Chinese firms barred from distribution operator sale

Conflict of interest, including in grid energy storage, a fast-growing market, has prompted power utility PPC to stop two Chinese firms interested in the prospective sale of a 49 percent stake in distribution network operator DEDDIE/HEDNO, a PPC subsidiary, from taking part.

State Grid Corporation of China (SGCC), a strategic partner of Greek power grid operator IPTO with a 24 percent stake, and another Chinese company, still undisclosed, both participated in a market test for the DEDDIE/HEDNO privatization, indicating an interest to submit bids.

A total of 19 firms reportedly expressed preliminary interest in the sale’s market test, conducted by the procedure’s consultants.

The DEDDIE/HEDNO partial privatization’s conditions include a term barring the participation of any firms directly or indirectly related to IPTO.

The conflict-of-interest term was included in the sale’s rules as electricity network companies, whether involved in high voltage, such as IPTO, or mid and low voltage, such as DEDDIE/HEDNO, are expected to find themselves competing in various electricity market services, including energy storage.

The grid energy storage market – offering large-scale storage systems that store electrical energy during times of abundance, low prices, or low demand before returning it to the grid when demand is high and electricity prices tend to be higher – is experiencing rapid growth on a global scale.

Greece still lacks a legal framework covering this domain. The energy ministry is working on this pending issue, crucial for the country’s effort to achieve National Energy and Climate Plan objectives through greater RES penetration.

This legal framework will, amongst other matters, determine market participation and remuneration terms for energy storage units, as well as related services to be traded on the energy exchange.

PPC anticipates first-round expressions of interest from four to six consortiums for the DEDDIE/HEDNO sale of a 49 percent stake.

 

DEDDIE sale preliminary deadline near, China’s SGCC out of contention

Prominent US funds such as Blackrock and KKR, European funds, including Ardian, as well as distribution network operators, primarily from Europe’s south, and central Europe, are among 19 likely participants, to date, in power utility PPC’s sale of a 49 percent stake in subsidiary DEDDIE/HEDNO, the distribution network operator.

An approaching expression-of-interest deadline set by PPC expires on January 29. In the lead-up, some 70 possible investors have been approached by three consultants, Goldman Sachs, Eurobank and Grant Thornton, commissioned by the power utility for the DEDDIE/HEDNO sale.

State Grid Corporation of China (SGCC) cannot take part in the sale as its strategic partnership with Greek power grid operator IPTO, in which the Chinese company holds a 24 percent stake, would represent a breach of conflicting-interest rules.

SGCC recently made clear an interest to further develop its presence in the Greek electricity market by either increasing its IPTO stake or pursuing a share in DEDDIE.

Preliminary talks for 9th post-bailout review begin today

Power utility PPC’s lignite monopoly ordeal, the effort to ensure proper functioning of target model markets, the progress of privatization plans, and Greece’s decarbonization master plan for the lignite-dependent local economies of west Macedonia, in the country’s north, and Megalopoli, Peloponnese, are the key issues on the agenda of the ninth post-bailout review set to be conducted by the European Commission.

Preliminary review talks are scheduled to commence today between energy ministry officials and Brussels technocrats. These will be followed by higher-level talks involving technocrat chiefs and Greece’s newly appointed energy minister Kostas Skrekas.

Though his predecessors faced plenty of pressure, especially over PPC’s dominance, the new minister could be in for a hard time if pending energy-sector issues are not directly dealt with.

RAE, the Regulatory Authority for Energy, and power grid operator IPTO are still seeking solutions to tackle problems faced by the target model’s new markets. They got off to a problem-laden start in November, prompting a sharp rise in balancing market costs during the first few weeks.

As for energy-sector privatizations, the plan to offer a 49 percent stake in distribution network operator DEDDIE/HEDNO appears to be making sound progress and attracting strong interest, as exemplified by the participation of 19 participants in December’s market test.

On the contrary, the privatization plan for gas supplier DEPA Commercial could be destabilized by the company’s ongoing legal battle with ELFE (Hellenic Fertilizers and Chemicals) over an overcharging claim made by the latter. This battle could delay and affect the DEPA Commercial sale.

The Just Transition Plan for Greece’s decarbonization effort is now beginning to make some progress, but this unprecedented endeavor’s degree of complexity cannot be overlooked. Vast amounts of land controlled by PPC need to be repurposed, Brussels must approve investment incentives, and licensing matters need to be resolved, amongst other matters.

Operators disagree on Crete network responsibility shift

Power grid operator IPTO and distribution network operator DEDDIE are locked in a dispute over the point in time at which management responsibility of Crete’s small-scale grid interconnection, to reach the Peloponnese, should be transferred from DEDDIE, currently responsible for Crete’s network as the island is classified as a non-interconnected island, to IPTO.

