PPC uploads improved Meliti lignite supply deal to VDR

The main power utility PPC has uploaded to its virtual data room an improved lignite supply agreement reached with the operator of the Ahlada mine feeding the Meliti power station, thereby resolving one of the biggest ambiguities that has shadowed the utility’s bailout-required sale package of lignite units for prospective buyers. The Meliti unit is included in this disinvestment package.

The agreement guarantees the Meliti power station a minimum annual amount of 2 million tons of lignite at a cost of 16.5 euros per ton over a five-year period beginning in 2020. These terms are based on the condition that the village Giourouki, in the Meliti area, will undergo expropriation procedures by the end of this year.

In the lead-up, a price of 21 euros per ton has been set for 2019.

The Meliti agreement’s annual lignite output of 2 million tons could be increased by 25 percent if certain requirements are met.

The Meliti unit’s high operating cost was a key factor behind PPC’s failure to attract investors to its initial sale effort offering the same package of lignite units.

 

PPC defers crucial lignite units SPA meeting for next Tuesday

A main power utility PPC board meeting scheduled today for a presentation of proposed SPA terms concerning the Meliti and Megalopoli power stations included in a bailout-required sale package of lignite units, has been postponed until next week, the session’s new date being April 23, when the utility’s financial results for 2018 will be announced, sources have informed.

SPA details, pivotal for the interest of investors, have yet to be finalized. Today’s deferral suggests last-minute efforts are being made to embellish Meliti and Megalopoli as more appealing prospects for investors. PPC was recently forced to relaunched its sale of lignite units after an initial effort failed to produce a result.

Sources with inside information on the proceedings have contended that no major changes have yet to be made to previous SPA terms.

“PPC’s disinvestment effort once again finds itself at a crucial stage, given the EU’s adverse regulatory framework concerning carbon,” one source stressed, adding that the sale’s details remain murky despite efforts by the board to clarify.

An agreement reached between PPC and the operator of the Ahlada lignite mine feeding the Meliti power station, for a lignite supply price reduction to 16.5 euros per ton from 23 euros per ton, has yet to be uploaded to the sale’s virtual data room.

Whether the units up for sale will be eligible for CAT remuneration also remains unclear. The European Commission has yet to respond to a Greek request on the matter.

Amynteo silence adds to investor jitters over PPC sale

A decision by the main power utility PPC chief Manolis Panagiotakis to drop from a recent board meeting’s agenda the subject of a closure of the now-expired Amynteo lignite-fired power station is believed to have added to the ambiguity surrounding the utility’s relaunched sale package of lignite units.

Panagiotakis’ unexecuted announcement has been interpreted as an attempt to send out a positive message to investors as Anynteo’s eventual withdrawal from the grid would make other power stations units included in PPC’s sale package more competitive.

PPC is not planning an immediate withdrawal of Amynteo. The power plant’s closure is expected in late 2020 or early 2021, when a 32,000-hour extension offered by the government through a ministerial decision last November – as a further extension to Brussels’ 17,500 hours – should expire.

Investors eyeing PPC’s sale package, whose initial sale effort failed to produce a result, are still waiting for clarity on a number of issues.

Details remain pending on a profit and loss sharing mechanism expected to apply for the Meliti and Megalopoli units offered in the package. Investors are waiting to see these details in an updated SPA.

Also unclear are the developments of PPC’s effort for an improved lignite supply agreement with Lignitorihia Ahladas, the operator of the Ahlada mine feeding the Meliti power station. Improved price and quantity terms are being sought. Energy minister Giorgos Stathakis is mediating these talks.

Gov’t, employees on edge amid PPC, Ahlada mine operator dispute

An ongoing effort by the main power utility PPC for improved terms of its supply agreement with Lignitorihia Ahladas, the licensed operator of the Ahlada lignite mine exclusively supplying the utility’s Meliti power station in northern Greece, has led to escalated tension between the two sides.

PPC has opted to stop payments to the operator for its lignite supply as a means of offsetting lower-than-expected output and pressuring Lignitorihia Ahladas for a lower supply price that would help the Meliti power station become sustainable.

Meliti is included in PPC’s bailout-required disinvestment package of lignite units, whose sale has just been relaunched following the initial effort’s failure to excite prospective buyers.

The government needs to intervene in an effort to resolve the dispute between state-controlled PPC and Lignitorihia Ahladas but must tread carefully as it knows well the power utility’s disinvestment could prompt political damage if its relaunch fails to produce a result.

The operator has dismissed eight of 600 employees amid its clash with PPC. Workers at the mine and Meliti power station fear the ongoing dispute could lead to more job losses.

Lignitorihia Ahladas contends it will not be able to continue operating the Ahlada mine should it succumb to PPC’s pressure for a supply price reduction to 18 euros per ton from the present level of 23 euros. The operator has counter-proposed reducing its supply price as of 2020, when its expropriation procedure concerning the Ahalda settlement, needed to facilitate output, is expected to have been completed.

PPC claims the supplier’s current price does not reflect actual conditions and potential at the mine, noting inefficient practices applied by the operator are increasing production costs.

 

PPC set for legal action to resolve mine supply concerns

The main power utility PPC is preparing to take legal action against the operator of the Ahlada lignite mine feeding the utility’s nearby Meliti power station in northern Greece in an effort to overcome issues with the existing supply contract that have kept prospective buyers away from Meliti.

The facility, included in PPC’s bailout-required sale of of lignite assets, just relaunched following the initial sale effort’s failure, is seen as a major drawback for the overall sale effort.

The existing agreement with Lignitorihia Ahladas, the Ahlada mine’s operator, is regarded as unappealing by investors as it does not secure price and quantity stability.

One of the sale’s participants, a consortium comprised of the Copelouzos group and CHN Energy, did not submit an offer to the initial sale effort, citing Ahlada mine supply contract concerns.

Late last year, the energy ministry extended the Ahlada lignite mine operator’s contract until 2023 with an option for a further five-year extension.

However, state-controlled PPC’s chief executive Manolis Panagiotakis has condemned the mine operator for under-producing and not fully utilizing the Ahlada mine’s potential.

In 2007, PPC signed an agreement with the operator for 2,000 tons of lignite per year at a price of 13.4 euros per ton. Focusing on a high-yield mine area, the operator was able to honor these terms until the end of 2009. However, since 2010, the operator has mined at lower-yield areas to avoid expropriation costs.

Lease for lignite mine feeding Meliti unit extended until 2028

The energy ministry has offered potential buyers of PPC’s bailout-required sale of lignite units an additional incentive by extending the lease of a state-owned lignite mine in the Ahlada region supplying the sale package’s Meliti power station until 2023 with an option for a further extension until 2028.

These five and ten-year extensions, offered to Lignitorihia Ahladas, the firm utilizing the mines, have been included in a ministerial decision signed by energy minister Giorgos Stathakis on the eve of Christmas.

According to the decision, Lignitorihia Ahladas will need to maintain its lignite production at a level of at least 2 million tons per year, unless unfavorable conditions for which the firm is not responsible end up prevailing and stifling output.

The lignite deposit at the Ahlada mine has been estimated at 32 million tons, according to a technical and financial report submitted by Lignitorihia Ahladas to the energy ministry last May, when the firm requested an extension of its contractual arrangement concerning the mine.