Preliminary talks for 9th post-bailout review begin today

Power utility PPC’s lignite monopoly ordeal, the effort to ensure proper functioning of target model markets, the progress of privatization plans, and Greece’s decarbonization master plan for the lignite-dependent local economies of west Macedonia, in the country’s north, and Megalopoli, Peloponnese, are the key issues on the agenda of the ninth post-bailout review set to be conducted by the European Commission.

Preliminary review talks are scheduled to commence today between energy ministry officials and Brussels technocrats. These will be followed by higher-level talks involving technocrat chiefs and Greece’s newly appointed energy minister Kostas Skrekas.

Though his predecessors faced plenty of pressure, especially over PPC’s dominance, the new minister could be in for a hard time if pending energy-sector issues are not directly dealt with.

RAE, the Regulatory Authority for Energy, and power grid operator IPTO are still seeking solutions to tackle problems faced by the target model’s new markets. They got off to a problem-laden start in November, prompting a sharp rise in balancing market costs during the first few weeks.

As for energy-sector privatizations, the plan to offer a 49 percent stake in distribution network operator DEDDIE/HEDNO appears to be making sound progress and attracting strong interest, as exemplified by the participation of 19 participants in December’s market test.

On the contrary, the privatization plan for gas supplier DEPA Commercial could be destabilized by the company’s ongoing legal battle with ELFE (Hellenic Fertilizers and Chemicals) over an overcharging claim made by the latter. This battle could delay and affect the DEPA Commercial sale.

The Just Transition Plan for Greece’s decarbonization effort is now beginning to make some progress, but this unprecedented endeavor’s degree of complexity cannot be overlooked. Vast amounts of land controlled by PPC need to be repurposed, Brussels must approve investment incentives, and licensing matters need to be resolved, amongst other matters.

Brussels wants further details on Greek energy market plan

The energy ministry is currently in the process of providing additional information to European Commission officials and clarifying Greece’s new energy market plan.

The procedure is being conducted at a technical level ahead of higher-level negotiations next month, when finalized decisions are expected.

Brussels officials have requested further information on a range of issues, including technical details concerning the forward market, whose launch is planned for February; a government plan to exempt power utility PPC from bailout-related restrictions imposed on public sector companies; the sale model for a stake in electricity distribution operator DEDDIE/HEDNO; as well as the privatization plan for gas utility DEPA.

The next Enhanced Surveillance Report on Greece will be delivered at the end of November. Information currently being collected is helping shape an initial draft.

A still-unofficial request by the Greek government for an easing of a market share contraction target concerning PPC, to 65 percent, from 50 percent by the end of this year, now impossible, will be among the problematic issues to be discussed at next month’s top-level negotiations.

Brussels is unlikely to accept this request for PPC unless a countermeasure of equivalent weight is offered, sources informed.


First round of new ministry, lender talks this Wednesday

The current financial standing of state-controlled power utility PPC, effort  to reduce the power corporation’s market share, competition in the electricity market, target model progress, and prospective energy utility privatizations will all feature on the agenda of the recently appointed energy ministry’s first official meeting with the country’s lender representatives, scheduled for this Wednesday in Athens, sources have informed.

Energy minister Costis Hatzidakis will participate in the meeting but the country’s lenders will not be represented at the highest level, the sources added. The energy minister’s participation at the meeting Wednesday highlights the political significance of the PPC rescue effort for the government, the sources noted.

Finalized decisions are not expected during Wednesday’s negotiations. Talks are expected to run until mid-November. A Greek post-bailout  appraisal has been deferred until then as a result of European Commission personnel changes following the European elections last May.

This Wednesday, the energy ministry will inform the country’s lenders on the results of a first round of measures taken by the new Greek government to prevent PPC’s collapse.

A government decision to abandon NOME auctions, introduced about three years ago to offer lower-cost wholesale electricity to independent players, will also be officially announced at Wednesday’s meeting. This measure has cost PPC approximately 600 million euros since its launch, according to Hatzidakis, the energy minister.

The energy ministry officials will also seek a revision of a PPC market share contraction agreement, included in the bailout terms, requiring the utility to reduce its retail market share to less than 50 percent by the end of this year. It is not yet clear if the lenders will accept this request and, if so, what the replacement plan could be.

The key aspects of a government plan for swifter decarbonization, including the closure of PPC’s Amynteo and Megalopoli III power stations; planned efforts for no further target model delays; as well as privatization plans concerning gas utility DEPA and Hellenic Petroleum ELPE will also be discussed Wednesday.

Key energy ministry official holds first session with lender technocrats

The new energy ministry’s secretary-general Alexandra Sdoukou is expected to hold her first meeting today with technocrats representing the country’s lenders, currently in Athens.

