Megalopoli

Investors not warming to PPC lignite units sale, deadline near

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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.

PPC unit candidates demanding major changes to SPA terms

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Possible buyers of lignite units offered by the main power utility PPC in a bailout-required disinvestment have warned that incentives offered so far do not suffice to prevent losses incurred by two power stations, Meliti and Megalopoli, included in the sale, and, as a result, are demanding major changes to the sales and purchase agreement (SPA) terms.

The sale procedure’s binding bids deadline has been given a further extension until January 23, but, despite the additional preparation time, investors are warning structural problems at the units will make it difficult for them to participate in the sale.

Certain pundits suggest the negative talk could be part of a bargaining game played by investors aiming for the best possible terms and deals.

The need for a workforce reduction at the two power stations, down to a total of 600 from the current 1,248, is one of the main demands of investors, who believe half the current workforce would be enough to keep these units running.

PPC has offered employees a voluntary exit plan offering 15,000 euros in severance pay plus a 5,000-euro bonus. However, buyers want the ongoing procedure completed before they submit any binding bids.

Prospective buyers have determined the Meliti and Megalopoli are incurring losses of between 60 and 70 million euros per year. A subsequent profit-and-loss sharing scheme offered by PPC as remedy was included in the SPA terms but ended up not being accepted by Brussels, the energy ministry has informed.

 

 

Ambiguities prompt deadline extension for PPC units sale

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Prospective buyers of lignite units offered by the main power utility PPC in a bailout-required disinvestment have been given additional time to submit binding bids, from January 7 to 15, as a result of various ongoing ambiguities troubling investors.

However, this eight-day deadline extension, granted unofficially without a proper Brussels approval procedure, may need to be stretched further if clarity is not secured for investors – especially the outcome of a voluntary exit plan for 1,248 employees at state-controlled PPC’s two lignite-fired power stations, Meliti and Megalopoli. All developments indicate the sale procedure will not go ahead unless this plan is completed.

Applying pressure, Finance Minister Euclid Tsakalotos wants pending national commitments, including the sale of PPC units, to be completed ahead of a second post-bailout review commencing on January 21.

Most investors eyeing the PPC sale have raised labor-cost concerns for both the Meliti and Megalopoli power stations, noting their aggregate workforce number should be reduced to 600.

The CAT remuneration level for these units, still unclear, is also spooking  investors.

Just after Christmas, on December 27, Energypress had reported that a deadline extension was inevitable, despite energy ministry claims of adherence to the procedure’s schedule, according to which, follow-up improved bids, if needed, would have been submitted on January 10. Given this schedule, the appraisal date for offers had been set for January 11 while Brussels was to be updated on January 15.

 

PPC’s voluntary exit plan terms still not ready, lignite units sale deadline near

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The eligibility terms and conditions for the main power utilty PPC’s voluntary exit plan concerning 1,248 employees at two power stations included in a bailout-required sale of lignite units have yet to be prepared despite being a crucial factor in the disinvestment effort’s outcome.

PPC has announced that employees interested in taking up the voluntary exit offer need to submit applications by January 10 but has yet to offer eligibility details.

This delay is injecting credibility into rumors of a deadline extension for binding bids by prospective buyers of PPC’s lignite units. They face a January 7 deadline.

Prospective buyers want to know the outcome of the voluntary exit plan before they submit binding bids.

Despite the time squeeze, energy ministry officials insist the  disinvestment’s schedule will remain as announced. If so, binding bids will need to be submitted on January 7, improved offers, if required, must be submitted on January 10, and evaluations of offers will be made a day later.

Investors have not been given any other schedule dates for the sale, iit is believed.

A total of 1,017 staff members are employed at PPC’s lignite-fired Megalopoli power station and 231 at Meliti, the two facilities for which the voluntary exit plan applies.

Investors want the combined workforce total of 1,248 at the two units reduced to 600 workers, meaning 120 could remain at Meliti and 480 at Megalopoli. Union groups believe such a drastic staff cut will be difficult to achieve.

The voluntary exit plan, which also applies for employees who have yet to gain pension rights, offers 15,000 euros in severance pay plus a 5,000 euro bonus for every outgoing staff member.