DEDDIE contends that IPTO must take on the responsibility of managing the island’s network with the launch of the small-scale interconnection, anticipated in March, and not in 2023, when Crete’s full-scale interconnection, all the way to Athens, is expected to begin operating.

Crete should be considered an interconnected island as soon as the small-scale grid interconnection to the Peloponnese is launched, even though this infrastructure’s capacity will be able to cover about 30 percent of the island’s energy needs, DEDDIE contends.

Normally, the grid status of islands is automatically revised from non-interconnected to interconnected when grid interconnections serving their energy needs are launched. However, Crete, Greece’s biggest and most populous island, represents a much bigger interconnection project that is being developed over two stages.

DEDDIE, backing its case, has cited an older opinion forwarded by RAE, the Regulatory Authority for Energy, to the energy ministry, through which the authority supported that Crete’s network must be considered a part of the national grid, ending its non-interconnected island status, once the small-scale interconnection begins operating.

Also citing technical reasons to support its view, DEDDIE has pointed out that IPTO will be responsible for the operation and maintenance of the small-scale grid link, infrastructure directly influencing the Cretan network’s performance. Therefore, the island’s high-voltage network and the Crete-Peloponnese interconnection must be managed by the one operator, DEDDIE contends.

IPTO does not reject the prospect of eventually becoming responsible for Crete’s network, but the power grid operator does oppose the idea of assuming responsibility for a fixed asset that does not belong to the company. Crete’s high-voltage network is owned by power utility PPC.

At present, PPC does not appear ready to sell. As a result, IPTO believes DEDDIE must be responsible for the network’s management until this asset is transferred to the power grid operator.

New minister, just appointed, has issues to resolve in 2021

Kostas Skrekas, just appointed new energy minister as part of the government’s cabinet reshuffle, in place of Costis Hatzidakis, who has headed the ministry for a constructive year and a half, faces a series of pending energy-sector matters that remained unresolved in 2020. They need to be addressed as soon as possible. Developments and conditions this year will be pivotal for these matters.

Skrekas was previously deputy minister for agricultural development and food.

Also in 2021, a year during which takeovers and mergers are seen occurring in the retail electricity and gas markets, rivals will continue battling for market share gains. The target model’s launch two months ago has brought about new conditions, strengthening the positions of vertically integrated suppliers.

The need for a normalization of the target model’s new markets stands as the energy ministry’s most pressing task at present. A sharp rise in wholesale electricity prices as a result of soaring balancing market costs has deeply unsettled the market, impacting the standings of non-vertically integrated suppliers, as well as industrial enterprises and consumers, who face rising bills.

Market coupling with Bulgaria’s day-ahead market, scheduled to take place within the first three months of the new year, is the next step of the target model, a procedure designed to harmonize EU energy markets and promote competition.

New energy-intensive industrial tariffs also need to be set soon. Though essentially a matter concerning state-controlled power utility PPC and Greece’s industrial players, the cost of industrial energy is crucial for Greek industry, carrying particular political and economic weight.

Also, Greece has little time left in its negotiations with Brussels for a framework to offer third parties access to PPC’s lignite-based generation. This issue is no longer as crucial as it once was because the country’s lignite output has been drastically reduced. Even so, it remains important for independent suppliers.

A number of energy-sector privatizations could be completed this year. Gas utility DEPA’s two new entities, DEPA Infrastructure and DEPA Commercial, electricity distribution network operator DEDDIE/HEDNO, and a tender for a tender for the development of an underground natural gas storage facility (UGS) in the almost depleted natural gas field of “South Kavala” in northern Greece are all on this year’s privatization list.

In renewable energy, the ministry needs to take decisions within the first few months to clarify terms regulating the sector. RES investment interest is currently high. Steps still need to be taken in an ongoing effort to simplify RES licensing procedures, while a legal framework must be established for energy storage, offshore wind farms and hydrogen use.

 

Solid Fitch Ratings grading for PPC paves way to bond issue

American credit rating agency Fitch Ratings has delivered a favorable review of power utility PPC that enhances the company’s credit image and takes it a step closer to capital markets.

The credit agency has not only added PPC to its catalogue of companies reviewed, but also given the utility a BB- rating, noting that a firm outlook lies ahead. This status is twice as good as a B rating offered by S&P in November.

It enables PPC to begin examining the prospect of borrowing through a bond issue for the first time in six years.

The Fitch Ratings grading has been embraced at PPC’s Athens headquarters, as it not only seals a perfectly successful year but also puts in place a solid foundation for an even better year in 2021.

Interpretations of the outcome by some analysts remain cautiously optimistic. These analysts believe consolidation of PPC’s improved standing must wait for the release of its financial results for the year. Favorable news on the forthcoming 49 percent privatization of subsidiary DEDDIE/HEDNO, the distribution network operator, will also further enhance PPC’s image, they pointed out.