Recent tariff hikes at power utility PPC, a campaign intended to improve the utility’s electricity bills collection record and a government plan for the gradual withdrawal of lignite units will all be presented by the energy ministry official.

Sdoukou also intends to present the government’s case supporting the need to end NOME auctions as well as details concerning the target model’s progress and finalized schedule.

NOME auctions have obligated PPC to offer below-cost wholesale electricity to rivals as a market share contraction measure over the past few years. The measure has affected the utility’s financial results and failed to produce results.

The ministry is seeking to establish a fresh setting for the country’s energy-sector negotiations with the country’s lenders, especially the European Commission, on Greece’s energy direction, the electricity market’s structure and PPC’s place in it.

The Greek bailout program includes objectives that have fallen too far behind to be achieved such as PPC’s market share contraction targets and disinvestment of lignite units.

The recently appointed energy minister Costis Hatzidakis is seeking a new overall solution for the country’s electricity market that would entail the adoption and implementation of EU strategic planning, as well as the eradication of any systemic threats, such as a possible collapse of PPC.

As part of this approach, the energy ministry has announced it will accelerate the withdrawal of lignite units and revise the National Energy and Climate Plan for even more ambitious RES targets.

The delay of a post-bailout appraisal of the Greek economy until mid-November, instead of October 31, should give the government additional time to prepare the details of its various energy sector plans, including lignite unit withdrawals, the termination of NOME auctions and privatization of distribution network operator DEDDIE/HEDNO.

Ministry seeking fresh setting for energy sector negotiations

The energy ministry is seeking radical changes to the setting amid which imminent energy-sector negotiations with the country’s lenders, especially the European Commission, will take place.

The talks will focus on Greece’s energy direction, the electricity market’s structure and power utility PPC’s place in it.

Energy minister Costis Hatzidakis will be hoping to avoid discussion on the extent of Greece’s adherence to bailout program obligations concerning the energy sector as, quite clearly, there is much catching up to do. For example, state-controlled PPC is well behind on its retail market share contraction targets, while the utility’s disinvestment plan for lignite assets has not produced results.

Instead, Hatzidakis will seek a new overall solution for the country’s electricity market to entail the adoption and implementation of EU strategic planning and the eradication of any systemic threats, such as a possible collapse of PPC.

According to sources, the energy minister has already presented his position to EU officials ahead of the imminent arrival to Athens of European Commission technocrats, as have ministerial assistants on a recent visit to Brussels.

The recently elected Greek government’s new plan for the energy sector is not only aligned with European Commission demands concerning the market’s decarbonization, but also exceeds Brussels targets, officials have contended.

The new plan is completely different to those of preceding governments, which sought lignite production extensions and continued CAT remuneration mechanism support, amongst other things, a highly ranked energy official informed.

The new focus is on greater RES penetration as well as electricity and natural gas network upgrades and investments, the official added.

The delivery of a Greek post-bailout assessment will be delayed until mid-November, instead of the end of October. This slight extension gives Athens some additional time to work on its desired energy plan revisions.




Brussels hears out Greek plan for electricity market reforms

The recently elected conservative New Democracy government’s plan for energy market reforms, especially in the electricity sector, has been closely listened to by leading European Commission officials over two days of talks in Brussels, generating cautious optimism for acceptance amid the government’s ranks.

Deputy energy minister Gerassimos Thomas spearheaded a Greek team to present the government’s proposals that include the termination of NOME auctions; withdrawal of lignite-fired power stations; reinforcement of the RES sector; and restructuring at power utility PPC.

The plan was presented to various Brussels officials, including the European Commissioner for Climate Action and Energy Miguel Arias Canete; the Director-General of the Directorate for Energy Ditte Juul Jørgensen; as well as to the office of new European Commission president Ursula von der Leyen.

The main aim of the Greek officials was to underline PPC’s poor financial standing as a systemic threat, stress the need for further electricity market reforms, and highlight the government’s commitment over these matters.

The Greek proposals did not prompt any negative reaction, at least for the time being. On the contrary, they could represent the beginning of a positive course as the proposed measures are in line with EU policies on lignite unit withdrawals, emphasis on renewable energy and other matters.

Prime Minister Kyriakos Mitsotakis may have set the tone by presenting a green agenda during recent talks with key European officials.

European Commission technocrats will soon be in Athens for negotiations concerning the Greek economy’s post-bailout monitoring. These talks could stretch beyond October given the recent change of guard at the European Commission.

