Settlement of PPC €100m amount for north a first post-lignite support step

A planned payment of an outstanding power utility PPC amount of 100 million euros to energy producing municipalities in the country’s north for regional development, owed since 2014, represents a first step in the west Macedonia region’s gradual transition towards a post-lignite era.

The prospective payment of this amount to the region’s municipalities will be included in a PPC draft bill being prepared by the energy ministry for presentation in October, energypress sources informed.

Local municipalities are eagerly awaiting payments in order to finance the completion of vital infrastructure projects needed to continue telethermal supply when it will no longer be offered by lignite-fired power stations.

Florina and Amynteo are among the locations whose telethermal projects are to be developed through the payment of PPC’s development funds.

The prospective settlement represents a first step in the post-lignite support plan for Greece’s west Macedonia region, where PPC’s mining and electricity generation activities account for 45 percent of the regional economy.

The local economy of Megalopoli in the Peloponnese is also greatly dependent on lignite.

Municipalities will anticipate further support for economic stability following 2028, when all lignite activity is expected to have stopped in Greece, according to a plan announced last week by Prime Minister Kyriakos Mitsotakis at the UN Climate Action Summit in New York.

Plenty of ministries will need to coordinate on numerous issues if a smooth and punctual transition to the post-lignite era, scheduled for less than a decade away, is to be achieved. Greece does not have a good track record in achieving targets of this scale.

The move towards decarbonization is a European challenge concerning many EU member states besides Greece, including Austria, the Czech Republic, Germany, Poland and Romania, all greatly exposed to lignite activity. They are hoping for generous support through Europe’s energy transition fund.

 

Ministry talks with Brussels on lignite unit closures underway

Negotiations aiming to accelerate Greece’s transition towards a post-lignite era, through the closure of old power stations, appear to have begun between the energy ministry’s leadership and the European Commission.

Measures requiring the withdrawal of old power stations as a solution for breaking power utility PPC’s dominant market position are also expected to be discussed and implemented.

A plan by the previous Greek government to sell PPC’s Meliti and Megalopoli power stations proved futile, prompting the new administration’s energy minister Costis Hatzidakis to talk of costly units negatively impacting the utility’s financial results.

European Commission officials, due to visit Athens for talks on September 16, have included on their agenda the need to discuss PPC’s disinvestment schedule.

The withdrawal of older PPC units could represent the last chance to keep alive the utility’s plan to develop Ptolemaida V, a prospective lignited-fired power station budgeted at 1.4 billion euros, sources noted.

Rising CO2 emission right costs will soon make many PPC units unsustainable, sources told energypress.

Besides Amynteo and Kardia, the withdrawal plan is expected to also include other units. Details will be discussed at the upcoming talks between Athens and Brussels officials.

In moving to withdraw lignite-fired units, the energy ministry will also aim for the cancellation of legal action taken against Greece at the European Court for PPC’s lignite monopoly. The lignite unit closures would restrict the utility’s dominance in production and, by extension, supply of this energy source.

Greek officials will also be looking to offset the inevitable negative impact of lignite unit withdrawals on local economies, including the west Macedonia region in Greece’s north, where livelihoods depend on lignite.

Energy ministry officials will also present the plan for closures as a measure seeking to limit PPC’s financial losses.

 

PPC lignite sale is over, overall market solution to be sought

The newly elected center-right New Democracy government, appearing determined for major energy sector changes, will begin new negotiations with the European Commission in search of an overall solution for the country’s electricity market and the role and place in it for the power utility PPC, currently struggling.

The long-running disinvestment effort offering investors PPC lignite units has just about collapsed. A binding-offers deadline for a package that includes PPC’s Megalopoli and Meliti units expires on July 15, following an extension. Investors have not shown any interest, while, given the flatness, an additional extension could not reinvigorate the sale.

The next NOME auction, the year’s third, scheduled for July 17 and planned to offer independent energy firms 500 MW/h of PPC’s lower-cost lignite and hydropower production, appears likely to be the last under existing terms agreed to by Greece and the country’s lenders. Changes are also expected along this front as part of the intention for an overall electricity market solution.

Initial contact between Brussels and officials of Greece’s new administration has already been made. Meetings are soon expected to become more regular once the government has set out the specifics of its rescue plan for PPC.

Any resulting solution will need to satisfy Greek bailout terms including the need for PPC to have reduced its retail electricity market share to less than 50 percent by the end of this year. The power utility’s share is currently at 73.5 percent, meaning PPC will need to surrender even greater low-cost electricity amounts to competitors through the NOME auctions.

Fair competition in the electricity market also needs to be assured. Hydropower sources, currently exclusively controlled by PPC, may be brought into the negotiating picture. The European Commission is currently conducting a related study on PPC’s management of hydropower generation. Findings have yet to be released.

 

 

Heavy 1Q losses at Meliti, Megalopoli bad news for sale

The main power utility PPC’s Meliti and Megalopoli power stations, both included in the corporation’s bailout-required disinvestment of lignite units, incurred heavy losses totaling more than 30 million euros in the first quarter, according to results uploaded into a VDR for investors considering the sale.

