PPC lignite units sale plan heading to parliament early March

A draft bill detailing the main power utility PPC’s lignite assets to be placed for sale, a bailout term, the dates of related tenders, as well as labor issue plans for these facilities, is expected to be submitted to Greek Parliament for ratification within the next few weeks, probably early March, according to sources.

The energy ministry has been working on the draft bill concerning the sale of PPC lignite units for quite some time.

The new PPC sale plan’s tender is scheduled to be announced in June.

Two sale packages are being prepared, one for the country’s north, including Meliti I and a Meliti II license, and one for the south, including Megalopoli III and IV.

The draft bill’s section on labor issues concening the lignite units to be sold is not expected to differ greatly from a previous bill concerning an older attempt to sell a percentage of PPC, locally dubbed “Little PPC”. The labor-related terms in that bill required prospective buyers to maintain most jobs for at least five years and transfer Megalopoli and Meliti workers to other utility units.

The European Directorate for Competition staged a market test last month to measure the level of investor interest and provide a platform for queries. Greece’s future electricity market conditions preoccupied the minds of most market test participants.

Prospective buyers sought information on a variety of matters such as lignite’s anticipated percentage in the country’s future energy mix; CAT remuneration eligibility of units being sold; the course of CO2 emission right prices; the timing of the target model’s implementation; the futures of the Vevi mine – currently closed – and mines in Florina; as well as license issues.


Amynteo lifespan extension request viewed favorably

A request forwarded by Greek authorities to the European Commission for an extension to the remaining operational hours of the main power utility PPC’s 600-MW Amynteo power plant, from 17,500 hours to 32,000 hours, is believed to stand a good chance of being approved.

According to sources, the Amynteo facility, an aging unit excluded from the utility’s bailout-required sale package of lignite units, may be permitted to continue operating well beyond 2019.

In its request, the Greek energy ministry contends that a withdrawal of the Amynteo facility in 2019, as is currently scheduled, would prompt serious telethermal issues at the Amynteo power plant and the Ptolemaida facility, whose prospective addition, Ptolemaida V, is not expected to be launched any time before 2021.

On the other hand, any lifespan extension for the Amynteo facility means prospective buyers of PPC’s lignite units placed for sale (Meliti, Megalopoli) would face an additional lignite-fired electricity producing rival. This prospect was pointed out by potential buyers during the market test staged for PPC’s bailout-required sale package.

Either way, prospective buyers are awaiting the final decision from Brussels.

Three investors have already expressed an interest to become involved in Amynteo’s environmental upgrade, should this be permitted by Brussels. The Copelouzos group and China’s Shenhua appear willing to join forces for such a project. This could secure the pair a minority stake in the Amynteo facility.

A second major energy player in the Greek market is also believed to have presented state-controlled PPC and the energy ministry with a utilization plan for Amynteo, even though the content of the utility’s sale package has yet to be finalized.

In addition, an energy-intensive industrial firm is also believed to be interested in the Amynteo upgrade, either alone or as a partnership with a fellow industrial player, in exchange for favorably priced electricity.




Possible PPC unit buyers still need to be convinced of market conditions

Now that the market test for the bailout-required sale of main power utility PPC lignite units has been completed, it remains to be seen how many of fifteen prospective buyers who have expressed a preliminary interest will follow through with binding offers in the procedure’s next stage. This will not be known any sooner than June, when the sale’s tender is scheduled to be launched.

Concerns over technical and licensing issues expressed by possible buyers are expected to be overcome. Two other factors underlined by market test participants – profit margins of lignite units and market risk – will prove crucial for the disinvestment’s success.

On a positive note, units at two of the lignite-fired power facilities up for sale, Megalopoli and Meliti, appear to possess comparative advantages. Despite market fluctuations and seasonal costs, especially at Meliti during the winter, the average variable production costs at these two facilities has ranged between 37 and 39 euros per MWh compared to levels of between 52 and 58 euros per MWh at other PPC lignite-fired power plants.

It should be pointed out, however, that these cost-related figures may not be entirely accurate.

Besides the production costs and profit margins, positive respondents in the market test, staged by the European Directorate for Competition as an attempt to get a rough idea of the current level of investor interest, highlighted that the market risk factor, including wholesale price levels and possible market distortions, will be even more crucial when the time comes for them to submit binding offers.

Untul then, much work is still needed to convince prospective buyers that current problems being encountered, including market distortions, will not persist following the sale.













Fifteen local, foreign players interested in PPC lignite units

Greek and foreign electricity production firms, mixed teams, as well as local industrial energy consumers make up fifteen enterprises which, according to the energy ministry, have expressed an interest, through a recent market test, to acquire main power utility PPC lignite units in Megalopoli and Meliti, being offered in a bailout-required sale package.

Though the sale procedure has yet to reach a binding stage, certain players, responding to a market test question asking respondents if they intend to participate in the upcoming tender, provided positive answers, while noting  that their current interest remains conditional.

According to energypress sources, these firms include GEK-Terna, the Copelouzos Group, joined by China’s Shenhua for the PPC units sale, industrial energy consumers such as Viohalco, as well as electricity producers from eastern Europe, where lignite-fired electricity generation remains widespread.

Other players, including local industrial giant Mytilineos, have opted to keep their intentions under wraps for the time being.

The results produced by the market test, staged by the European Directorate for Competition to get a feel of investor intentions, will not necessarily be followed up later on in the sale, meaning that any interpretations of indications at this stage are premature.