PPC’s integrated business structure, dominant market position, long-term sustainability as a result of strategic repositioning, as well as favorable energy sector reforms from 2019 to the present were key factors in the favorable Fitch Ratings grading.

Strong market test turnout for DEDDIE sale, 18 players in all

A total of 18 prospective bidders have taken part in a market test staged by Goldman Sachs for power utility PPC’s forthcoming sale of a 49 percent stake in subsidiary firm DEDDIE/HEDNO, the distribution network operator.

The list, forwarded by Goldman Sachs to PPC, includes investors already familiar to the Greek market such as US firm Blackrock, specializing in transportation and energy infrastructure long-term investments; prominent infrastructure funds; as well as many European operators.

France’s Engie and Italy’s Enel, both often linked with the DEDDIE/HEDNO sale, were not among the 18 market test participants, sources informed.

Interestingly, no previous market test staged to gauge interest in the prospective sale of any Greek State asset has generated such a strong turnout.

Authorities behind DEDDIE/HEDNO’s partial privatization hope this more than promising response for the market test will result in intense bidding competition and a higher sale price.

A clear picture on the number and identity of the sale’s participants will become apparent on January 29, the deadline for the procedure’s first round official expressions of interest.

Officials have attributed the strong market test interest to five key factors: the operator’s new regulatory framework; an elevated WACC level of 6.7 percent for 2021 to 2024, well over levels of between 2.5 and 3 percent offered by other European operators; strong confidence in the governance of the country, pivotal for long-term investments; good timing, as, at present, no other network operator in Europe is up for sale; and a massive accumulation of global capital currently available for investment as a result of numerous lockdowns imposed in many parts of the world since March.

The Greek government will aim to complete DEDDIE/HEDNO’s partial privatization in the first half of 2021.

 

Investment funds targeted in operator DEDDIE’s 49% sale

Power utility PPC’s forthcoming sale of a 49 percent stake in subsidiary firm DEDDIE/HEDNO, the distribution network operator, will not be limited to potential buyers with energy-market backgrounds, according to the sale’s terms, published yesterday, suggesting the seller is aiming to attract investment funds.

DEDDIE/HEDNO’s investment plan for the next five years is worth 2.3 billion euros, including 850 million euros for a nationwide digital power meter upgrade, an amount the government will seek to draw from the EU recovery fund.

Three major infrastructure funds have already expressed unofficial interest in the operator’s sale through a market test staged by Goldman Sachs, sources informed.

The sale is planned to take place over two stages, beginning with expressions of interest by candidates until a January 29 deadline, followed by a second round of binding bids from second-round qualifiers.

They will be given access to a virtual data room for evaluations before binding offers are shaped and submitted.

The government will aim to complete DEDDIE/HEDNO’s partial privatization in the first half of 2021, energy minister Costis Hatzidakis noted during an online Capital Link Forum staged yesterday.

 

Smart meter 6-year installation plan forwarded for public consultation

Details of a DEDDIE/HEDNO distribution network operator project for the replacement of parent company power utility PPC’s old power meters around the country with digital meters have been included in a five-year, 2.3 billion-euro development plan prepared by the operator, just forwarded for public consultation.

The operator’s power meter upgrade, a project budgeted at 850 million euros and expected to require six years for completion, is expected to draw from the EU recovery fund.

The project will entail procurement and installation of 7.5 million smart meters for low-voltage consumers nationwide, as well as their inclusion in a new telemetric center with a capacity to host 8 million points.

Consumers stand to benefit from smart meters as the digital technology of these systems will enable monitoring of electricity consumption patterns and levels through home devices or web applications. As a result, consumers will be able to shift energy-intensive practices to lower-cost time zones.

Electricity suppliers will also gain from the conversion to smart meters as these new systems will permit suppliers to shape demand-based pricing policies, offering flexibility to consumers for more competitive packages.

At least 10 candidates emerge for DEDDIE sale’s market test

At least ten prospective bidders, among them a number of infrastructure funds as well as European operators, have taken part in a market test staged by distribution network operator DEDDIE/HEDNO in the lead-up to its sale of a 49 percent stake.

The privatization’s officials have deemed the turnout as considerably satisfactory, both in terms of numbers and the reputations of participants.

Some of the funds, both from Europe and beyond, that emerged for this market test are either already present in the Greek market or have been considering to make an entry for quite some time. They specialize in infrastructure and energy projects as long-term investments.

The board at power utility PPC, DEDDIE/HEDNO’s parent company, will be fully informed on the market test’s participants at a meeting scheduled for today, before the privatization is officially launched.

The privatization’s exact number of first-round participants should become known by the end of January, when the expression-of-interest deadline is expected to be set.

Officials believe the overall sale procedure can be completed by spring in 2021. Attractive WACC levels set recently by RAE, the Regulatory Authority for Energy – 7 percent for 2020 and 6.7 percent for 2021 to 2024 – are expected to lure candidates.