These losses, attributed to a sharp increase in CO2 emission right costs to levels of more than 25 euros per ton, make PPC’s disinvestment effort an even tougher mission. They also underlining the difficulties faced by the utility’s lignite-fired production facilities.

The 1Q net losses at Megalopoli, registered at 23.02 million euros, include a 4.2 million-euro cost concerning a voluntary exit plan for employees.

The losses at Meliti for the same period were 7.95 million euros, whose voluntary exit plan was valued at 0.5 million euros.

According to PPC, the company’s results could have benefited by 2.4 million euros as a result of an improved lignite supply agreement reached by PPC with the operator of the Ahlada mine supplying the Meliti power station in northern Greece. But this agreement does not come into effect until 2020 onwards.

Investors interested in PPC lignite units, challenges remain

With just 19 days remaining until the May 28 deadline for binding bids in the main power utility PPC’s bailout-required disinvestment of its Megalopoli and Meliti lignite power stations, prospective bidding teams appear interested but challenges remain for the sale, relaunched after an initial attempt failed to produce a result.

The candidates are believed to be preparing decent offers based on the current SPA terms, Greek electricity market conditions and EU climate change policies.

The Czech Republic’s Sev.En Energy, joined by GEK Terna; CHN Energy-Damco Energy (Copelouzos Group); Mytilineos; and Elvalhalcor are preparing worthy offers, sources have informed.

China’s CHN Energy and Sev.En Energy have emerged as the chief partners of their respective pairings, while their Greek associates have assumed negotiating roles with PPC.

Mytilineos and Elvalhalcor are both still looking to establish an association for the disinvestment and are also pushing for further sale term improvements.

The Greek participants are particularly keen to acquire the lignite units as a means of breaking PPC’s monopoly and avoiding any new sale attempt that would also bring hydropower units into the picture and end up attracting major European players with financial might.

Greek energy firms are looking to avoid the market entry of foreign competitors as this would lead to market share contractions and a loss of their leading domestic roles.

Despite the investor interest, the sale attempt remains challenging for all sides. The Megalopoli and Meliti lignite units, according to PPC’s financial results for 2018, incurred losses of more than 360 million euros. Also, CO2 emission right costs are continuing on their upward trajectory, while Brussels’ tough stance on carbon is  stiffening.

 

PPC’s renewed lignite units sale faces crucial three-week period

The main power utility PPC, in its financial report for 2018, has made blatantly clear the positive impact on the company of a successful sale of its Meliti and Megalopoli power stations, included in a bailout-required disinvestment of lignite assets.

Besides being rid of annual operating losses incurred by these facilities, estimated at a total of 100 million euros, PPC also stands to benefit from reduced CO2 emission right cost purchases, a lighter environmental footprint, a gain of approximately 223.8 million euros from the gradual withdrawal of NOME auctions, and less European Commission pressure for an additional disinvestment of hydropower units.

The 25-day period remaining until the sale procedure’s completion on May 28 will be crucial for the effort’s outcome. Possible buyers remain reserved.

An improved lignite supply agreement reached by PPC with the operator of the Ahlada mine feeding the Meliti power station, uploaded several days ago to the sale’s virtual data room, has not fully eased the concerns of investors. A number of issues concerning the expropriation of the village Giourouki in the area, which needs to be completed by December 31, remain unresolved. Otherwise, the new supply agreement’s terms cannot apply.

Also, investors appear to have raised wider energy mix issues and proposed other adjustments that could increase the likelihood of a successful sale, renewed after an initial effort failed to produce a result.

PPC’s board has noted it cannot guarantee the prevention of further disinvestment obligations in the future concerning its interests in lignite and other sectors as a means of meeting market share contraction targets in electricity production and supply.

 

PPC unit contenders promised 30% price return without CATs

Investors have been promised a 30 percent return of the price paid for the acquisition of the main power utility PPC’s Meliti and Megalopoli power stations, included in a bailout-required package of lignite units, if these units are not remunerated through a European Commission CAT mechanism within nine months of the acquisition’s completion, according to the sale’s revised SPA terms, endorsed by the utility’s board yesterday, energypress sources have informed.

It remains unclear if the SPA includes an improved lignite supply agreement reached between PPC and the operator of the Ahlada lignite mine supplying the Meliti power station.

Some sources contend this agreement has been incorporated into the revised SPA while others claim it concerns an arrangement for the supply of additional lignite quantities to Meliti from other producers.

PPC has relaunched its sale of lignite units after an initial effort failed to produce a result.

CAT remuneration eligibility for the Meliti and Megalopoli units, as has been called for by some of the sale’s participants, is absent from the revised SPA terms.

 

 

PPC sale participants want extension beyond May 6 date

The main power utility PPC’s finalized SPA terms for a bailout-required sale of lignite units that includes its Meliti and Megalopoli power stations will, barring unexpected developments, be presented at a board meeting today.

