HEDNO bidders to next stage of sale with regulatory ambiguities

Second-round qualifiers of a privatization offering a 49 percent stake of distribution network operator DEDDIE/HEDNO, a subsidiary of power utility PPC, are entering the procedure’s next stage without a clear picture on the company’s regulatory framework, still not established, despite a March 31 deadline.

Though related talks began well in advance, RAE, the Regulatory Authority for Energy, is still awaiting all the details it requires from the operator on its regulated earnings and network development plan before the authority can reach a decision on the regulatory framework.

The operator’s regulatory framework is crucial for the privatization as it concerns pivotal matters such as extra wacc for certain projects, as well as Opex, Capex settings, amongst other details.

Once established, DEDDIE/HEDNO’s new regulatory framework will be applied retroactively, as of January 1, 2021.

Though its delivery date still remains unclear, it will include two periods, covering 2021 to 2024 and 2025 to 2028, which will give potential buyers a long-term perspective on the returns to be offered by the investment.

RAE has already decided on a formula calculating required earnings from the distribution network as well as the wacc level.

Second-round qualifiers are expected to be given access to DEDDIE/HEDNO’s virtual data room within the next few days for an assessment of the operator’s financial standing as part of due diligence.

PPC set to sign securitization agreement with Pimco

Power utility PPC is set to sign a large-scale securitization agreement with international investment company Pimco for unpaid receivables of over 90 days.

PPC will receive approximately 200 million euros of 300 million in total, sources said.

This securitization package was preceded by a small-scale agreement with JP Morgan late last year for unpaid receivables of up to 60 days. PPC received 150 million euros in a deal worth a total of 200 million euros.

PPC and Pimco have both approved this latest securitization agreement, a 14,000-page text, with just their signatures pending, the sources informed.

The 350 million-euro sum coming from PPC’s two securitization agreements, along with 775 million euros raised by the corporation through two recent bond issues, represents major cash flow relief worth 1.2 billion euros that promises to facilitate the utility’s upcoming investments and cover operating costs.

In addition, funds to come from the anticipated privatization, in the second half, of a 49 percent stake in PPC subsidiary DEDDIE/HEDNO, the distribution network operator, promise to further boost the power utility’s investment ability.

HEDNO suitors all real-money investors with long-term views

All nine qualifiers through to the second round of a tender offering a 49 percent stake of distribution network operator DEDDIE/HEDNO possess extensive experience in infrastructure management around the world and are long-term, real-money investors.

The tender’s shortlist, announced yesterday, includes Blackrock, the world’s biggest investment fund, back in the Greek picture after subscribing to a bond issue staged last month by the operator’s parent company PPC, the power grid operator.

Blackrock has based these investment decisions on Greece’s economic prospects beyond the pandemic as well as common business principles shared with PPC.

The capital managed by the nine qualifiers is worth 10.2 trillion euros. More importantly, the qualifiers are backed by formidable profiles, their portfolios carrying investments in utilities, infrastructure and energy companies.

France’s Ardian, managing assets worth over 100 billion euros, Canadian investment corporation British Columbia Investments (BCI), handling a 100 billion-euro portfolio, the American funds Blackrock, managing assets worth 9 trillion dollars, CVC Capital Partners (120 bn), KKR (250 bn) and Oak Hill (50 bn), Italy’s infrastructure fund F21, as well as Australia’s Macquarie (420 bn) and First Sentier (180 bn) are all long-term investors.

BCI and Macquarie have jointly engaged in a series of takeovers, beginning in 2012 with German networks company Open Grids Europe, and following up, in 2014, with US electricity firm Cleco, and networks company Endeavour Energy in 2017. BCI also controls Chilean power distributor Transelec as well as Canada’s Corix.

Blackrock controls US corporation Hearthstone Utilities and the UK’s Kelas Midtream and Calisen PLC, active in smart meters.

America’s KKR acquired New Jersey water management company Bayonne Water and Wastewater Concession in 2012 and Middletown Water in 2014.