Energy ministry officials believe negotiations concerning the government plan to abolish Greece’s NOME auctions will have been completed prior to October 16, when the year’s final session is scheduled to take place, and therefore enable energy minister Costis Hatzidakis to scrap this particular session and the auctions in general, as the minister has declared he intends to do.

The NOME auctions, introduced by the previous Syriza government, are seen as a loss-incurring measure for PPC, obligated to offer below-cost wholesale electricity to independent suppliers since 2015.

ELPE ownership decisions to be sought in coming days

The uncertainty concerning the next steps to be taken for the future ownership of ELPE (Hellenic Petroleum) could become clearer this week as the country’s lender representatives pursue their post-bailout review in Athens.

The position to be adopted by the lenders on ELPE will be particularly important on how the matter plays out. They could insist on a privatization repeat for ELPE’s 50.1 percent following the initial effort’s failure to produce a result. If so, a relaunch would not take place until after this month’s European elections, and, almost certainly, the Greek elections, due in autumn.

Attracting investors during the pre-election period would be difficult to accomplish. ELPE’s privatization is not a market restructuring measure but is purely driven by cash-collecting incentives.

The Latsis group, whose Paneuropean Oil contributed 30.1 percent of its 45.47 ELPE stake to the initial sale effort, wants to hold on to its stake in the listed petroleum company, according to sources. The Greek State offered 20 percent of its 35.48 percent share in the ELPE sale.

Energy minister Giorgos Stathakis has ruled out the possibility of any sale of the Greek State’s ELPE stake through the bourse.

The sooner ELPE’s future ownership is cleared up the easier it will become for authorities to push ahead with the privatization of DEPA Trade, one of two new entities that emerged from a recent split at gas utility DEPA. ELPE holds a 35 percent stake in DEPA.

The petroleum group, which has made clear its interest for a bigger role in Greece’s natural gas market, may seek to increase its DEPA stake.

Lender representatives visiting Athens in a pre-election mood

Pending energy market reforms, including privatizations, PPC’s disinvestment of lignite units, and other market liberalization measures, will be discussed between government officials and the country’s lender representatives, visiting Athens to begin a post-bailout review this week.

Long-term decisions on various matters will most likely need to be made following Greece’s elections, due in autumn, once the political climate has settled. This delay, though, could end up prompting tougher demands by the lenders, including the European Commission.

PPC’s sale of lignite units, relaunched following a failed previous effort, is expected to dominate the talks. The disinvestment’s deadline for binding bids has been extended to May 28, which virtually coincides with the European elections, making the prospect of the sale procedure’s punctuality uncertain.

The lenders are expected to push for financial restructuring measures at state-controlled PPC, which has just posted disappointing results for 2018. Some of these measures will entail political cost.

The lender representatives will also push for decisions on slow-moving energy-sector privatizations. The sale procedure for gas utility DEPA has fallen behind schedule while uncertainties have crept into the the ELPE (Hellenic Petroleum) privatization.

The target model as well as Crete’s urgently-needed electricity grid interconnection with Athens will also be on the agenda. The latter has led to a control-related dispute between Greek power grid operator IPTO and Euroasia Interconnector, a consortium of Cypriot interests heading a wider PCI-status Greek-Cypriot-Israeli electricity grid interconnection project.

ELPE sale ‘may be dropped’ if alternate revenue plan is found

An ELPE (Hellenic Petroleum) privatization offering a 50.1 percent stake, whose initial tender failed to produce a result last week, could be scrapped if the government finds an alternative way of raising the sale’s anticipated 500 million euros for the country’s privatization fund, highly-ranked energy ministry sources have told energypress.

“The ELPE sale is not a structural measure or market revision but was included in the privatization fund TAIPED’s program for cash-collecting purposes as the sale price achieved would have contributed to reducing the national debt,” a source noted, indicating alternative ways of raising an equivalent amount could be sought instead of an ELPE sale relaunch.

If so, the government will need to convince the country’s lenders of an alternative fund-raising plan when they arrive in Athens next month for a third post-bailout review of the Greek economy.

The Greek State was offering 20 percent of its 35.48 percent share in ELPE and the Latsis group’s Paneuropean Oil 30.1 percent of its 45.47 stake.

Glencore, an early candidate, was eventually joined by US firm Carlyle, and Dutch trading firm Vitol, the sale’s other early contender, was joined by Algeria’s Sonatrach. Neither bidding team followed through with offers last week, when the deadline for binding bids expired.


PPC sale deadline extension ‘pointless without better terms’

Investors considering the main power utility PPC’s bailout-required sale of lignite units expect new sale-term improvements beyond certain incentives already offered now that a last-minute decision was taken by authorities earlier this week to extend a January 23 binding bids deadline to February 6.