The power utility is aiming to set a May 6 deadline for binding bids but prospective buyers fear such a date offers little time for a thorough assessment of terms and shaping of bids and is made even tighter by the loss of working days as a result of the upcoming Greek Orthodox Easter break, sources informed. The prospective buyers will push for a few extra days to prepare their bids, the sources added.

The revised SPA terms for this sale, relaunched after an initial effort did not produce a result, do not feature any spectacular changes, sources informed. The package will not include a profit-and-loss sharing arrangement for PPC and new unit owners, as had been requested by some of the prospective buyers seeking investment protection.

Calls by investors for clarification on the CAT remuneration eligibility of units remain murky as the European Commission has yet to endorse such a plan.

However, improved lignite supply terms between the operator of the Ahlada mine feeding Meliti and this power station’s owner will be included in the revised SPA terms.

The new terms will be uploaded onto the sale’s video data room within the next few hours, sources informed.

PPC views its Meliti and Megalopoli power stations as profitable following the recent implementation of a voluntary exit plan that has reduced staff numbers. Investors will have the final say once they receive the sale’s SPA terms.

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.

PPC ‘Amynteo closure’ news intended for investors, Brussels

The main power utility PPC’s plan to discuss the closure of its now-expired Amynteo lignite-fired power station ended up not being included on the agenda of a board meeting last Friday, as the company chief Manolis Panagiotakis had announced ahead of the session, the official reason, according to the company boss, being the need for an additional study on the matter.

However, other underlying reasons were at play, it can be safely presumed. Investors eyeing PPC’s bailout-required sale of the Meliti and Megalopoli power stations were one of the audiences targeted by the utility chief’s Amynteo-related announcement, as it is anticipated this plant’s closure will make Meliti and Megalopoli more competitive and generate better sale price prospects. This sale has been relaunched after an initial effort failed to excite investors.

Panagiotakis’ Amynteo announcement was also aimed at the European Commission as an indication of the power utility’s intention to conform amid reports of a launch of infringement procedures by Brussels against Greece for PPC’s overtime usage of the power plant. A 17,500-hour Amynteo lifeline extension offered by the European Commission expired early last winter but the unit is still operating.

Domestic political interests are another factor behind the board’s avoidance of a discussion on Amynteo’s future at last Friday’s PPC meeting. Given the fact that some 1,000 jobs could be lost if Amynteo is shut down, state-controlled PPC would rather delay any talk on the subject until after the upcoming local, regional and European elections.

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.

PPC to withdraw Amynteo in support of effort to sell Meliti, Megalopoli

The main power utility PPC’s board is expected to reach a decision today to withdraw its now-expired Amynteo lignite-fired power station from the grid in order to improve the clarity and market conditions for investors in the utility’s bailout-required disinvestment package that includes two other lignite units, Meliti and Megalopoli.

An Amynteo facility withdrawal, combined with an ongoing effort by PPC for improved supply terms from the operator of the Ahlada mine feeding the Meliti power station, would boost the incentive of investors considering the PPC disinvestment package. Its initial sale effort did not produce a result.

PPC’s chief executive Manolis Panagiotakis wants an Amynteo withdrawal decision from the board today in an effort to avoid Brussels sanctions against the utility for its continued operations of the outdated facility.

Amynteo is currently operating beyond a 17,500-hour lifeline extension granted by the European Commission in 2016.

Last week, Kostas Skrekas, the main opposition New Democracy party’s shadow energy minister, told a Power & Gas Supply Forum in Athens that the European Commission has begun infringement procedures against Greece for this overtime usage.

The Amynteo withdrawal will not be instant but, instead, made in late 2020 or early 2021, when a 32,000-hour extension offered by the government through a ministerial decision last November is expected to expire.

This extension, which effectively added 14,500 hours to Brussels’ 17,500-hour extension in 2016, had not received any approval from the European Commission.

Brussels had set its 17,500-hour extension limit as part of the EU decarbonization policy.

Genop, the power utility PPC’s main union, is planning action against the planned closure of Amynteo in Greece’s north, with support from local and regional authorities. The plan casts doubts over the jobs of 1,000 PPC workers and could also affect the region’s telethermal needs and economic activity.

PPC had received four different Amynteo environmental upgrade proposals from the Mytilineos, Copelouzos, Peristeris and Intrakat groups prior to this latest decision for the facility’s eventual withdrawal.

 

 

 

PPC chief informs Brussels of crucial factors in lignite units sale

The main power utility PPC’s chief executive Manolis Panagiotakis has provided the European Commission with a series of a factors he sees as crucial to the success of the utility’s follow-up sale attempt of lignite units following a failed initial effort.

EU law limiting investment activity of non-EU investors is indirectly yet quite clearly presented as an obstacle that should not restrict the PPC sale, the utility’s chief official pointed out in his letter, forwarded to Brussels competition and energy authorities.

According to Panagiotakis, Russian, Chinese and American players of repute have obtained the sale’s necessary data and are considering participating in the sale. The relaunch of the sale, a bailout requirement, is expected to feature improved terms for investors.