 

 

Voluntary exit offer a final pitch in PPC lignite units sale effort

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The main power utilty PPC has included a voluntary exit plan for 1,248 employees stationed at the loss-incurring Megalopoli and Meliti power stations into the sales and purchase agreement (SPA) terms of its bailout-required sale of lignite units in what appears to be a final pitch to convince hesitant investors.

The labor flexibility term is one of four key incentives included in the SPA by the power utility, appearing eager for a successful sale procedure, representing 40 percent of its overall lignite capacity, to avoid repercussions, notably the addition of hydropower units to its bailout-required sale list.

In comments yesterday, PPC’s chief executive Manolis Panagiotakis argued the losses being incurred at the utility’s Megalopoli and Meliti power stations are less than figures being reported. He contended quarterly losses are 4.5 million euros at the Meliti unit and 3 million euros at Megalopoli.

Employees accepting the voluntary exit plan stand to receive severance pay of 15,000 euros and a bonus amount worth 5,000 euros.

A total of 1,017 staff members are employed at the Megalopoli facilities and 231 at Meliti. In the case of Megalopoli, employing a far greater number of persons, the voluntary exit plan will also be available to workers who have yet to accumulate retirement rights.

Investors have called for a reduction of workers at both units to 600 employees in total, which could be difficult to reach as 648 employees would need to accept the voluntary exit offer.

Other key incentives offered to investors in the SPA include Brussels-endorsed CAT remuneration of between 35,000 and 40,000 euros per MW for lignite-fired power production over a six-year period; a steady lignite supply price by PPC for the Meliti power station until a dispute concerning the nearby lignite mines in Florina is resolved; and the eradication of a lignite surcharge, already ratified in parliament and factored into investor equations.

Binding bids by potential buyers are due on January 7.

Buyers presented PPC sale’s make-or-break SPA terms

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Prospective buyers of main power utility PPC lignite units on offer through a bailout-required disinvestment will be presented a finalized sale and purchase agreement’s (SPA) terms today, seen as a make-or-break step in this sale procedure.

The appraisal by investors of the SPA, featuring four new bonuses as incentives, will determine their level of interest in the sale of power stations and mines representing 40 percent of PPC’s overall lignite capacity, as well as the level of  binding bids they will be prepared to submit on January 7. Officials plan to complete the procedure on January 15.

The SPA includes the elimination of a lignite surcharge, already implemented and factored into calculations by investors.

It also includes a new term, submitted to parliament yesterday as part of a wider package of energy sector adjustments, enabling new owners to reduce personnel at units acquired. Any staff members not needed at these units will be transferred to DEDDIE/HEDNO, the Hellenic Electricity Distribution Network Operator, according to the SPA. All prospective buyers had demanded this labor flexibility term. It is estimated between 300 and 400 employees, the majority from the Megalopoli power station, could end up being transferred.

A third bonus in the SPA entails CAT remuneration eligibility for PPC’s lignite-fired power stations up for sale for a period of at least six years, until 2025, as was announced yesterday by the European Commission.

The fourth incentive ensures investors a steady lignite supply price by PPC for the package’s Meliti power station until a dispute concerning the nearby lignite mines in Florina is resolved.

The energy ministry and PPC believe these four bonus terms will offset operating losses believed to be incurred by the power stations for sale, as was determined by investors.

All possible buyers have continued to remain cagey on their intentions, despite the announcement of the sale’s bonus terms.

 

Energy ministry, DG Comp discussing new incentives for PPC units sale

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Energy ministry officials and the European Commission’s Directorate-General for Competition are negotiating a new incentive plan for investors considering the main power utility PPC’s sale of its Meliti and Megalopoli power stations, part of a bailout-required disinvestment of lignite units, energypress sources have informed.

The two sides are distancing themselves from a previous Greek proposal offering prospective buyers a profit-and-loss sharing arrangement for the units and focusing on a new incentive model, the sources added.

The Meliti and Megalopoli power stations are loss-incurring, possible buyers have determined through due diligence.

Officials closely monitoring the negotiations informed the new model’s objective is to restrict expenses and increase revenues.