DEDDIE/HEDNO’s ambitious 2.3 billion-euro investment plan, included in the operator’s preliminary network development plan, its projects featuring the installation of 7.5 million digital power meters, transmission network upgrades and expansions, as well as a fiber optics project, should serve as further stimulus for a solid sale price.

PPC debt to end year at €600m, down from €900m last year

Power utility PPC’s debt owed to energy market operators as well as project contractors has continued to fall, quelling fears of a debt-reduction slowdown during the country’s second lockdown.

The power utility’s total debt figure is projected to end the year at approximately 600 million euros, down from 900 million euros in July, 2019, a 35 percent drop in a year and a half, according to sources.

The company’s debt reduction is declining at an average rate of 18 million euros per month, driven by an improved collection record for unpaid receivables and better operating profit figures.

PPC’s payments to RES market operator DAPEEP, power grid operator IPTO and distribution network operator DEDDIE have all improved for a complete turnaround compared to a year earlier.

The power utility’s outlay for liquid fuels, natural gas, solid fuels, CO2 emission rights and electricity purchases, down by 678.1 million euros during this year’s nine-month period compared to the equivalent period a year earlier, has been a favorable factor in PPC’s improved results and debt-reduction effort.

PPC aims to further reduce its total debt to a level of between 250 and 300 million euros by the end of 2021.

 

PPC plan includes strategic investments for distr. operator

Power utility PPC’s new business plan, presented yesterday, envisages distribution network operator DEDDIE/HEDNO, a subsidiary, as a key catalyst in the country’s energy transformation with major investments lined up for the operator.

DEDDIE/HEDNO, according to the business plan, covering 2021 to 2023, will make 13 strategic investments worth a total of 1.6 billion euros.

These investment moves are expected to increase the operator’s regulated asset base by 500 million euros to 3.5 billion euros at the end of the three-year period and also boost PPC’s operating profit by 70 million euros by 2023.

The operator’s list of strategic investments includes control center and information system upgrades, smart meter installations, improved customer service, network automation, IT modernization, development of remote customer service systems, adoption of digital tools, supply chain reorganization, and a new data management system.

In addition, DEDDIE/HEDNO expects to save 80 million euros from operating cost improvements, including partial replacement of retiring personnel; automation and digitization of key operations; as well as the adoption of RES load forecast analysis systems and demand management tools.

Big month for PPC begins with 9-month results, business plan

December promises to be a big month for power utility PPC on a number of fronts, beginning with the corporation’s announcement tomorrow of profitable nine-month results.

The results will be followed by the presentation of PPC’s  updated and ambitious business plan for 2021 to 2023 on Wednesday, and the launch, on Thursday, of a market test concerning the privatization of a 49 percent stake in distribution network operator DEDDIE/HEDNO, a PPC subsidiary.

In addition, PPC is also awaiting a response, imminently, from the European Commission on a compensation request linked to the utility’s plan to withdraw its lignite-fired power stations sooner than planned.

PPC may also opt to head to capital markets in December.

The power utility’s nine-month profit to be announced tomorrow, including operating profit in 3Q for the fourth quarter in succession, has been attributed to lower natural gas and wholesale prices as well as the utility’s diminished use of lignite. These latest results should pave the way for an EBITDA figure of over 900 billion euros.

Natural gas prices have been low in 2020, but higher price levels are expected in 2021.

PPC will present its updated business plan at Wednesday’s Investor Day, rescheduled as an online event amid the pandemic. It will involve the participation of dozens of Greek and foreign analysts.

Besides a RES energy-mix share of between 15 and 20 percent, the three-year plan will also feature a more aggressive commercial policy, electromobility and digitalization initiatives, as well as the DEDDIE/HEDNO privatization.

RAE to set DEDDIE’s WACC level this week, investors keen

The launch of a privatization procedure to offer a 49 percent stake in distribution network operator DEDDIE/HEDNO should be brought one step closer to its actualization this week as RAE, the Regulatory Authority for Energy, is expected to set a WACC level for 2020, before following up, a few weeks later, within December, with a WACC level covering 2021 to 2024.

These steps are intended to offer investors clarity on the operator’s earning potential.

The distribution network operator’s WACC level for 2021 to 2024 is expected to be set at just below 7 percent, a highly attractive level given the far lower yields offered by respective European distribution network operators.

Investor interest in the forthcoming DEDDIE/HEDNO sale is currently high, energy ministry sources informed. Though no companies were specified, the sources indicated that potential buyers who had surfaced prior to the pandemic remain interested.

Germany’s EON, Italy’s Enel, France’s Enedis and a number of Chinese firms had all expressed interest. Surprise additions to this list cannot be ruled out.

