Indoverse

PPC sale contenders embrace coal cost cut, await SPA terms

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Prospective buyers considering the main power utility PPC’s bailout-required sale package of lignite units, relaunched after an initial effort failed to produce a result, have responded favorably to news of a lignite supply cost reduction for Meliti, one of the stations up for sale, but they remain on hold awaiting the sale’s finalized SPA terms before reaching conclusions.

PPC has secured a lignite supply cost reduction of 28 percent for its Meliti power station following an agreement with the operator of the Ahlada mine feeding the power station. The lignite supply price has come down to 16.5 euros per ton from 23 euros per ton.

“The finalization of any pending issue is positive news [for the sale], but we will take positions once we see the SPA,” one source noted.

A total of six bidding teams are participating in the sale. Beijing Guohua Power Company Limited, joined by Damco Energy; China Western Power Industrial; the Czech Republic’s Sev.En Energy – Indoverse Coal Investments Limited; GEK Terna; Elvalhalcor; and Mytilineos make up the field of contenders.

 

All first-round PPC units sale participants to make next stage

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All first-round participants of the main power utility PPC’s bailout-required sale of  lignite mines and power stations representing 40 percent of the utility’s overall lignite capacity meet the procedure’s criteria to qualify for the next stage, PPC officials have unofficially made known.

A total of six bidding schemes submitted non-binding expressions of interest for the sale’s first round, expected to end today with the announcement of qualifiers.

As of Monday, the sale’s second-round qualifiers will gain access to the procedure’s data room for two months – once they have signed confidentiality agreements – to evaluate technical and financial information concerning the power stations and mines up for sale.

A consortium comprising Beijing Guohua, a subsidiary of China’s Shenhua, and Damco Energy, a wholly owned subsidiary of the Copelouzos group; GEK-Terna; ElvalHalcor, a member of the Viohalko group; Czech firm EPH (ENERGETICKÝ Α PRŮMYSLOVÝ HOLDING); Indoverse Coal Investments Limited, also Czech; as well as Mytilineos, all submitted first-round expressions of interest.

The wide turnout could lead to aggressive bidding in the next round, when investors will be expected to produce binding offers. However, not all pundits are convinced turnout alone will be enough to generate elevated bids for a lofty sale price.

PPC’s administration has stressed solid incentives are needed for the prospective investors, including CAT payment assurances for the units included in the disinvestment’s packages, one covering the country’s north and the other the south.

Second-round terms are expected to be announced to the qualifying schemes next week. PPC and the utility’s advisers have pushed the sale’s authorities for the most favorable terms possible in an effort to increase the sale’s appeal for investors.

PPC wants terms that will enable, even encourage, participants to join forces. Mobility is being reported among the first-round bidders, including the Czech bidders, believed to be maneuvering for possible partnerships.

The second-round terms are also expected to clarify whether participants will be permitted to submit a joint offer for the sale’s northern and southern packages. Sources said such a provision will be included in the second-round terms, based on a formula applied for the privatization of regional airports around Greece.

The PPC disinvestment’s Greek-Chinese bidding team of Beijing Guohua and Damco Energy, which yesterday signed a partnership agreement for this sale yesterday, made clear it is interested in both the northern and southern packages.

CAT eligibility vital for prospects of PPC units sale, chief notes

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The level of investor interest, asset value and achievable sale price of a bailout-required sale of main power utility PPC lignite mines and power stations will depend on whether the units being offered will be eligible for CAT remuneration, the power utility’s CEO, Manolis Panagiotakis, has told journalists.

Strong political support by the government, perhaps from its top level, will be needed as European Commission directives issued so far exclude lignite units from CAT mechanism payments, the PPC boss noted.

Conventional power stations, such as lignite-fired units, must satisfy a CO2 emission limit of 550 grams per KWh to qualify for CAT mechanism payments.

A European Commission proposal calling for even stricter limits is gaining growing support throughout Europe.

Given the developments, the PPC lignite units placed for sale will most likely remain ineligible for CAT support. If so, this will severely limit their appeal for investors in general. They would need to be taken on by industrial enterprises active in sectors eligible for mechanisms offsetting a considerable percentage of CO2 emission right costs.

Meanwhile, taking the sale process a step further, PPC shareholders yesterday approved a split from the corporation of the two lignite unit packages being offered in the sale of lignite mines and power stations, representing 40 percent of the utility’s overall lignite capacity.

Yesterday’s approval now enables PPC to open a data room through which six candidate investors will be informed on the details of assets included in the disinvestment.

“Our work begins now – to correctly inform interested parties, make appropriate presentations and highlight the details that make the units attractive investment prospects – in order to to achieve a satisfactory sale price,” PPC’s chief executive, Manolis Panagiotakis, informed journalists. “Now is also the time for the government and the European Commission to show, with action, their support for lignite-related production,” he added.