The PPC boss also lists CAT remuneration eligibility for the lignite-fired power stations included in the sale package as pivotal.

Staff reductions at the Megalopoli and Meliti power stations, both believed to be loss-incurring, are also crucial for the sale, according to the PPC chief. A voluntary exit plan offered by PPC is currently in progress and leading to payroll cost reductions, he informed. Savings at the Megalopoli plant are expected to reach approximately 25 million euros a year, Panagiotakis noted in his letter.

An existing lignite supply agreement between PPC and the license holder of Ahlada, a mine feeding PPC’s nearby Meliti lignite-fired power station in northern Greece, remains a problem as it does not secure price and quantity stability, the utility boss also pointed out, adding that legal pressure is being applied on the license holder.

The lack of a clear-cut national energy plan, or, more specifically, the ambiguity surrounding the future of the country’s lignite-fired power stations, is another issue that troubled investors in the previous sale effort, Panagiotakis noted.

Greek energy planning studies indicate the need for lignite-related output in the medium term, but at levels clearly below current levels, the PPC boss supported.

 

 

Czech offer to serve as lower limit in new PPC sale attempt

The main power utility PPC’s recently failed bailout-required sale of lignite units is headed for a relaunch rather than an extension, which will enable the entry of new candidates, as well as a market-based evaluation rather than a book value estimate of assets, as was the case with the first attempt, ongoing negotiations between the energy ministry and the European Commission are strongly indicating.

Bids submitted by participants in the initial sale attempt are expected to be taken into account for the new evaluation.

The Mytilineos group had offered 25 million euros for PPC’s Meliti unit while a Greek-Czech bidding team comprising Gek Terna and Seven Energy submitted a 103 million-euro offer for Meliti and two Megalopoli units.

However, this latter offer was rejected as it included a profit-and-loss sharing condition that had not been included in the sale’s terms. Authorities are now looking at including a profit-and-loss sharing mechanism to the new sale’s terms. Also, the amount offered by Gek Terna and Seven Energy is expected to be adopted as a lower limit.

Energy ministry officials are aiming for a finalized agreement by this Thursday’s Eurogroup meeting of eurozone finance ministers. PPC’s lignite disinvestment is a key bailout commitment that remains pending. A one-billion euro tranche for Greece depends on this sale procedure.

PPC’s chief official Manolis Panagiotakis believes that a renewed sale attempt cannot take place sooner than May, given the preparations required.

Greek officials are hoping for a sufficient time period that will enable the completion of a staff reduction demand made by prospective buyers for the sale package’s units.  Local authorities also hope PPC’s lignite units will qualify for CAT remuneration by May.

Athens given second chance by Brussels for PPC lignite sale

Energy ministry officials are busy preparing a follow-up proposal for the main power utility PPC’s bailout-required disinvestment of lignite units, expected to be forwarded to the European Commission within the current week, sources have informed.

The new proposal, which follows a recently failed first sale attempt whose terms did not fully convince investors and subdued offers, is seen as a second chance for Greece to meet its lignite-related bailout commitments, intended to break PPC’s dominance in the sector.

The new sale effort could head in one of two directions. The initial tender, whose package includes units at PPC’s Megalopoli and Meliti power stations, could be given an extension with improved terms for potential buyers, such as a 50 percent staff reduction at the units up for sale, as well as more favorable lignite supply terms for the Meliti unit, in the country’s north, from the nearby Ahlada mine. Investors had tabled both these demands in the lead-up to the first sale effort.

A second scenario that could emerge would entail relaunching the sale with new terms and open doors for new participants. PPC appears to favor this option believing a greater number of contenders will increase the likelihood of better offers and a successful sale.

 

PPC lignite control, market shares, EC hydropower probe an explosive mix

When the Syriza party, as chief partner of the country’s coalition government formed early in 2015, decided to nullify legislation ratified by a previous administration for the establishment and sale of “Small PPC”, a new company that was to be carved out of the power utility to represent 30 percent of its production capacity – including lignite and hydropower units – customers and debt commitments, it trumpeted a political victory for nullifying, in an unprecedented move, a bailout-related law, but, at the same time, was taking on a big risk.

This PPC initiative now appears to be backfiring as the EU’s ensuing decarbonization policies – the basic reason behind last week’s failure of Syriza’s alternative plan, a sale offering PPC lignite units – progressed at a more rapid pace than the government had anticipated.

A successful sale by PPC of Meliti and Megalopoli power station units included in its disinvestment package was crucial for the prevention of further measures by the European Commission.

Instead, the current combination of three pivotal factors in Greece’s electricity market makes for an explosive mix.

PPC’s ongoing monopoly of the country’s lignite resources, offering the utility unfair advantages over rivals in the wholesale and retail electricity markets; the power utility’s stubbornly high electricity market shares; as well as a developing Brussels investigation of PPC over suspicions it has abused its market dominance and manipulated Greece’s energy market through its hydropower units could prompt major developments.

 

PPC fate in hands of Brussels, hydropower units addition a fear

The main power utility PPC’s future corporate make-up, following the apparent debacle of its bailout-required disinvestment of lignite units, now lies in the hands of the European Commission, whose intentions are soon expected.