“There is no point in the deadline extension if further incentives are not offered,” a source at one of the sale’s contender firms told energypress, echoing the thoughts of all possible buyers. The PPC units on offer are not capable of generating profit figures under the sale’s existing terms, the source added.

Contenders have remained adamant on earlier views. The Czech Republic’s Seven Energy, which has teamed up with Gek Terna for this sale, insists on a 50 percent staff cut at two power stations, Megalopoli and Meliti, included in the sale package. Both plants remain loss-incurring, the candidates remind.

A team made up of China’s CHN Energy and the Copelouzos group is demanding a lignite supply cost reduction, especially for the Meliti plant.

The energy ministry is under less pressure to complete state-controlled PPC’s sale effort now that Greece’s bailout program has concluded and the country’s borrowing ability is no longer directly linked with the bailout terms.

At worst, energy ministry officials believe, the PPC sale effort will sink and the European Commission will again challenge the power utility’s dominant position in Greece’s lignite market, seen as a slow bureaucratic procedure.

Post-bailout energy talks Thursday, day after PPC sale’s expected results

The energy ministry’s leadership and lender representatives are scheduled to meet for a post-bailout review of Greece’s energy sector commitments this Thursday morning, one day after the expected results of the main power utility PPC’s sale of its Megalopoli and Meliti lignite-fired power stations, part of a bailout-required lignite disinvestment package.

Prospective buyers will need to to submit their binding bids by tomorrow midday. Without a doubt, the outcome of the PPC sale will figure prominently in Thursday’s talks.

Should investors decide not to emerge for PPC’s lignite units sale with binding bids tomorrow, then the disinvestment effort and PPC, as a corporation, overall, will enter uncharted territory, sources have told energypress.

New measures aimed at opening up Greece’s electricity production market will enter the picture if PPC’s current sale effort fails. The sale of hydropower facilities to new owners, for example, is one of the possibilities.

Investors have remained tentative in the lead-up to the sale as a result of unfavorable conditions surrounding the prospects of lignite assets, including the sharp rise in CO2 emission right costs.

The Czech Republic’s Seven Energy, joined by Gek Terna for this sale, is depicting a negative picture. The Mytilineos group, another candidate, views such an investment as particularly challenging. China’s CHN and the Copelouzos group’s Damco, another pair eyeing the sale, have pointed out that many initiatives aimed at creating a favorable setting for the sale remain unfinished.

Privatizations, energy-climate plan the focus of technocrats

A team of technocrats representing the country’s lenders and currently in Athens for preliminary talks with local officials ahead of next week’s arrival of creditor representatives for work leading to a progress report have already made clear the issues of greatest concern for the lenders.

The visiting technocrats are focusing on the completion of energy market reforms; bailout-required privatizations, namely the main power utility PPC’s disinvestment of lignite units and the progress of gas utility DEPA’s sale; market liberalization and correction measures, such as the target model and NOME auctions; as well as the progress of RES auctions for new renewable energy facility installations.

In an unexpected development, the technocrats have also turned their attention to the delayed National Energy and Climate Plan until 2030. The plan has been criticized by various local market officials, including PPC, for possessing numerous contradictions, gaps and ambiguities.

Next week’s post-bailout meetings between Greek officials and lender representatives will play a crucial role in the preparation of a new progress report to be published next month.


High failure risk for PPC lignite units sale without extension

Possible buyers of lignite units being sold by the main power utility PPC through a bailout-required disinvestment may keep offers subdued at extremely low levels or refuse to make any offers at all if the current deadline for binding bids, set for January 7, is not extended, investors considering the sale have indicated.

They are troubled by the ongoing ambiguity of a series of sale and purchase agreement (SPA) terms included in the disinvestment as incentives – including a voluntary exit plan for employees at two lignite-fired power stations, Meliti and Megalopoli, and the CAT remuneration level for these – and, as a result, cannot yet factor these into their calculations.

The energy ministry and PPC are both well aware of the sale effort’s current risk of failure but the ministry – officially, at least – continues to expect binding offers three days from now.

The CAT remuneration level for the sale package’s power stations has been estimated at 40,000 euros per MW but the European Commission has yet to offer its official approval.

The energy ministry is treading carefully to avoid any blame on Greece for delays in PPC’s disinvestment procedure, one of the country’s main post-bailout commitments.

At this stage, two scenarios appear possible. The sale’s authorities could offer a sizable deadline extension, until March, for example, and ensure clarity for investors, or the sale can proceed as is under a high risk of failure.