Minimum sale prices to be set by an independent evaluator will be crucial. They will remain sealed and disclosed once first-round offers have been opened to determine qualifiers of the sale, scheduled to take place in June. PPC may request improved offers if these are below evaluation levels. Many market officials believe evaluation levels will be reasonable.

“If the evaluation levels are reasonable then many players may participate in the sale, including ones who did not express an interest in the market test. However, if these evaluation levels are deemed to be too high, then the number of participants could be restricted to a single-digit figure,” noted a highly-ranked official at one company.

This official added that certain negative market test responses could end up becoming positive as the sale procedure’s conditions are clarified over time. The content of a draft bill currently being prepared by the energy ministry will also be crucial factor, the official noted.

PPC’s commitment to share unit withdrawal costs with investors, once the time comes, is seen as a positive factor by prospective investors.

The European Commission will maintain full control of the sale procedure through a monitoring trustee, according to Greek daily Kathimerini.





DG Comp updates on PPC staff, mine licenses, facility sharing

Issues concerning main power utilty PPC lignite unit personnel, mining licenses, the inclusion of  the Vevi mine to the utility’s bailout-required sale package, as well as the ability of PPC and prospective buyers to share facilities associated with units being placed for sale dominated teleconference talks yesterday between energy ministry officials and the European Directorate for Competition.

The session was essentially held so that DG Comp officials could further update the energy ministry on comments provided by prospective investors during December’s market test. It was staged by the Brussels authority to enable investor feedback ahead of the PPC lignite units sale. A brief update had been delivered to the Greek ministry last week.

No surprise developments, or, more specifically, any demands concerning the inclusion of PPC hydropower faclities to the sale package, emerged during yesterday’s session, energypress sources informed. However, in their market test responses, certain participants did note that the package would represent a more enticing prospect if it were more balanced.

In their market test responses, participants are believed to have expressed concerns over mine licenses. Some licences are due to expire between 2019 and 2022. PPC faces lignite supply issues at its Meliti power plant in the Florina area, northern Greece, because neighboring mines, including Vevi, remain closed.

Energy ministry officials assured the DG Comp that PPC would take all needed action to settle mine license issues. The Vevi mine will also be included in the sale package, the energy ministry officials assured.

Teleconference participants agreed that prospective buyers and PPC will be able to share facilities supporting the Megalopoli III and IV power plants included in the package. These include a waste treatment plant serving these two units as well as Megalopoli V, a natural gas-fueled power plant not included in the sale package. Contracts are expected to be signed setting prices for the access to facilities to be provided by PPC.

The DG Comp officials also raised questions over the 1,100 employees currently stationed at Megalopoli III and IV, associated lignite mines, as well as Megalopoli V. A proportion of the personnel at these facilities, some of which are believed to be overstaffed, could be transferred by PPC to other units. The DG Comp wants to ensure qualified personnel remains at the Megalopoli units up for sale. The Brussels authority also called for no more personnel additions to these units.

All these issues will be incorporated into a PPC draft bill being prepared by the energy ministry. Greek officials will need to deliver a final commitment to the DG Comp before the PPC bill is ratified in Greek parliament, expected next month. The launch of the sale’s tender is being planned for early summer.

The PPC lignite units sale has been divided into two packages, a northern package including Meliti I and a license for Meliti II, as well as a southern package including Megalopoli III and IV. The PPC draft bill will offer a description of the sale procedure, permitted buying combinations, a date for the tender, probably in June, and plans concerning employment, facility and license issues.



PPC market test concerns to be worked into unit sale draft bill

The concerns of investors considering taking part in the main power utility PPC’s bailout-required sale of lignite units are focused on two issues, one being the utility’s Megalopoli III and IV units, especially staff numbers, believed to be excessive, and the other, pending license issues linked to mines intended to supply Meliti I and, later on, Meliti II, once this latter facility is developed.

These concerns were highlighted by the results of a market test conducted by the European Directorate for Competition and delivered to Greece’s energy ministry late last week.

The DG Comp comments do not go into great detail but represent a basis for further discussion, according to energypress sources. A teleconference to involve energy ministry and DG Comp officials is being planned for this week, the sources informed.

Prospective investors are believed to have also expressed concern over the future of lignite, noting PPC’s sale package would be more atttactive if hydropower plants were included.

As for the overstaffing issue at PPC’s Megalopoli III and IV units, the market test participants are seeking details on the legislation to be drafted for 1,100 staff members currently employed at the power station.

Prospective investors also enquired about the current state of PPC’s transmission network.

Following this week’s teleconference between energy ministry and DG Comp officials, the Greek government will need to incorporate any required revisions into a draft bill concerning the PPC lignite units sell-off.

Then, Greek authorities will need to deliver a final commitment to the DG Comp before ratifying the bill in parliament. This is expected to take place next month ahead of an announcement of a tender early next summer.

Greek authorities have already begun working on the PPC sale’s draft bill, whose articles offer a description of PPC lignite assets to be placed for sale as well as details on the sale procedure.

Two sale packages, a northern and southern package, will be offered to investors. The northern package will include Meliti I and the Meliti II license. The southern package will include Megalopoli III and IV.

The draft bill’s article on labor issues is expected to include previous conditions set for an older but unexecuted 17 percent sale plan for PPC, locally dubbed “Little PPC”. These terms included conditions requiring buyers to maintain a large majority of jobs at any units sold for at least five years.