Three major local players, GEK-Terna, Mytilineos and ElvalHalcor, a member of the Viohalko group, as well as a fourth, the Copelouzos group, joined by Beijing Guohua, a wholly owned subsidiary of China’s Shenhua, submitted first-round expressions of interest for the PPC lignite units. Two Czech firms, EPH (ENERGETICKÝ Α PRŮMYSLOVÝ HOLDING) and Indoverse Coal Investments Limited, also emerged as surprise participants.

 

 

 

Two Czech firms emerge as PPC unit sale’s surprise contenders

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The emergence of two Czech firms, EPH (ENERGETICKÝ Α PRŮMYSLOVÝ HOLDING) and Indoverse Coal Investments Limited, for expressions of interest in the first round of the main power utility PPC’s bailout-required sale of lignite mines and power stations, is the procedure’s surprise development so far.

Expressions of interest by three major local players, GEK-Terna, Mytilineos and ElvalHalcor, a member of the Viohalko group, joined by Beijing Guohua, a wholly owned subsidiary of China’s Shenhua, had been widely anticipated.

EPH is the most recent buyer of lignite units in Europe. The Czech firm acquired facilities with a total capacity of 8,000 MW in 2016. Located in Germany’s east, these lignite units were sold by Sweden’s Vattenfall. Roughly half were built in the 1980s and the other half about two decades ago.

Vattenfall, a state-owned firm, is believed to have sold these units to EPH in order to reduce its portfolio’s exposure to CO2 polluting lignite.

The corporate size of EPH is comparable to that of PPC. Its assets are valued at 12.8 billion euros and annual total turnover reaches about 6 billion euros. However, the Czech firm’s profit figures are a lot more robust. The company’s most recent EBITDA figure was reported at 1.9 billion euros.

EPH maintains assets in central Europe – Czech Republic, Slovakia, Germany, Hungary and Poland – as well as in Italy and the UK.

The EPH group was established in 2009 with the PPF group, which has invested in Greece’s OPAP state lottery, among its founding shareholders. Through subsidiaries, EPH controls and operates lignite-fired power stations, mines, telethermal systems, natural gas networks and storage facilities. It also operates as a coal trader and supplier of electricity and natural gas and owns a number of renewable energy units.

The main shareholder at EPH, 42-year-old Daniel Kretinsky, sold 31 percent of EPH Infrastructure to Australia’s Macquarie Infrastructure and Real Assets in 2016. Kretinsky also holds stakes in Czech media and is a co-owner of the Sparta Prague soccer club.

Indoverse, the other Czech firm to emerge for the first round of PPC’s sale, is active in the Czech Republic’s coal market and operates one power station and mines. Early this year, the company’s head, energy-sector investor Pavel Tykac, who is ranked one of his country’s five wealthiest individuals, declared an intention to invest over one billion euros in European coal-fired power stations.

Tykac has been involved in a number of contentious issues and has needed to face legal charges prompted by unorthodox business practices, including aggressive takeover attempts.

He is the sole owner of Sev.en Energy Group, Indoverse’s parent company. The Sev.en energy group is far smaller than Greece’s PPC. It produces approximately 10 million tons of lignite each year and operates a 410-MW lignite-fired power station.

PPC sale draws expected local players, Shenhua, Czech firms

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Three major local players, GEK-Terna, Mytilineos and ElvalHalcor, a member of the Viohalko group, as well as a fourth, the Copelouzos group, joined by Beijing Guohua, a wholly owned subsidiary of China’s Shenhua, have – as was anticipated – all submitted first-round expressions of interest for the main power utility PPC’s sale of bailout-required sale of lignite mines and power stations. Two Czech firms, EPH (ENERGETICKÝ Α PRŮMYSLOVÝ HOLDING) and Indoverse Coal Investments Limited, also emerged as surprise participants. The deadline for expressions of interest expired yesterday afternoon.

PPC needs to disinvest power stations and mines units representing 40 percent of the utility’s overall lignite capacity.

The list of first-round bidders could be revised if partnerships are established or entrants fail to meet criteria enabling qualification for binding bids in the second round. The PPC board will decide on the qualifiers.

Finalized investment schemes will need to be officially declared by the end of July. A September deadline is expected to be set for binding bids.

It is not yet known if any of the sale’s early participants intend to submit binding second-round bids. They are expected to decide after examining PPC’s financial, technical and legal information to be made available to first-round participants through a data room. Investors are not expected to decide any sooner than next month.

The sale price to be demanded by PPC will be a crucial factor for investors. Though definitely interested in acquiring lignite-fired power stations and mines as a means of  controlling their cost of electricity sold, participating suppliers are troubled by the rising production cost of solid fuel-based power generation, a development prompted by EU climate change policies.