It is believed negotiations could conclude tomorrow, if all goes well, otherwise talks will continue into next week.

PPC is scheduled to stage a board meeting on December 20 to endorse the corporate group’s nine-month results and the sale and purchase agreement (SPA) terms, including incentives.

Binding offers by investors for the Meliti and Megalopoli units are scheduled to be submitted on January 7. If improved bids are requested, these will need to be submitted on January 10. Offers are planned to be appraised by PPC’s board a day later and, on January 15, the energy ministry will inform the European Commission’s Directorate-General for Competition on the disinvestment procedure’s results.

This is the official schedule. It remains to be seen if the plan will be adhered to. All will depend on whether investors will embrace the incentives now being discussed.

 

 

Grid upgrade to end network saturation in the Peloponnese

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A network revamp planned by the power grid operator IPTO in the Peloponnese offers potential for further RES development in the region, currently restricted by a saturated grid, while also promising appropriate conditions for full-capacity operations at Megalopoli V, the main power utility PPC’s new gas-fired power station.

Contracts awarded for the development of an underwater power cable connection at the Rio-Antirio crossing, between the mainland and the Peloponnese, represent a pivotal step. Budgeted at 105 million euros, Corridor A, as the project has been dubbed, is scheduled for completion within 2019 and will enable electricity transmission to and from the Peloponnese.

The benefits to be offered by this project will be maximized by the development of Corridor B, to link Megalopoli, slightly southwest of central Peloponnese, Corinth and Athens. A tender is now in progress for work concerning the Megalopoli-Corinth section, expected to be completed by 2021. The Corinth-Athens segment is scheduled for completion in 2024.

Launch of PPC’s Megalopoli V seen impacting wholesale market

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The commercial launch of the main power utility PPC’s new gas-fired power station Megalopoli V on August 14, following a prolonged period of trial runs and priority dispatch rights that led to further market distortions, is expected to impact wholesale electricity market levels.

This new unit’s commercial launch appears to have been timed intentionally for the purpose of enabling PPC to seek CAT flexibility remuneration for a further 500 MW. Megalopoli V’s installed capacity actually measures 800 MW but 300 MW cannot be utilized until a grid update has been completed.

Megalopoli V will be able to participate in CAT flexibility auctions, expected to be launched next month following European Commission approval. The CAT flexibility mechanism will remain valid until the end of 2019 and remunerate power plants offering flexibility to the grid.

Megalopoli V launch ready, hidden unit costs disclosed

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The main power utility PPC’s new Megalopoli V power unit, which has been put through an extended trial run, offering the facility priority system rights, is now set for its commercial launch.

A related statement by IPTO, the power grid operator, has been delivered to RAE, the Regulatory Authority for Energy, which is expected to approve the power plan’s launch within the next few days, sources said.

Once commercially launched, Megalopoli V will need to offer competitive prices shaped by its variable costs, a development that is expected to impact the wholesale electricity market.

The first signs of impact have become apparent over the past few days. The utility has temporarily stopped operating, following the trial run’s completion, which has led to an increase in the level of lignite-fired electricity production as well as higher gas-fueled generation by independent units, currently finding more space in the market, as suggested by day-ahead market data released by LAGIE, the Electricity Market Operator.

According to this data, the heightened activity of lignite-fired units has disclosed the high variable costs of certain units, especially during hours when these units are shaping the System Marginal Price (SMP).

It has become apparent, for example, that PPC’s Agios Dimitrios units will today exceed 56 euros per MWh, a cost level carrying notorious utility issues such as overstaffing and bloated remuneration packages.

According to LAGIE’s day-ahead market data, PPC’s Agios Dimitrios 2 is today offering an SMP of 59.22 euros per MWh, Agios Dimitrios IV is at 56.2 euros per MWh and Kardia at 54.5 euros per MWh. Quite clearly, such levels offer plenty of capacity for correction and cost reduction, as is expected to be highlighted in a study now being conducted by the consulting firm McKinsey.