Even if the Mytilineos group does submit an improved follow-up offer today, as has been requested, for PPC’s Meliti facility in Florina, northern Greece, and the unit is sold, the country’s commitments to the European Commission will not have been fulfilled.

Two units of PPC’s Megalopoli facility failed to attract investors, meaning the sale’s objective of reducing PPC’s lignite market share by 35.6 percent cannot be attained.

The initial offer made by the Mytilineos group for Meliti is believed to be well under the price tag set by an independent evaluator for the facility.

Another offer made by Seven Energy and Terna, for Megalopoli, was apparently rejected for not meeting terms, while the sale’s third contender, a team comprised of the Copelouzos group and CHN Energy, ended up not submitting any offers.

The crucial question, as things have turned out, is whether Brussels will bring Greece’s hydropower units into the picture, as an addition to the lignite package.

The energy ministry is definitely worried about such a prospect and insists this remains a red-line issue for energy minister Giorgos Stathakis.

Greece will be under considerable pressure should Brussels and the country’s other lender institutions decide to associate the lignite unit sale’s apparent debacle with Greece’s slow progress in opening up the retail electricity market to competition.

Data provided by the energy exchange for December showed PPC’s retail market share rose to 80.29 percent from 78.63 percent in a month. According to bailout terms on the matter, PPC’s market share at the end of 2018 was supposed to have dropped to 62.24 percent before reaching 49.24 percent by the end of 2019.

 

 

Export limit among factors seen subduing NOME prices today

Export limits imposed by RAE, the Regulatory Authority for Energy, on electricity amounts acquired by bidders at NOME auctions are expected to play a fundamental role in subduing prices at today’s first session for the year, despite the relatively modest electricity amount of 350 MWh/h offered and the currently elevated System Marginal Price (SMP), or wholesale, levels.

The new NOME electricity export limits, being implemented for the first time today, will severely limit the ability of players to transmit amounts to regional markets.

Lower price levels in neighboring markets, where SMP levels are currently lower than they are in Greece and are expected to drop further as a result of greater hydropower output generated by heavy rainfall this winter, are also expected to play a role in restricting Greek electricity export activity.

A third factor seen keeping NOME prices low today is the main power utility PPC’s seemingly failed attempt to sell its lignite-fired power stations at Megalopoli and Meliti, a bailout-required disinvestment. If speculation of the sale’s failure is made official, electricity amounts at the ensuing NOME auctions will not be reduced.

Today’s NOME price level stands no chance of reaching the lofty level of 54.74 euros per MWh registered at the previous auction as a result of the three aforementioned factors, pundits have asserted. Instead, they forecast a forty-something price level.

PPC units sale close to failure, call for improved sole valid offer

The main power utility PPC’s bailout-required sale of units at Meliti in Greece’s north and Megalopoli in the south could end up being half successful, at best, but a full debacle is considered most likely, the disclosure of binding bids submitted yesterday, the sale’s deadline day, has indicated.

Sale authorities have requested an improved bid from just one participant, the Mytilineos group, for its offer concerning the Meliti facility, while another offer made by Seven Energy and Terna for Megalopoli has apparently been rejected as it does not meet the tender’s terms, energypress has understood following a thorough cross-examination of incoming information.

According to one of Greece’s bailout commitments, based on a European Court verdict, the sale effort requires a disinvestment representing 40 percent of PPC’s lignite capacity. Meliti I and II and Megalopoli III and IV need to be sold if this disinvestment target is to be achieved.

PPC has suggested it will strive for an imminent follow-up sale in an effort to honor the European Court disinvestment decision. If this is permitted, problems that have made the current sale unattractive to investors will need to be resolved. The current composition of the Megalopoli package, in particular, is virtually unsellable, investors agree.

PPC remains determined to achieve decent sale prices for Meliti and Megalopoli, despite the fact that both facilities have been assessed as loss-incurring by investors. In recent comments, the power utility’s chief Manolis Panagiotakis noted that PPC is “selling not selling out.”

PPC lignite units sale stands little or no chance of success

Latest developments concerning the main power utility PPC’s ongoing effort to sell its Megalopoli and Meliti power stations strongly suggest the sale stands little or no chance of attracting even just one offer by tomorrow, when the procedure’s extended binding bids deadline expires.

Indicative of the friction that has simmered between the seller and buyers, PPC’s chief executive Manolis Panagiotakis, speaking yesterday at a company event for the New Year, remarked: “We don’t expect private-sector investors to offer amounts that will take 25 years to recover, as has been the case with PPC. Let them recover these amounts in half the time.”

The utilization of electricity quantities promised by the acquisition outweighs the importance of profit margins, the PPC boss contended.

“In markets and countries of far greater maturity and economic development enterprises do not rely on big profit margins but product quantity,” Panagiotakis said.

PPC will do whatever possible for a successful outcome in the sale, he stressed, thereby suggesting the power utility should not be held accountable if the procedure fails to produce a result.