A market test, to measure the level of interest of prospective bidders, is expected to take place next month, immediately following an Investor Day online event planned by state-owned power utility PPC, the operator’s parent company, for early December, energy minister Costis Hatzidakis told a recent energypress conference.

DEDDIE/HEDNO, possessing networks covering 242,000 kilometers, has prepared a major investment plan that includes installation of 7.5 million smart power meters, a project budgeted at 850 million euros, and a digital upgrade of the network. The operator’s assets are valued at 3.6 billion euros.

PPC’s upcoming Investor Day event on strength of good news

Power utility PPC plans to go into early December’s rescheduled Investor Day, an online event organized by the corporation for its presentation of an updated 2021-2023 business plan to international analysts, on the back of favorable developments, including yet another profitable quarter, the fourth in a row, as well as new business openings.

PPC had originally planned Investor Day for last March, in London, but was forced to postpone and reshape for an online version as a result of the pandemic’s outbreak.

A year earlier, PPC was struggling, but the succession of positive quarters has lifted the company into a confident higher flyer.

Its updated business plan will feature more specific goals of greater ambition for the three-year period. They are expected to include a RES market share target of between 15 and 20 percent and capacity of over 1 GW, as well as fresh news on the company’s digital transformation, electromobility effort, commercial policy, and, possibly, an even swifter withdrawal plan for the company’s lignite-fired power stations.

Just days ahead of the Investor Day event PPC will announce a series of favorable developments, namely an initial securitization deal collection of 150 million euros; a higher EBITDA figure for yet another quarter; the launch of a privatization procedure to offer 49 percent of distribution network operator DEDDIE/HEDNO, a subsidiary; and, on December 1, financial results for the nine-month period, including a profitable third quarter.

PPC is also expected to announce a further workforce reduction plan and employee shifts from lignite units headed for closure. Earlier this year, the power utility reported a 10 percent payroll cost reduction for the first half.

 

Small fraction of PV connection term applications making cut

Just a fraction of RES connection term applications result in installed capacity as one in three applications for small-to-medium solar energy projects are being approved, on average, according to unofficial data provided by regional authorities of distribution network operator DEDDIE/HEDNO.

RES market players are well aware of this high percentage of rejections, and, as such, consider recent energy ministry measures affecting 500-KW PV projects and energy community projects to be unacceptable.

Worse still, the lockdown’s impact on public services has made it more difficult for RES investors to obtain necessary supporting documents from regional services, forestry authorities and other agencies in order to submit complete connection term applications to DEDDIE/HEDNO as well as power grid operator IPTO by an approaching December 31 deadline.

The combined effect of the aforementioned factors is causing a significant contraction of the small-to-medium solar energy market, sector officials have noted.

DEDDIE/HEDNO has requested more flexible operating terms, in terms of geographical jurisdiction, from the energy ministry to hasten its processing ability. At present, the operator examines connection term applications on a broad regional level but also wants more control at a narrower provincial level.

This would effectively enable swifter approval of connection term applications by RES investors in provinces where capacity is available. Investors would be spared of bureaucratic processing at a regional level.

Speaking at a recent energypress conference, a DEDDIE/HEDNO official noted the operator estimates all connection term applications it has received will have been processed by next summer.

 

RAE deciding on DEDDIE 2020 WACC, terms for 2021 to 2024

RAE, the Regulatory Authority for Energy, intends to reach decisions this week on the WACC and allowable income levels for 2020 of distribution network operator DEDDIE/HEDNO, both pending regulatory factors needed ahead of the operator’s privatization.

The authority has already approved a formula determining the required network earnings.

RAE intends to approve the operator’s WACC level for 2021 to 2024 by the end of the year before deciding early in 2021 on the regulated earnings and a network business development plan covering 2021 to 2024.

The distribution network operator’s WACC level for 2021 to 2024 is expected to be set at just below 7 percent, sources informed. Such a level would be seen as highly attractive by investors given the far lower yields offered by respective European distribution network operators.

Decisions on all these regulatory matters will enable prospective buyers to evaluate DEDDIE/HEDNO’s prospects and shape their offers for a 49 percent stake to be offered through the operator’s privatization.

The sale could be completed by the first quarter of 2021. Pundits anticipate the sale price could reach approximately 1.5 billion euros.

In accounting terms, the operator’s fixed assets – networks covering 239,000 kilometers and substations – are worth 3.5 billion euros.

Electricity theft cost gradually shifted to operator DEDDIE

The cost for the market of electricity theft will be gradually shifted to distribution network operator DEDDIE/HEDNO, ridding suppliers and, indirectly, consumers, of this financial burden, according to a new formula for the operator’s required revenue established by RAE, the Regulatory Authority for Energy.

The operator will need to reduce, on an annual basis, its percentage of required revenue covering electricity theft losses until these have been eliminated. If annual electricity theft reduction objectives are not met, then the operator will assume the resulting cost. On the contrary, if these objectives are exceeded, then the operator will keep surplus amounts for the company coffers.