The timing of Megalopoli V’s commercial launch does not appear to have been left to chance. Its 500 MW to be offered to the system will be added to the CATs to be targeted by PPC. (It should be noted that this new unit is actually an 800-MW facility but 300 MW remains unavailable because the network has yet to be upgraded.

 

 

 

Bigger interests in Megalopoli spark stronger PPC unit sale resistance

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The turnout at a rally in Megalopoli, Peloponnese yesterday, held to protest against the planned sale of main power utility PPC’s Megalopoli III and IV units, exceeded the expectations of its union organizers with over 2,000 persons attending to signal the sale will not proceed without resistance.

The situation was far milder at a rally in northern city Florina, organized by Genop, PPC’s main union, which drew an estimated 500 protesters to rally against the inclusion of PPC’s Meliti unit, located in the area, to the sale package.

The reaction was stronger in Megalopoli as the employment stakes are far higher in this Peloponnesian city. The two Megalopoli units to be placed for sale employ some 1,100 persons, mostly locals, whereas the Meliti unit in the Florina area provides work for about 60 locals of 200 employed at the unit in total.

Also at stake for the people of Megalopoli is the potential loss of a sizeable carbon-related support sum distributed by PPC to the local community to help the development of various regional projects. This sum is believed to be worth 7 million euros annually. The handling by any private-sector investor of this vital financial injection for the Megalopoli community remains completely unknown.

At a political level, some unrest that has become apparent within the ranks of the Syriza party, the coalition’s key partner, appears to be superficial. Certain party MPs and affiliates have described PPC’s bailout-required disinvestment as a sell-out but are admitting they will ultimately abide by the party line.

 

PPC’s Megalopoli believed to posses 15-year lignite potential

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Lignite deposits feeding the main power utility PPC’s Megalopoli lignite-fired power station in the Peloponnese, whose units III and IV have been included in the bailout-required sale of lignite units, are estimated to last a further 15 years, until 2032, perhaps 2033.

The regional lignite deposit potential of units being offered in the sale stands a key factor in the details being examined by prospective investors.

Other matters currently preoccupying investors during this early stage of consultation ahead of a market test to be launched in January include market conditions, level of transparency, fair competition, and the possibility of additional costs at facilities, an issue requiring further clarification.

The first signs of appraisals being made are said to be encouraging.

Speaking at the American-Hellenic Chamber of Commerce’s annual “Greek Economy Conference” earlier this week, PPC’s chief executive Manolis Panagiotakis described  Megalopoli III and IV as top-rate assets.

The PPC boss expressed a preference for Chinese investors as buyers of the Megalopoli units, which could be interpreted as implying his anticipation of rich offers for their acquisition.

Certified recoverable lignite deposits at Megalopoli are estimated to exceed 100 million tons, energypress was informed earlier this year.

DG Comp reiterates outright rejection of Amynteo for PPC sale list

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The European Commission’s Directorate-General for Competition has once again rejected an intention by Greek officials to include the main power utility PPC’s ageing Amynteo lignite-fired facility in a bailout-required sale package of utility lignite units, energypress sources have informed.

The DG Comp reiterated its position in a letter received by the energy ministry on Wednesday, the sources said.

Technocrats representing the country’s lenders for preliminary negotiations ahead of next Monday’s arrival in Athens of the lender representatives – for about a week of work on the Greek bailout’s third review, including energy sector issues – warned Greek officials that time for the PPC sale package is running out.

The technocrats are pushing for a solution that would satisfy the DG Comp. The authority supports the sale-list inclusion of state-controlled PPC’s more modern Megalopoli unit in the Peloponnese rather than Amynteo, located in the country’s north.

The gap between the DG Comp and Greek team of officials does not appear to be bridgeable at present. Recent local reports suggested the DG Comp could be willing to accept the inclusion, on the PPC sale package, of Amynteo, a facility needing a major revamp if its lifespan is to be extended. However, the latest letter forwarded by the authority to the energy ministry fully rejects such a prospect.

In its letter, the DG Comp rejects a Greek argument claiming PPC would be comparatively disadvantaged – in terms of unit lifespans – if the more modern Megalopoli facility is sold to investors and PPC is left with ageing facilities, the energypress sources informed.