned for Greece’s energy sector and one of the overall program’s biggest, are still being considered by local officials despite the fact that the government and country’s lenders have settled for the sale of a 51 percent stake of the petroleum group.

The government, representing the Greek State’s 35.5 percent stake of ELPE, and Paneuropean Oil, a member of the Latsis corporate group, which controls a 45.47 percent stake, will need to forge an agreement offering a majority stake for a strategic investor.

Three lines of thought have emerged. The finance ministry, powering the first of these, is pushing to finalize all pending bailout issues by a June 21 Eurogroup meeting. Officials at the ministry know well that the course of the country’s privatizations program will be pivotal for post-bailout terms, including relief measure negotiations.

Energy minister Giorgos Stathakis, the chief advocate of a second approach to the ELPE privatization, appears to have abandoned initial thoughts entailing various alternatives and has agreed on the basics of the plan to offer investors a 51 percent of the petroluem group. However, he seems determined to hold on to some sort of Greek State control for ELPE, currently experiencing one of the most profitable periods in the corporation’s history. ELPE’s board supports this approach.

As for the sale’s other factor, the Latsis corporate group’s Paneuropean Oil appears to have struck common ground with the Greek State for an agreement that would offer investors a 51 percent stake of ELPE.

Developments concerning this privatization are expected to unfold over the next few weeks. The sale’s international tender is, according to the bailout terms, planned to be announced in roughly two weeks’ time.

Moment of truth for energy-sector privatizations has arrived

Posted on February 26, 2018February 26, 2018 by admin

Greece’s energy minister Giorgos Stathakis and finance minister Euclid Tsakalotos will hold crucial meetings with the country’s lender representatives today, seen as pivotal for the shape of upcoming energy-sector privatizations.

Alternative approaches concerning the prospective privatizations of ELPE-Hellenic Petroleum (35%), DEPA-Public Gas Corporation (65%) and PPC-Public Power Corporation (17%), which the energy minister appears to be supporting, are expected to be tabled.

Stathakis is believed to be aiming to utilize part or all of these utility stakes through a transfer to the new privatization fund, whose framework includes a holding company allowing for improved asset utilization; convertible bond issues representing equivalent stakes; or some other plan that would ensure control of the utilities for the Greek State.

TAIPED, the state privatization, now a subsidiary of the new privatization fund, is already working on privatization plans agreed to with the lenders. It remains to be seen how the energy minister’s attempt to promote alternative scenarios will be received, if, in fact, these are discussed.

It appears that the finance ministry, well aware of bailout fourth-review repercussions any disagreement could provoke, is not in favor of structural revisions concerning the privatization plans already established with the lenders.

In the case of ELPE, enjoying a period of record profits, government officials are keen to achieve a solution that may reflect this success. A foreign evaluator, in a recent study conducted on ELPE, is believed to have put a price tag of 4.8 billion euros on the firm. Any prospective buyer would also need to shoulder the enterprise’s debt of two billion euros. The study, which also sought to measure the level of interest of investors, indicated that firms from the west, even beyond, including China, would probably not be willing to pay such an amount.

DEPA, too, has posted robust performance figures in recent times. In 2017, the firm’s natural gas sales exceeded 4 billion cubic meters, reaching 4.04 billion cubic meters, a 2 percent increase compared to a year earlier, while its net profit after tax amounted to 133 million euros, a 37 percent increase.

A hybrid solution for DEPA, entailing the entry of a strategic investor as well as the listing of company shares on the bourse, is possible.

As for ELPE, the Greek State and Paneuropean Oil, a member of the Latsis corporate group holding a 45.47 percent stake in ELPE, have begun discussions for a plan entailing offering 51 percent of ELPE to a strategic investor, plus managerial rights.

If any alternative plans for the ELPE, DEPA and PPC privatizations are adopted, then the government will need to somehow cover the three billion euros in overall privatization revenues it has agreed to over the next two years – two billion in 2018 and one billion in 2019.

According to the 2018 national budget, the ELPE, DEPA and PPC privatizations are expected to provide 850 million euros.

Series of pending energy issues to be tackled in 4th review

Posted on February 23, 2018February 23, 2018 by admin

A series of pending energy-sector issues that were either not resolved during the bailout’s third review or emerged most recently will be the focus of the Greek program’s fourth – and final – review beginning next week in Athens.