Macquarie’s portfolio includes Spain’s Viesgo, Germany’s Open Grid Europe, and the portfolio of First Sentier (previously First State) includes the UK’s Electricity North West and Anglian Water.

PPC’s 2020 results, out April 20, to reflect company ascent

Power utility PPC, planning to announce its financial results for 2020 on April 20, is expected to release robust figures confirming its positive course, including, according to analysts, an EBITDA level of approximately 900 million euros.

Given the corporation’s 618 percent EBITDA surge in this year’s nine-month period, up to 696 million euros from 96.9 million euros a year earlier, PPC should register operating profit well above the 2019 level, when its recurring EBITDA ended the year at 333.6 million euros.

Sharply declined fuel costs and wholesale electricity prices during the first three quarters, as well as the continual limitation of PPC’s lignite-fired power stations, now loss-incurring as a result of higher CO2 emission rights, have been the driving forces behind the 2020 EBITDA forecast of about 900 million euros.

An EBITDA objective of one billion euros by 2024 now appears achievable sooner, possibly as early as next year.

The company’s capitalization is currently at 2.11 billion euros.

PPC, needing to push ahead with RES investments, will require capital for the effort. An ongoing privatization offering a 49 percent stake in distribution network operator DEDDIE/HEDNO, a subsidiary, is expected to raise capital for PPC’s investment plans, including in renewable energy, and also lower the company’s debt level.

The shortlist of qualifiers into the second round of the DEDDIE/HEDNO sale is expected to be announced today.

HEDNO 49% privatization shortlist set to be announced tomorrow

A short list of qualifiers through to the second and final round of a privatization offering a 49 percent stake of distribution network operator DEDDIE/HEDNO is expected to be announced tomorrow, when endorsed by the board of the operator’s parent company PPC, the power utility.

The qualifiers will be given access to confidential data stored in the tender’s video data room.

Though PPC has not offered details on the first-round participants, informing only that the bidders, eleven in total, are strategic investors, network infrastructure operators and funds, banking officials have leaked their identities, revealing the turnout of leading international investors.

They include US fund Blackrock, the world’s biggest investment fund, as well as fellow American funds KKR, Oak Hill Advisors and CVC Capital Partners, the recent buyer of insurance company Ethniki Asfalistiki.

One of Europe’s biggest funds, France’s Ardian, two Australian funds, Macquarie and First Sentier, Italy’s infrastructure fund F21, Canadian investment corporation British Columbia Investments (BCI), Chinese consortium China South Power Grid – China Three Gorges, and fellow Chinese firm Guangzhou Power make up the other seven first-round entries.

DEDDIE/HEDNO’s new business plan, covering 2021 to 2024 and carrying investments totaling 3.5 billion euros, is a key driver behind the considerable interest, as is a yield rate of approximately 7 percent offered by the operator.

Standout features of the operator’s new business plan include an 850 million-euro project entailing the installation of 7.5 million digital power meters around the country, whose tender is nearing; an addition, to networks, of fiber optics for telecommunication and 5G services; as well as projects for undergrounding, upgrading and modernizing networks in anticipation of mass investments in RES units.

DEPA Commercial privatization on hold, awaiting ELFE dispute

Energy minister Kostas Skrekas’ admission of concern over the impact, on DEPA Commercial’s privatization prospects, of the gas company’s ongoing legal dispute with ELFE (Hellenic Fertilizers and Chemicals) increases the likelihood of this sale being deferred until late this year, if not later, sources contend.

The minister, speaking at Power & Supply Forum, an online event staged earlier this week by energypress, admitted being troubled by DEPA Commercial’s unresolved legal battle with “a major consumer”.

DEPA Commercial has challenged an Athens Court of First Instance verdict that ordered the company to return 61 million euros to ELFE for alleged overcharging between 2010 and 2015. The appeal has been deferred for September and may be jointly heard with a separate case involving the two companies over a similar amount of unpaid receivables that is allegedly owed by the fertilizer and chemicals producer to DEPA.

The government will most likely wait for the outcome of this legal dispute to be settled before taking any further steps in the DEPA Commercial privatization, planned to offer the Greek State’s 65 percent stake of the company and a 35 percent stake held by Hellenic Petroleum (ELPE).