PPC may need to deal with European Commission pressure for the inclusion of hydropower facilities into an expanded sale package if the current effort sinks.

Potential buyers have adamantly pushed for improved sale terms in the lead-up and remain dissatisfied, reminding that Megalopoli and Meliti are both loss-incurring units.

 

 

PPC lignite units sale failure highly likely, day after examined

The main power utility PPC’s ongoing effort to sell its Megalopoli and Meliti power stations as part of a bailout-required disinvestment of lignite units appears increasingly likely to fail as possible buyers are maintaining an unfavorable view of the prospects of the units on offer.

An extended deadline for binding bids is nearing and expires on February 6.

PPC has planned a series of meetings for today with the sale’s three possible buyers – CHN Energy-Copelouzos group, Seven Energy-Gek Terna and Mytilineos – to update on the progress of its voluntary exit plan offered to employees at the Megalopoli and Meliti units and transfer of 400 employees to other units.

PPC believes these changes will transform the loss-incurring units into profitable ventures but the buyers remain tentative. Their analysis of data made available paints a darker picture.

The sale’s participants have called for the implementation of a profit-and-loss sharing system for Megalopoli and Meliti. The European Commission has rejected a plan forwarded by PPC but the investors contend it was very different to a preliminary plan embraced by Brussels. The buyers also want a more drastic reduction of employees at the two plants to 480 from the previous combined total of 1,248. They are also demanding clarity on the CAT remuneration eligibility of the two plants and a clearer picture on the lignite price for supply from the Ahlada mine to the Meliti unit.

The energy ministry is believed to already be examining options based on EU regulations should the sale effort fail. If so, the ministry believes the forthcoming European Parliamentary elections, to be held May 23-26, will hold up and thrust forward the sale to a future date.

Finalized CAT agreement expected within fortnight

Greece and the European Commission are no more than a fortnight’s time away from reaching a deal on the country’s CAT mechanism, reliable sources closely following ongoing negotiations on the matter between the energy ministry and Brussels officials have informed.

Once an agreement is finalized, Brussels will deliver its notification, in other words a finalized list of observations on the Greek CAT plan. Its finalized look, to emerge following any needed adjustments, could be announced by the end of March, barring unexpected developments.

A certain period of time, depending on the pace of bureaucratic procedures in Brussels, will then be needed for the plan’s approval by the European Commission. This will enable preparations for the first CAT auction, expected, without a doubt, within 2019.

The nucleus of the Greek CAT plan, based on an Italian model that has already been endorsed, complies with EU directives, the European Commission has already recognized. Brussels officials have apparently requested revisions from Greece that will result in a CAT mechanism version sharing an even greater amount of similarities with its Italian equivalent.

Greece’s new CAT plan mainly concerns private-sector thermal electricity producers and the main power utility PPC as it will greatly shape their operating conditions over the next decade.

Investors considering PPC’s Megalopoli and Meliti power stations included in an ongoing bailout-required disinvestment of lignite units are also monitoring developments as the resulting CAT plan will greatly determine the earning potential of these units.

The PPC’s Ptolemaida V power station, now under construction, is expected to be among the units to qualify for CAT remuneration.

Meliti, Megalopoli units still a profit challenge for buyers

Transforming the Meliti and Megalopoli lignite-fired power stations into profitable ventures continues to represent a major challenge, latest data acquired by investors on the two units included in the main power utility PPC’s bailout-required sale of lignite units has indicated.

Investors contend their calculations based on fresh data do not result in better financial prospects for the two units, both loss-incurring at present, despite certain incentives. A voluntary exit plan offered to employees as a means of cutting payroll costs and other sales and purchase agreement (SPA) term revisions do little to ensure the sustainability of Meliti and Megalopoli, investors have pointed out.

On the contrary, PPC insists appropriate sale term adjustments will generate profit potential for both units.

According to data examined by possible buyers, turnover and operating cost figures concerning Meliti last November produced a deficit of approximately 10 euros per MWh. Earnings of 64.5 euros per MWh were outweighed by operating costs totaling 74.9 euros per MWh and pushed higher primarily by increased CO2 emission right costs.

Revenue and cost figures for Megalopoli have fluctuated wildly, data showed. This facility underwent maintenance on many occasions and often did not contribute to the grid. Last July, revenues at the unit were 64.2 euros per MWh and operating costs reached 68.9 euros per MWh. In September, revenue rose slightly to 66 euros per MWh while operating costs rose sharply to 96 euros per MWh.

Last week, authorities decided to extend a January 23 binding bids deadline to February 6. Investors considering the sale expect new sale-term improvements beyond certain incentives already offered, they have made clear.

 

Electricity suppliers facing challenges despite good news

Despite certain favorable developments emerging for the country’s independent electricity suppliers in 2019, such as the abolishment of a RES-supporting supplier surcharge and the main power utility PPC’s plan to reduce a 15 percent discount offered to punctual customers, independent suppliers face challenging times as a result of a gradual rise of the system marginal price (SMP), or wholesale electricity prices, driven up by increased CO2 emission right and fuel costs, as well as the diminished role of NOME auctions.

