Snam officials in Athens this week for vital DESFA sale talks

Top-ranked officials at Italian company Snam, a key player in the effort to finalize the stranded privatization of DESFA, Greece’s natural gas grid operator, will visit Athens this week for talks, it has been confirmed.

Snam appears to have agreed to take on a 17 percent share of DESFA from Azerbaijani energy firm Socar following European Commission intervention. This would reduce Socar’s share of DESFA to 49 percent, if the deal is completed.

Brussels has issued a decision specifying that Socar, the winning bidder of a DESFA tender completed in 2013, must remain a minority shareholder of the Greek operator.

The Italian company’s role in the deal has acquired greater significance as a result of the increased likelihood of a withdrawal by Socar. The Azerbaijani company is dissatisfied by a network usage fee hike limitation recently imposed on DESFA by the energy ministry. The measure reduces the operator’s revenue potential.

Snam officials are expected to make clear the Italian operator’s position at the upcoming Athens meeting. Snam did not demand that the revenue-limiting measure be anulled when company representatives first met with Greek energy ministry officials over the DESFA sale about two months ago. This offers a glimmer of hope for the troubled deal.

Greece’s lenders, currently engaged in a review of bailout prior actions needed for the  disbursement of a subtranche of 2.8 billion euros, are applying pressure for an end to the long-running DESFA sale.

Snam could take on a greater share of the operator, roughly 30 percent, while ELPE (Hellenic Petroleum) appears keen to maintain the 35 percent stake it holds in DESFA.

Belgian operator Fluxys, which had expressed an interest in DESFA in the past, may also enter the picture again.

Local privatization fund fears DESFA sale will not progress

TAIPED, the State Privatization Fund, fears the long-running effort to privatize DESFA, Greece’s gas grid operator, could be headed towards a dead end as a result of a number of negative developments.

Besides the problems faced by Azerbaijan’s oil-dependent economy amid the sharp decline in international crude oil prices over the past year and a half, which has affected the financial standing of the country’s state-run energy company Socar – the potential main buyer of DESFA – Belgian company Fluxys, considering a smaller stake, is having serious thoughts about investing in the Greek operator, driven by the country risk factor, sources have informed energypress.

Canadian shareholders holding a stake in Fluxys have appeared increasingly reluctant to commit to any investments connected with Greece as a result of permit issues faced by Canadian gold mining company Eldorado Gold in Greece.

One source has informed that Fluxys is preparing to withdraw its interest in acquiring a 17 percent share of DESFA. The Azeri company Socar, the winning bidder of an international tender offering a 66 percent share of DESFA, must surrender 17 percent following European Commission intervention, which would leave it with 49 percent.

Besides the likely withdrawal of Fluxys, the interest of Italy’s Snam, which has also examined the prospect of acquiring DESFA’s 17 percent stake, is also in doubt. Snam officials were absent from a delegation of Italian energy officials that accompanied Italian foreign minister Paolo Gentiloni on a trip to Athens slightly less than a month ago.

A pending revision to gas network usage fees, the only source of income for DESFA, is also troubling investors. Based on existing regulations, these fees were headed for a significant increase before energy minister Panos Skourletis intervened to avoid sharp natural gas price hikes for households and businesses.

Consulting firms hired by Fluxys and Snam to assess the prospect of investing in DESFA have apparently provided negative reports to their clients, basing their advice on the country risk factor.

Potential DESFA buyers advised to withraw interest over Greek risk

Indications of a possible withdrawal of interest by three European companies considering to acquire a stake in DESFA, Greece’s natural gas grid operator, are growing as a result of unfavorable developments concerning the company, as well as the Greek market and economy.

Italy’s Snam and Belgian-Spanish team Fluxys-Enagas have been looking into the prospect of acquiring a 17 percent of DESFA. Following European Commission intervention over EU energy security and competition concerns, the Azeri energy company Socar must surrender this portion from 66 percent initially agreed to with DESFA as the winning bidder of an international tender that was finalized in 2013. Socar’s offer of 400 million euros for a 66 percent stake in DEFSA had been accepted by the then-Greek government.

According to sources, consulting firms hired by Snam and the Fluxys-Enagas team have, in recent days, delivered unfavorable reports, primarily as a result of two key issues. Consulting firms are concerned about the risk factor concerning investments in Greece as well as current local discussion on possible regulatory revisions that would affect the gas operator’s pricing policy.

The Greek government wants to make revisions to avoid a sharp hike in gas network usage fees that could be made by the new owners under DESFA’s current operating regulations.

Snam officials did not join an Italian delegation of corporate figures that accompanied Italy’s foreign minister Paolo Gentiloni on an official visit to Athens less than a fortnight ago. Officials of Italian companies that are either already present in the Greek market or looking to invest joined Gentiloni, who met with Greek energy minister Panos Skourletis.

In another worrisome sign for the DESFA sale’s prospects, Snam and the Belgian company Fluxys have expressed interest in the sales of two other European natural gas networks, Germany’s Thyssengas and Austria’s Gas Connect. Considering the respective sizes of Snam and Fluxys, in particular, they will most likely not be able to take on all these deals, including DESFA, at the same time.