Regardless of the outcome at the appeals court, this legal wrangle is expected to be taken all the way to the Council of State, Greece’s Supreme Administrative Court, the sources noted.

Should ELFE be vindicated in the overcharging case, other DEPA customers – even bigger consumers than ELFE – can also be expected to also take legal action, which could end up costing the gas company as much as a billion euros in refunds, the sources said.

Cancellation of the current privatization procedure and an ensuing company split of DEPA Commercial that would enable the sale of subsidiary Fysiko Aerio/Hellenic Energy Company is an unlikely prospect, the sources added.

Desfa-Gek Terna, Energean to S. Kavala UGS tender 2nd rnd

DESFA-GEK TERNA and Energean Oil & Gas have advanced to the second-round, binding-offers stage of a tender offering use, development and operation of an underground natural gas storage facility (UGS) in the almost depleted natural gas field of “South Kavala”, while China’s CMEC-MAISON GROUP failed to qualify, privatization fund TAIPED has announced in a statement.

Following the signing of confidentiality agreements, the two qualifiers will be granted access to the tender’s virtual data room, where financial and technical data will be uploaded for due diligence procedures.

However, much work lies ahead before this project matures to enable the submission of binding offers. A number of regulatory issues remain pending, officials monitoring developments have informed, describing the project as complex and highly technical.

Pending issues include determining the percentage of the UGS’s capacity to be regulated for pre-determined earnings, and the percentage of capacity whose earnings will be shaped by market forces. The regulatory period and WACC level also need to be decided and set.

Given these tasks, as well as obstacles raised by the pandemic, binding offers are not expected to be submitted any sooner than late-2021. The final stage of this tender appears most likely to take place early in 2022.

Privatization fund names 2nd round qualifiers for tenders

HRADF pre-qualifies interested parties for the next phase of the tenders of Alexandroupolis and Kavala ports, the UGS “South Kavala” and the lease of smelting plant, mines and relevant mining rights owned by the Hellenic Republic

The Board of Directors of the Hellenic Republic Asset Development Fund (HRADF) convened today and pre-qualified the interested parties that meet the eligibility criteria to participate in Phase B (Binding Offers Phase) of the following tender processes:

  • Alexandroupolis Port Authority

The HRADF’s BoD decided that four interested parties meet the criteria to participate in Phase B for the acquisition of a majority stake of at least 67% of the “Alexandroupolis Port Authority” (in alphabetical order):

  1. Consortium composed of the companies CAMERON S.A.- GOLDAIR CARGO S.A.- BOLLORE AFRICA LOGISTICS
  2. Consortium INTERNATIONAL PORT INVESTMENTS ALEXANDROUPOLIS, composed of the companies BLACK SUMMIT FINANCIAL GROUP – EUROPORTS-EFA GROUP and GEK TERNA
  3. QUINTANA INFRASTRUCTURE &DEVELOPMENT
  4. THESSALONIKI PORT AUTHORITY S.A.

 “Philippos II” port, operated by Kavala Port Authority

For the tender of the sub-concession of the right to use, maintain, operate and exploit a multi-purpose terminal within “Philippos II” port (currently operated by Kavala Port Authority S.A. – O.L.K. S.A.), the Fund’s BoD pre-qualified the following Interested Parties (in alphabetical order):

  1. Consortium composed of the companies IMERYS GREECE S.A. – GOLDAIR CARGO S.A. – I.M.G. S.A.
  2. Consortium INTERNATIONAL PORT INVESTMENTS KAVALA, composed of the companies BLACK SUMMIT FINANCIAL GROUP – EFA GROUP and GEK TERNA
  3. QUINTANA INFRASTRUCTURE & DEVELOPMENT
  4. THESSALONIKI PORT AUTHORITY S.A. 
  • UGS “South Kavala”

The Fund’s BoD pre-qualified two interested parties to participate in Phase B (Binding Offers Phase) of the tender for the concession of the use, development and operation of an underground natural gas storage facility (UGS) in the almost depleted natural gas field of “South Kavala”.