NOME auctions will become a less effective source for lower-cost electricity as amounts to be offered to participants will be greatly reduced, starting prices will be sharply higher, and electricity export restrictions planned by RAE, the Regulatory Authority for Energy, promise to confine the quests of players for new customers in other markets.

RAE has planned a 1,444 MWh/h electricity amount offering through NOME auctions in 2019. According to sources, the prospect of an additional 520 MWh/h offering, as a penalty against PPC for its failure to meet a market share contraction target set for 2018, will be dropped as the power utility is now downsizing its assets through a bailout-required disinvestment of lignite units.

Instead, the 1,444 MWh/h NOME amount allotted by RAE for 2019 is expected to be reduced by approximately 520 MWh/h, presuming the PPC disinvestment effort goes according to plan.

Should PPC successfully sell its Meliti and Megalopoli lignite-fired power stations, both part of the lignite disinvestment package, then the country’s electricity amount to be offered through NOME auctions in 2019 will be reduced to represent 13 percent of total consumption, from the previous level of 22 percent, according to a bailout term. This would reduce the NOME amount for 2019 to approximately 920 MWh/h.

No extra time for PPC units sale, advisor HSBC informs

Prospective buyers taking part in the main power utility PPC’s bailout-required disinvestment of lignite units will need to submit their binding offers by the sale’s current January 23 deadline, at 12 pm, the procedure’s financial advisor HSBC has informed, dispelling rumors of a new deadline extension, energypress has understood.

Even so, participants will most likely remain adamant and request additional time as a number of matters concerning the disinvestment remain unclear. These include the outcome of a voluntary exit plan for employees at two power stations, Megalopoli and Meliti, included in the sale, and PPC’s ongoing negotiations with the owners of the Ahlada lignite mine, feeding the Meliti power station, for a lower supply price and longer supply agreement.

A comprehensive post-bailout review of Greece’s reform commitments is currently in progress. Keen for approval from the country’s lenders for the ongoing PPC disinvestment, the government will avoid taking any initiatives that could make it accountable for any further delays of the sale effort.

PPC widens voluntary exit plan eligibility, limits food allowance

The main power utility PPC’s severance pay of 15,000 euros offered to employees agreeing to depart through the corporation’s voluntary exit plan will now also be made available to staff members who have been employed at the company for at least 25 years, not just older personnel eligible aged at least 62 and eligible for retirement, PPC’s administration has decided at a board meeting.

The measure, part of a PPC personnel restructuring plan prepared by the consulting firm McKinsey that includes more flexible labor terms for new and outgoing employees, incentives and staff redistribution, aims to lower the average age of the power utility’s workforce, currently numbering approximately 10,000, to less than 50, the current average age.

So far, the voluntary exit plan has been accepted by 273 employees at two lignite-fired power stations, Megalopoli and Melit, included in PPC’s bailout-required disinvestment of lignite units, as well as a further 220 employees at other divisions and units.

It remains to be seen if PPC will succeed in reducing its payroll by approximately 4,000 employees for cost savings of 330 million euros, as McKinsey has advised in its business plan for the Greek power utility.

As part of the corporation’s wider cost-reduction measures, the PPC board has also decided to reduce a food allowance offered to employees to 3.40 euros per day from its previous level of 6 euros per day over the next three years.

PPC lignite unit contenders up pressure, new deadline possible

Three contenders considering the main power utility PPC’s sale of its Megalopoli and Meliti lignite-fired power stations included in a bailout-required disinvestment of lignite units are intensifying their pressure on PPC for more favorable terms as the deadline for binding bids approaches.

In response, PPC has been eager to present any new favorable developments that have emerged from the implementation of incentives in an effort to support the sale’s conditions and price-tag potential.

This was demonstrated yesterday by chief executive Manolis Panagiotakis in comments to journalists.  He made reference to the results of a voluntary exit plan offered to employees at the Megalopoli and Meliti units, both loss-incurring. A total of 360 employees working at the two lignite-fired power stations have accepted the offer. Prospective buyers have indicated they want the workforce at Megalopoli and Meliti, totaling 1,248 prior to the voluntary exit plan, to be cut down to 600. PPC has just announced a voluntary transfer plan for Meliti and Megalopoli unit employees to other company posts.

Panagiotakis also noted PPC is negotiating with the owners of the Ahlada lignite mine, feeding the Meliti power station, for a lower supply price and longer supply agreement.

Reacting to the PPC chief’s comments, China’s CHN and the Copelouzos group’s Damco, one of the sale’s three potential bidding teams, described the results of the staff reduction effort at the two power stations as a good basis for cost reduction.

A consortium comprising the Czech Republic’s Seven Energy and Gek Terna has refused to comment. The Seven Energy firm has yet to present itself as a certain participant in the sale. In recent times, it has made note of narrow profit margins despite the voluntary exit plan, CAT remuneration uncertainties surrounding for the two units, and increased CO2 emission right costs.

