PPC partnerships possible no sooner than end of year, utility admits

The main power utility PPC’s administration appears to have become aware of the practical difficulties involved in establishing subsidiaries for prospective retail market partnerships with private-sector companies that would serve a proportion of the utility’s existing customers.

This approach is being viewed by PPC as a controlled way of surrendering some of its dominant retail market share, as demanded by the country’s bailout agreement.

According to latest estimates by the utility’s administration, the establishment of such partnerships with private-sector power suppliers is not practically possible any sooner than the end of this year.

NOME auctions intended to provide third parties with access to PPC’s low-cost lignite and hydropower sources as a measure to break the utility’s dominance – will first need to be launched before partnership plans may be developed. PPC has tried to avoid the auctions, now seeming like they will be launched in October, not September, as originally scheduled.

PPC officials believe that the achievement of a retail market share contraction by the utility through the establishment of partnerships with private-sector suppliers will reduce the amount of electricity that will need to be made available by the utility’s production units at the NOME auctions for rival retail suppliers.

For the time being, none of the country’s three vertically integrated energy corporations are interested in forming retail partnerships with PPC, energypress has been informed.

As for the electricity production sector, PPC’s boss Manolis Panagiotakis – speaking yesterday at an information day  organized by RAE, the Regulatory Authority for Energy, for a public discussion on the proposed NOME auction terms – said investors are welcome to join a planned consortium featuring China’s CMEC (China Machinery Engineering Corporation) for the construction of a secong power station in Meliti, Florina, northern Greece. The Chinese company is expected to hold a majority stake in this venture. “Anybody can join in, as long as capital is contributed,” the PPC boss remarked.

Panagiotakis also warned that PPC’s survival could be threatened if the utility is forced to provide a large proportion of its production, below cost, to the imminent NOME auctions. This will not be permitted, he stressed. Panagiotakis also reiterated his opposition to the bailout-required auctions as a means of reducing PPC’s market share.


PPC voluntary retirement offer may help propel partnerships plan

The negative reaction by main power utility PPC’s union groups to a plan envisioning the establishment of partnerships between PPC and private-sector firms makes even more difficult this task whose aim will be to offer third parties access to lignite sources as well as hydropower production, sectors currently dominated by PPC.

Negative union reaction in the past has sunk similar-minded plans, including an effort concerning the establishment of a partnership between PPC and Germany’s RWE. Admittedly, much time has since passed, while current conditions, largely shaped by bailout-related demands, are very different. However, any union reaction will need to be handled appropriately if progress is to be made.

PPC sources have informed that talks are already underway to establish terms for favorable retirement packages to be offered to staff members employed at units to be included in prospective partnerships. The objective, sources informed, is to offer appealing retirement packages to a substantial number of employees, especially older staff members.

A successful outcome of the retirement would help lure private-sector investors, who are expected to be offered 51 percent stakes in the PPC partnerships.

Reports claiming that PPC has taken on board an excessive number of employees in certain divisions, such as hydropower plants and administration, have occasionally emerged. On the contrary, some reports have contended that the utility faces a shortage of technical staff and workers at its mines and lignite-fired stations. It is estimated that PPC currently employs over 6,000 persons at its mines and production units in Greece’s north.

Greek officials, in negotiations with the country’s international creditors, tabled the PPC partnerships plan as an alternative to the sale of a 30 percent share of PPC, locally dubbed “Little PPC”.

The partnerships plan is expected to be a leading issue during talks between Greek officials and the country’s lenders in autumn.


PPC considers excluding production from partnerships

The main power utility PPC’s administration wants the utility’s potential partnerships with private-sector enterprises, an initiative intended to reduce its dominant market shares, to be limited to trade and supply activity, without the inclusion of any production units in future consortiums, according to energypress sources.

PPC officials contend that the bailout-related need to reduce the utility’s share of electricity production to less than 50 percent, from the current level of roughly 60 percent, can be easily attained through the withdrawal of some of its old  producing facilities.

This alone would suffice, which makes the establishment of partnerships with private-sector partners in the production domain, with the latter holding majority stakes, unnecessary, according to the utility’s administration.

It is a different story for the utility’s electricity supply business activities, where PPC’s market share reaches levels as high as 98 percent. Partnerships in this domain, in which PPC would hold minority stakes of between 30 to 40 percent, would help reduce its market share, as is demanded by the bailout agreement. PPC must reduce its market share in electricity supply to less than 50 percent by 2020.

According to sources, PPC’s administration is already engaged in talks with certain private-sector major players currently active in Greece’s retail electricity market.

Should PPC choose to neglect production in its partnerships plan, it will leave unresolved another requirement concerning the need for the utility to offer third parties access to its lignite sources. The inclusion of private-sector partners in both electricity production and supply activity would fulfill this requirement. PPC has had to confront legal challenges at European courts over its refusal to liberate the lignite market.

Two major private-sector players, Elpedison and Mytilineos, have both already publically expressed an interest to establish partnerships with PPC in electricity production and supply. Heron, the Greek market’s other vertically integrated energy corporation, is believed to be interested. It remains unknown how these firms could react if PPC decides to limit its partnership proposals to the supply sector.