The pre-qualified interested parties are (in alphabetical order):

  1. DESFA-GEK TERNA
  2. ENERGEAN OIL & G.A.S. 
  • Smelting plant, mines and relevant mining rights owned by the Hellenic Republic

For the lease of the Larymna smelting plant, the Larymna and Loutsi mines and relevant mining rights and other assets owned by the Hellenic Republic and currently leased to “LARCO General Metallurgical & Mining Company S.A.” (LARCO), in Phase B of the tender will participate the following interested parties (in alphabetical order):

  1. COMMODITY & MINING INSIGHT IRELAND LIMITED
  2. GEK TERNA S.A. – AD HOLDINGS AG
  3. MYTILINEOS S.A.
  4. SOLWAY INVESTMENT GROUP LIMITED
  5. THARISA PLC
  6. TRAFIGURA GROUP Pte Ltd.

Following the signing of the relevant confidentiality agreement, the pre-qualified investment schemes for each tender will receive the documents of phase B’ (submission of Binding Offers) and will grant access to the virtual data room (VDR), where data and information related to the assets and the tenders will be uploaded.

Energy privatization plans delayed by negative conditions

The government has decided to slam the brakes on procedures for major energy-sector privatizations, preferring to defer bidding deadlines as a result of a series of administrative hurdles and external factors, exacerbated by challenges and uncertainties caused by the pandemic over the past year.

Binding-bid deadlines for the sales of two gas utility DEPA offshoots, DEPA Commercial and DEPA Infrastructure, initially planned for this month by privatization fund TAIPED, will now be reset for early autumn, sources have informed.

Lockdown measures have prevented possible buyers from visiting the DEPA Commercial and DEPA Infrastructure headquarters and facilities as part of their due diligence procedures.

In addition, an ongoing legal battle between DEPA Commercial and ELFE (Hellenic Fertilizers and Chemicals) has also unsettled potential buyers. According to sources, investors are demanding protection in the form of guarantees should any court verdict require DEPA Commercial to compensate ELFE over a gas-pricing dispute.

As for issues surrounding the DEPA Infrastructure sale, Italy’s Eni, currently holding a 49 percent stake in EDA THESS, a DEPA Infrastructure subsidiary distributing to the Thessaloniki and Thessaly areas, wants to sell its stake. Officials are now examining a solution that would enable the DEPA Infrastructure privatization to be completed and followed up by the sale of Eni’s 49 percent stake in EDA THESS.

TAIPED’s announcement of second-round qualifiers in a tender offering development and operation of an underground gas storage facility (UGS) in the almost depleted natural gas field of “South Kavala” in northern Greece is expected in April. But the overall procedure will not be completed until next year.

A privatization plan for ELPE (Hellenic Petroleum) has been put on hold given the unfavorable conditions surrounding the global oil industry at present.

RES spatial plan to be delivered within 2021, Action Plan notes

The completion of a RES sector spatial plan within the current year has been included in an energy ministry Action Plan for 2021, just published along with the respective action plans of all other ministries.

The energy ministry’s action plan lists interventions planned for 2021 in nine areas under its authority, including energy-sector privatizations, energy market reforms, support for decarbonization and recycling, adoption of circular economic principles, greenhouse gas emission reduction, the tackling of climate change effects, as well as green energy transition.

RES sector measures this year will help cut down the time needed by new RES projects for licensing procedures to two years, the ministry anticipates in its action plan.

It also expects the installation, by the end of the year, of at least 2,000 recharging units for electric vehicles in public areas, including along highways, and at private properties, including domestic and commercial.

On the privatization front, the energy ministry expects all seven energy privatization plans to have been completed or reached an advanced stage by the end of the year.

On energy market reforms, the adoption of a remuneration mechanism for grid sufficiency, to replace a transitional mechanism remunerating flexibility, is a standout feature.

The energy ministry also intends to adopt, as Greek law, an EU directive promoting energy storage and demand response systems.