Representing between 4 and 5 percent of overall electricity consumption, electricity theft, a major problem for the Greek market, increased during the recession. The responsibility for its cost had even generated friction between power utility PPC and DEDDIE/HEDNO, the utility’s subsidiary.

Energy companies, including PPC, look to reinforce ahead of tough winter

Energy sector companies, including power utility PPC, are looking to financially reinforce ahead of what is likely to be a challenging winter in terms of cash flow.

Though overall market activity is clearly better compared to last March, when lockdown measures were introduced in Greece, persisting four-digit figures for new domestic coronavirus cases and hints of tougher pandemic measures in Athens, as is already the case in Thessaloniki, leave no room for complacency.

PPC, fearing stricter lockdown measures could last a while, is working intensively to collect some 500 million euros stemming from two securitization packages for unpaid receivables by late November or early December. The company is also intensifying its hunt for payments from consumers regarded as able but unwilling to service electricity bill arrears.

The power utility has a number of fronts to cover financially. Firstly, the company has offered employees voluntary exit packages as part of its decarbonization drive to phase out lignite-fired power stations. PPC is also preparing to make the first of a number of major RES investments. The utility is also in the midst of a successful and fast-moving effort to reduce debt owed to operators – power grid operator IPTO; distribution network operator DEDDIE/HEDNO; and RES market operator DAPEEP; as well as sub-contractors.

PPC’s total debt to third parties, which was at a level of 900 million euros in July, 2019, was reduced to approximately 650 million euros in June and fell further to 580 million in a latest measure.

The company aims to reduce this debt figure to 550 million euros by the end of the year. However, tougher lockdown measures would probably slow down this debt-reduction effort.

DEDDIE board moves to reduce workforce ahead of privatization

Privatization-headed distribution network operator DEDDIE/HEDNO, a subsidiary of power utility PPC, has decided to implement employment term revisions enabling the termination of contracts of workers who, by December 31, have either qualified for pension rights and are at least 63 years of age or have turned 67 and served at the operator or the power utility for a total of at least 15 years.

The operator’s board has also decided to offer aged employees a 20,000-euro bonus as an incentive to hasten departures ahead of the privatization. This bonus will only apply for employees who take up the departure offer by December 31.

The company intends to apply this new employment rule unilaterally if workers belonging to either of the two aforementioned retirement categories do not submit their resignations by the end of 2020.

Employees will be gradually dismissed as of January 31, 2021, beginning with oldest staff members, according to the DEDDIE/HEDNO plan.

Severance pay not exceeding 15,000 euros will be offered to departing employees irrespective of whether they volunteer to retire or end up being dismissed.

Any debt owed by employees to the company will be offset with exit package amounts.

DEDDIE/HEDNO employees serving in highly specialized fields and not instantly replaceable will be exempted from the operator’s new staff exit plan and could have their contracts extended by a year with an option for an additional year for exceptional cases.

DEDDIE formula for required revenue approved by authority

RAE, the Regulatory Authority for Energy, has approved a formula determining the required revenue for electricity distribution networks, an important first step towards the finalization of distribution network operator DEDDIE/HEDNO’s regulatory framework, essential for its privatization procedure to offer a 49 percent stake, sources have informed.

A WACC level still needs to be set and approved for the operator. RAE intends to reach a decision by December 31 so that prospective buyers can have even greater clarity on the operator’s potential revenue.

Given the time required for the processing of related data concerning the operator’s regulated earnings and the network’s business development plan for 2021 to 2024, RAE should deliver a decision on the four-year period by March 31, 2021, which would be retroactively applied as of January 1, 2021.

The new framework includes two periods covering 2021-2024 and 2025-2028, offering investors a long-term picture of the investment’s potential yield.

According to sources, the authority intends to set a WACC level of just below 7 percent for 2021-2024, highly attractive for investors given levels of no more than 2.5 percent offered by equivalent distribution network operators around Europe.

RAE plans to launch a market test, to measure the level of investor interest in DEDDIE/HEDNO, next month.

Prior to the pandemic, Germany’s EON, Italy’s Enel, Enedis – an EDF subsidiary – as well as a number of Chinese companies, had expressed interest in the DEDDIE/HEDNO privatization plan.

DEDDIE wants PV connection-term review rules revised for swifter results

Distribution network operator DEDDIE/HEDNO has decided to push for a revision of evaluation criteria concerning connection term applications for solar energy projects following talks with sector professionals, the objective being to unblock thousands of project applications by next summer.

The operator is expected to forward to the energy ministry during the week – if it has not done so already – its proposal for revisions to a related ministerial decision implemented last March concerning prioritization and assessment methods for connection-term applications.