Panagiotakis, the PPC chief, yesterday told journalists the Mytilineos group remains a contender for the Megalopoli and Meliti power stations. The Mytilineos group has not responded but, according to sources, remains troubled by what it sees as an unfavorable investment conditions surrounding the lignite sector, including the sharp rise in CO2 emission right costs.

Just days remain before the sale’s January 23 deadline for binding bids expires. An extension could be required as a result of PPC’s last-minute Ahlada mine negotiations and a Brussels delay concerning the European Commission’s position on Greece’s CAT remuneration mechanism proposal, a crucial factor for the lignite units sale.

 

 

PPC voluntary exit plan’s payroll cost savings estimated at €21.2m

The main power utility PPC’s voluntary exit plan offered to staff at the corporation’s loss-incurring Meliti and Megalopoli power stations will produce payroll savings of more than 21.2 million euros for the corporation, energypress sources closely following the power utility’s bailout-required disinvestment of lignite units, which includes the aforementioned facilities, have informed.

A total of 360 employees working at the two lignite-fired power stations have accepted PPC’s voluntary exit proposal, offering 25,000 euros in severance pay.

A total of 243 PPC employees at the Megalopoli unit have registered for the voluntary exit plan. Their total payroll cost for the corporation has been estimated at 14.5 million euros. In addition, 76 Megalopoli unit employees departed in the previous six-month period for severance pay amounts of 15,000 euros. Their payroll cost reduction is estimated at 4.5 million euros, which brings the tally of the payroll cost reduction for all 319 employees to nearly 19 million euros.

As for the Meliti unit, a total of 41 employees have agreed to leave, producing payroll savings of 2.2 million euros.

Prospective buyers have indicated they want the workforce at Megalopoli and Meliti, totaling 1,248 prior to the voluntary exit plan, to be cut down to 600.

PPC yesterday announced a voluntary transfer plan for Meliti and Megalopoli unit employees, offering jobs at other power utility posts, sources informed.

The response of employees to this transfer offer is expected to be subdued as workers will take into account the distance factor. Most available posts are believed to be situated in the Athens area, not close to the Florina and Arcadia locations of the two units.

On another front, PPC and the owners of the Ahlada lignite mine feeding the Meliti power station are engaged in talks to resolve issues concerning their supply agreement, whose  whose pricing and quantity details are vague. The supply agreement will be taken on by Meliti’s prospective new owner.

 

 

 

Meliti, Megalopoli worker exodus at 360, Brussels grants extension

Main power utility PPC staff employed at the corporation’s Meliti and Megalopoli power stations, both loss-incurring, appear to be embracing a voluntary exit plan offered by the company as part of an effort to entice investors to its bailout-required disinvestment of lignite units. Outgoing workers presumably fear the job insecurity that lies ahead at the utility, now undergoing transformation.

A total of 360 workers at the Meliti and Megalopoli lignite-fired power stations have so far registered for the voluntary exit plan, offering severance pay of up to 25,000 euros, including bonuses, energypress sources informed. Officials believe the exodus tally could rise further.

Investors have indicated they want the workforce at Megalopoli and Meliti, totaling 1,248, to be cut down to 600. However, even such a reduction cannot guarantee sufficient investor interest as possible buyers want more incentives that would  compensate for these loss-incurring units.

At present, 1,017 workers are employed at the Megalopoli unit and 231 at Meliti. Investors want 480 workers to remain at Megalopoli and 120 at Meliti.

According to energy ministry officials, the European Commission has officially granted Greece a deadline extension for the voluntary exit plan that resets the date for February 8 from January 31.

If all goes according to plan, binding offers by prospective buyers will be expected on January 23, while improved offers, if needed, and a PPC announcement of the winning bidder will be due by January 31. Greece, according to the current schedule, needs to officially update the European Commission of the disinvestment’s conclusion by February 8.

Investors not warming to PPC lignite units sale, deadline near

Prospective buyers are maintaining an unfavorable outlook of the main power utility PPC’s bailout-required sale of lignite units with just over a week remaining before the latest deadline for binding bids expires.

PPC and the energy ministry will need to make further improvements to the disinvestment’s sale and purchase agreement (SPA) terms, sources stressed.

SPA revisions made in the lead-up to the sale’s deadline, now expiring on January 23, including a commitment for CAT remuneration of 40,000 euros per MW or up to 30 percent of the sale price, as well as a voluntary exit plan for workers at the loss-incurring Meliti and Megalopoli power stations included in the sale do not appear sufficient to generate genuine buyer interest.

Uncertainty continues to surround the outcome of state-controlled PPC’s voluntary exit plan as the date for binding bids draws nearer. Investors believe the workforce at the Meliti and Megalopoli power stations, currently totaling 1,248, needs to be cut down to 600. However, little time remains for an exodus of such magnitude.

Also, an existing agreement concerning lignite supply from the Ahlada mine to the Meliti facility has not been embraced by investors as its price and quantity terms appear vague.

In addition, a profit-and-loss sharing arrangement proposed by PPC for the units has not been been included in the SPA.