Leading energy ministry officials will hold meetings with technocrats representing the lenders, arriving Monday.

Seven energy-sector issues will need to looked at by the energy ministry officials and visiting technocrats, while an eighth matter, energy firm privatizations, will also involve finance ministry officials.

The energy ministry will seek to avoid selling the entirety of the Greek State’s stakes in ELPE (Hellenic Petroleum), DEPA (Public Gas Corporation) and PPC (Public Power Corporation). It prefers solutions that could maintain the Greek State’s control in these enterprises.

A road map for natural gas market reforms needs to be finalized during the fourth review talks. Many reforms have already been implemented but the role of DEPA in the wholesale, retail and distribution markets needs to be clarified.

NOME auction revisions and other measures needed to open up the retail electricity market is another issue. PPC’s market share remains stubbornly high, at around 85 percent.

A formula for a RES-supporting supplier surcharge reduction, viewed as a first step before the surcharge is replaced by a new mechanism, also needs to be forged.

The possibility of new energy-sector account deficits that may result from a more generous social policy pursued by the government through public service compensation (YKO) and social residential tariffs (KOT) revisions will also be examined.

The delayed implementation of Target Model measures is another matter to be tabled.

A new transitional flexibility remuneration mechanism for gas-fired electricity production needs to be finalized and endorsed. Delays here have unnerved the European Commission.

The new RES support framework will also be on the agenda of the upcoming talks. Pending issues for certain RES technologies, the most pressing being regulatory framework and tariffs for hybrid projects, need to be resolved.

PPC to receive bulk of public service YKO returns early on

Posted on November 8, 2017 by admin

Negotiations between the country’s lenders and government officials for a Public Service Compensation (YKO) retroactive return to the main power utility PPC, totaling 360 million euros and concerning 2012 to 2016, are progressing favorably for the utility.

Though PPC stands no chance of receiving anything over the aforementioned amount – the utility had originally demanded 735 million euros – it can expect to receive a considerable part of the 360 million euros in 2018.

It appears the negotiating sides have settled for a payment of 130 million euros to PPC in 2018 before the remaining sum is evenly divided over a four-year period covering 2019 to 2022.

According to sources, the 130 million-euro payment to be made to PPC in 2018 will stem from the budget’s primary surplus. Finance Minister Euclid Tsakalotos recently told parliament that a portion of the primary surplus would be used to service amounts owed by the Greek State to various enterprises and agencies.

Authorities needed to turn to the primary surplus as the lender institutions wanted to avoid burdening the 2018 budget despite insisting that PPC must receive its retroactive YKO sum.

The 360 million-euro payment’s remaining 230 million euros is expected to be covered by the budget.

An YKO surcharge is imposed on electricity bills to primarily subsidize high-cost electricity production on Greece’s non-interconnected islands and also support the Social Residential Tariff (KOT) program offering underpriviledged households subsidies for lower-cost electricity.

PPC advised to improve profit margins, cut operating costs

Posted on October 31, 2017October 31, 2017 by admin

The finance ministry has advised the main power utility PPC to improve its profit margins and cut operational costs in a preliminary report concerning the utility’s strategic direction and forwarded to Greece’s new privatization superfund (EESYP), expected to start operating at the beginning of 2018.

The finance ministry’s preliminary report on PPC also calls for the utility to focus on offering modern services and utilize interconnections and modern technologies.

A total of 17 state utilities, including 34 percent of PPC held by the Greek State, will be transferred to the Public Holding Company (EDIS), to serve as a subsidiary of the new EESYP superfund. These utilities will be subject to the demands of the EDIS holding company, whose role will be to seek ways of improving utility performances as an effort to prevent their privatizations.

The Greek State’s other 17 percent of PPC is already controlled by TAIPED, the existing state privatization fund being incorporated into the overall structure of the new superfund.

The finance ministry’s proposals are expected to be fine-tuned in November and December, when the privatization fund establishes its strategic plans for each of the 17 state utilities.

The recommendations included in the preliminary PPC report, forwarded to the privatization fund by finance minister Euclid Tsakalotos, call for net profit margin and operating profit improvements through better capital management, as well as a reduction in operating costs.

All utility boards, including that of PPC, will be appraised based on the performances of their respective utilities, before new strategic plans are set.

All utilities transferred to the EDIS fund will be obligated to meet specific targets. These will become known early next year, once the superfund has been launched.