The proposed revisions would give DEDDIE/HEDNO flexibility to also examine applications on a more localized scale, at municipal level, not just on a bigger provincial level, as is the case at present.

In other words, DEDDIE/HEDNO wants connection-term application decisions to be based on the availability of grid capacity at a municipal level, as opposed to requiring investors to wait in line for approval by provincial authorities.

If the operator’s proposed changes are implemented, then thousands of PV connection-term applications could be processed, for approval or rejection, over the next ten or so months.

Current rules have prompted an accumulation of these applications at DEDDIE/HEDNO.

DEDDIE market test next month, rules framework soon

Goldman Sachs, the privatization consultant for power distribution network operator DEDDIE/HEDNO’s forthcoming sale, plans to stage a market test in November, barring unexpected pandemic-related developments, for a measure of the level of interest of prospective bidders.

This preliminary step in the sale procedure will attract major energy players from Europe and beyond, including funds seeking to invest in infrastructure offering high and stable returns, reliable sources have informed.

A February launch of the privatization by power utility PPC, DEDDIE/HEDNO’s parent company, is considered highly likely. Bidders are expected to be given a two-month period to submit binding offers. If so, officials will be in a position to announce the winning bidder in May, 2021.

Importantly, RAE, the Regulatory Authority for Energy, still needs to announce the distribution network operator’s new regulatory framework before the market test can be launched.

A formula determining the operator’s WACC, or yield, is expected to be announced by RAE this week, or, at the very latest, early next week. An official WACC figure, helping bidders shape their bids, should be set in December.

 

New bill arrears rule restricting electricity consumer switches

Several thousand electricity consumers were blocked from switching suppliers in September, a trend that has continued this month, following a rule revision enabling suppliers to stop their customers from switching to rivals if they have not fully settled outstanding energy bills, suppliers have informed energypress.

Distribution network operator DEDDIE/HEDNO implemented the new rule at the beginning of September following a request by RAE, the Regulatory Authority for Energy.

Though suppliers have sought closer monitoring of outstanding electricity bills linked with consumers preparing to switch companies, the new rule’s level of strictness is believed to even be impeding the mobility of punctual consumers with small and unintentional arrears left to pay.

Suppliers are now concerned about the measure’s impact on competition as even the smallest of bureaucratic obstacles can be enough to deter consumers from switching energy companies.

Consumer switches, both from power utility PPC to independent suppliers and from one independent firm to another, are currently high and would be even higher if the new restriction were not imposed, company officials noted.

Suppliers have protested that the rule revision was not preceded by public consultation.

DEDDIE’s WACC close to 7%, RAE framework approval soon

Distribution network operator DEDDIE/HEDNO’s new WACC level, determining the yield, required by potential buyers, will be set at just below 7 percent for a four-year period covering 2021 to 2024, energypress sources have informed.

This WACC level, well over rates of no more than 2.5 percent offered by respective European operators, is expected to be seen as a very attractive offer by investors.

RAE, the Regulatory Authority for Energy, has been given the green light by the energy ministry to hasten proceedings for a launch of the DEDDIE/HEDNO privatization, offering a 49 percent stake, in November, as promised by the ministry.

DEDDIE/HEDNO has awaited RAE’s approval of its new regulatory framework, including the WACC level, to launch the tender. This framework will include an option for a four-year extension, covering 2025 to 2028.

If the privatization is launched next month, it could be completed within the first quarter of 2021.

Market officials have forecast a DEDDIE/HEDNO selling price of close to 1.5 billion euros for the 49 percent stake.

The operator’s assets, essentially comprising networks totaling 239,000 kilometers in length, plus substations, are estimated to be worth 3.5 billion euros.

The DEDDIE/HEDNO business plan for 2021 to 2024, still subject to official approval, should excite investors. It features investments worth 2 billion euros and network 5G add-on potential for a wide range of telephony and internet services.

The prospective installation of 7.5 million digital power meters in place of conventional meters around the country, an upgrade budgeted at 850 million euros, is another strong selling point. Recovery funds will be sought for this project, energy minister Costis Hatzidakis recently informed. This would save the operator a considerable amount.

Germany’s EON, Italy’s Enel, Enedis, a subsidiary of France’s EDF, as well as a number of Chinese companies had showed interest, unofficially, in the DEDDIE/HEDNO sale well before the pandemic broke out.

 

 

Upper limit for non-auction PV units down from 500 to 200 KW

Local authorities have decided – in a proposal to be forwarded to the European Commission for approval – to lower to 200 KW from 500 KW a capacity upper limit requiring PV projects to participate in RES auctions for tariffs when this limit is exceeded, sources informed.

A satisfactory transitional period will be offered to investors to facilitate the actualization of scheduled RES projects up to 500 KW.

Greek officials expect to have finalized revising local RES auction rules within the next fortnight before submitting a plan to Brussels for an extension of competitive procedures.