Technical team returns Monday for full review of energy sector

A technical team representing the country’s lenders will be returning to Athens Monday to examine, with Greek authorities, the progress of energy-sector revisions agreed to in the bailout era.

Besides the disinvestment procedure for main power utility PPC lignite units and the course of privatizations, the visiting team’s inspection will primarily focus on the local effort being made for maintenance of the target model’s time frame, which appears to be behind schedule.

For quite some time now, the country’s lenders have applied pressure on Greece for full implementation of the target model – aiming for market coupling, or harmonization of EU wholesale markets – by the first quarter of 2019 and a launch of the local energy exchange by April.

These target dates will be difficult to achieve given the current rate of developments. The time frame’s viability is expected to be discussed by Greek officials and the visiting inspectors.

Electricity market liberalization issues as well as developments concerning RES auctions and the implementation of a transitional CAT mechanism compensating electricity producers offering grid flexibility will also be on the agenda.

Post-bailout energy sector inspections begin next week

The first post-bailout era meeting between energy minister Giorgos Stathakis and the country’s creditors, planned for next week, will focus on the progress of main power utility PPC’s bailout-required disinvestment of lignite units; the DEPA gas utility and ELPE (Hellenic Petroleum) privatizations; NOME auctions; and the target model, aiming for market coupling, or harmonization of EU wholesale markets.

According to sources, the meeting will take place some time between next Wednesday and Friday, once technocrats have laid the groundwork on Monday and Tuesday.

Energy-sector fronts are expected to be closely monitored in the post-bailout era, PPC’s sale of lignite units being the most pressing issue at this stage.

China’s CHN Energy, which has joined forces with the Copelouzos group for the sale of lignite units – offered as two respective packages representing 40 percent of the utility’s overall lignite capacity in the north and south – has requested a deadline extension of one or two months for the submission of binding offers. The current deadline expires on October 17.

If granted by the European Commission, the announcement of the sale’s preferred bidder or bidders will be delayed until the first quarter of 2019, instead of the end of this year.


DEPA split plan finalized, to be presented Monday

The gas utility DEPA and the energy ministry, aided by consultants and legal advisors, have overcome numerous technical details over the past couple of months to emerge with a finalized a plan entailing the gas company’s split into two firms, DEPA Infrastructure and DEPA Trade, as agreed to by the government and the country’s lenders for the gas utility’s privatization.

This DEPA plan will be presented to a team of post-bailout inspectors arriving in Athens this coming Monday.

The country’s two gas-sector privatizations – DEPA and DESFA gas grid operator – both appear to have made satisfactory progress. On the contrary, the ELPE (Hellenic Petroleum) and main power utility PPC lignite unis sales have been dogged by delays.

DEPA and energy ministry officials have worked against the clock to finalize DEPA’s split plan, involving a highly complex distribution of assets, as related law needs to be ratified by October.

According to the DEPA split plan, a 50.1 percent stake of the trading firm is expected to be offered to investors while 14.9 percent, including veto rights, will be maintained by the Greek State, which is expected to retain a 51 percent stake in DEPA Infrastructure.

The DEPA privatization procedure is scheduled to begin between September or October.


PPC, NOME, target model to preoccupy authorities in the post-bailout era

Commitments and reforms remain pending despite the completion of Greece’s third and final bailout program. A reinforced surveillance mechanism covering not only fiscal, social security and banking matters but also market reform policies, including for the energy sector, will follow the final bailout program, which was completed yesterday, according to an official announcement made by the European Stability Mechanism (ESM), designed to safeguard financial stability in the euro area.

Quarterly surveillance reports will be issued as part of the reinforced effort. These will include assessments of energy sector commitments, including a plan to phase out a RES-supporting supplier surcharge.

Three key energy sector issues will preoccupy authorities in the country’s post-bailout surveillance. The sale procedure and schedule for the main power utility PPC’s disinvestment of lignite-fired power stations and mines, representing 40 percent of the utility’s lignite capacity, will be closely watched.

The role, beyond 2020, of NOME auctions, introduced in Greece two years ago to offer third parties access to PPC’s lower-cost lignite and hydropower sources, will be examined at the end of 2019, once the results of new target-model markets have become clear. Retail electricity market shares will be assessed and a formula will be established to keep the market’s conditions competitive, as was envisioned with the NOME auctions, for the benefit of consumers.

As for the target model, aiming for market coupling, or harmonization of EU wholesale markets, Greece’s lenders have set an April 1, 2019 launch date for the Greek market’s coupling with the Italian and Bulgarian markets. A delay in the introduction of new target-model markets until the summer of 2019 or failure to achieve market coupling before 2020, as has been speculated, would be viewed negatively by the lenders.