Government officials have yet to decide on the duration of the RES auction extension to be requested as well as the total capacities for wind and solar energy to be auctioned.

However, the government officials have already taken initiatives to revise auction terms for greater bidding competition that would lower tariff prices for RES output.

Meanwhile, a prospective draft bill that would secure tariffs for RES units once they have been certified as ready by the distribution network operator DEDDIE/HEDNO, instead of when electrified, as is the case at present, will take some before being submitted to parliament.

 

 

Revision to ensure HEDNO framework for privatization

A legislative revision set to be submitted to parliament by the energy ministry will enable the implementation of a new regulatory framework for DEDDIE/HEDNO, the distribution network operator, as of January 1, 2021, as planned by a revised schedule.

The operator’s new framework, including two four-year periods covering 2021 to 2024 and 2025 to 2028, was initially scheduled to be approved by June 30 but this date was missed as a result of the pandemic’s impact and a leadership change at RAE, the Regulatory Authority for Energy.

Besides being crucial for the market’s operation, the new regulatory framework is a prerequisite for the announcement of the operator’s privatization, to offer prospective buyers a 49 percent stake.

The operator’s WACC rate is expected to be announced in the lead up, either this month or next, if no further delays hamper the overall procedure.

PPC, going green, to present transformation plan on Monday

Power utility PPC’s new three-year business plan, to transform the company from a lignite-centered utility into a RES-focused enterprise backed by a range of modern and digital commercial services, will be officially presented on Monday by the state-controlled company’s board, headed by chief executive Giorgos Stassis (photo), with Prime Minister Kyriakos Mitsotakis in attendance.

A new company logo symbolizing PPC’s shift from lignite to renewables will also be unveiled at the event along with the launch of the motto “PPC welcomes the future”.

PPC’s trademark lightning bolt-bearing logo that has featured for years at the façade of the company’s Athens headquarters has already been removed to make way for the the new logo, to be unveiled at Monday’s event.

On the day, PPC will present details on its plan to develop a RES portfolio with a capacity of between 2,000 and 3,000 MW over the next three years. This effort will coincide with the utility’s phase-out of lignite-fired power stations.

The privatization plan for the forthcoming sale of a 49 percent stake in subsidiary DEDDIE/HEDNO, the distribution network operator, expected to begin towards the end of this year, will also be presented at Monday’s event.

So, too, will an abundance of new services, including house repair and maintenance insurance.

PPC’s new three-year plan, at its core, will aim for high profitability and an annual EBITDA figure of between 700 and 900 million euros. It will also detail the company’s interest in DEPA Commercial, a new gas utility DEPA entity headed for privatization.

On Monday, PPC will also offer an update on ongoing talks with investors, including Germany’s RWE, for the development of solar farms worth 1.2 billion euros in northern Greece’s lignite-dependent west Macedonia region.

Funds of between 500 and 550 million euros stemming from PPC’s securitization of unpaid receivables will be used to help finance RES investments. The company is also considering a bond issue for the end of the year. Funds to be raised through the prospective DEDDIE/HEDNO sale will also be used for these investments.

Sensing a bright future at PPC, a growing number of institutional investors and hedge funds from abroad are considering the company’s share. They include Allianz Global Investors, Bell Rock Capital, Helm Investment Partners, Bluecrest Capital Management, Polygon, Fiera Capital, Zenon and Prince Street Capital.

 

 

 

DEDDIE sale launch awaiting RAE approval of framework

Distribution network operator DEDDIE/HEDNO is awaiting the approval of its new regulatory framework by RAE, the Regulatory Authority for Energy, needed for the launch of a tender concerning the operator’s privatization, to offer investors a 49 percent stake.

As things stand, RAE is expected to give the green light within October, energypress sources informed.

The operator’s new regulatory framework, to be valid for a four-year period, from 2021 to 2024, and feature an option for a four-year extension, was forwarded for public consultation in June, but a change of leadership at RAE early in July delayed the process.

The operator’s new WACC level, determining the yield for potential buyers, is expected to be announced in October or November so that the privatization’s tender can be announced before the end of the year.

At present, the operator’s annual revenue totals 800 million euros.

It remains to be seen if the overall plan will be carried out as planned as the framework’s approval is a complicated task requiring plenty of work, while RAE faces no legal obligation to deliver on schedule.

Last week, energy minister Costis Hatzidakis, speaking at an Economist conference, assured the DEDDIE/HEDNO privatization will begin in November. However, certain pundits contend the current schedule is overoptimistic.

The new DEDDIE/HEDNO business plan – envisaging an increase of investments to a level of between 350 and 400 million euros, annually, considerably higher than previous levels of around 150 million euros; as well as the recruitment of 1,000 staff members for technical posts – cannot be considered complete without a new regulatory framework.