The ministry’s action plan also anticipates the signing of agreements this year for distribution network development and RES penetration support. It also expects DEDDIE/HEDNO, the distribution network operator, to announce a tender for the installation of smart power meters within the current year.

Taking into account plans by DEDDIE/HEDNO and power grid operator IPTO, the ministry expects investments in distribution and transmission networks to reach one billion euros this year.

Investments for gas network upgrades and expansion are expected to reach at least 300 million euros, primarily driven by projects planned by gas distributor DEDA, covering all areas around the country except for the wider Athens, Thessaloniki and Thessaly areas.

On international projects, the action plan notes that a Greek-Bulgarian gas pipeline project, the IGB, promising to significantly diversify Greece’s gas sources, will be completed by the end of 2021.

A latest edition of the Saving at Home program subsidizing energy efficiency upgrades of properties, budgeted at one billion euros, will stimulate work on 80,000 buildings in 2021, according the energy ministry’s action plan.

This activity will contribute to a National Energy and Climate Plan objective for an improvement, by 2030, of energy efficiency at buildings by 38 percent, reducing energy consumption to levels below those registered in 2007, the action plan notes.

 

DEPA Commercial, Infrastructure sales delayed, new June bids deadline seen

The privatization schedule for gas utility DEPA’s two offshoots, DEPA Commercial and DEPA Infrastructure, appears headed for further delay as a result of four main issues holding back procedures, sources closely monitoring these sales have informed.

The privatization fund TAIPED had initially planned to accept financial offers for DEPA Commercial and DEPA Infrastructure this month but has since unofficially extended these offer deadlines to April. Further revisions cannot be ruled out, the most likely outcome being a deferral of these deadlines to the end of June.

As for the DEPA Commercial sale, lockdown restrictions have made it difficult for potential buyers to visit the company facilities for on-the-spot technical and financial appraisals as well as clarification on vague points. This has delayed the accumulation of information needed by possible buyers for a complete picture on the gas company’s financial standing.

In addition, an ongoing legal battle between DEPA Commercial and ELFE (Hellenic Fertilizers and Chemicals) has also unsettled potential buyers. According to sources, investors are demanding protection in the form of guarantees should any court verdict require DEPA Commercial to compensate ELFE over a gas-pricing dispute.

Two issues are also obstructing the DEPA Infrastructure sale. Firstly, Italy’s Eni, currently holding a 49 percent stake in EDA THESS, a DEPA Infrastructure subsidiary distributing to the Thessaloniki and Thessaly areas, wants to sell its stake. As a result, two options are being examined. One entails DEPA Infrastructure buying Eni’s 49 percent stake in EDA THESS. The other involves incorporating EDA THESS into the DEPA Infrastructure sale.

The other concern holding back proceedings for the DEPA Infrastructure sale has to do with pending appraisals, by the possible buyers, of new distribution network development plans prepared by the gas company’s three distribution subsidiaries, which, besides EDA THESS, include EDA Attiki, covering Athens, and DEDA, covering the rest of Greece. Suitors may require as much as two months to complete their respective appraisals.

DEPA Infrastructure sale could include Eni’s 49% in EDA Thess

The likelihood of revisions to Greek privatization fund TAIPED’s ongoing sale of DEPA Infrastructure that would incorporate the sale of a 49 percent stake in gas distributor EDA THESS, held by Italy’s Eni gas e Luce, into the procedure is now seen as probable as talks on the prospect have advanced.

DEPA Infrastructure, EDA THESS’s parent company, holds a 51 percent stake in the gas distributor covering the Thessaloniki and Thessaly areas, while Eni gas e Luce maintains the management rights with its 49 percent stake in the gas distributor.

Though Eni gas e Luce has been particularly upbeat in its judgement of EDA THESS’s performance until now, its involvement in distribution has remained secondary to retail energy, the company’s primary focus, on an international scale.

Eni gas e Luce’s 49 percent stake in EDA THESS is the Italian company’s sole distribution investment.

Prior to TAIPED’s launch of the DEPA Infrastructure sale, Eni gas e Luce had made clear its intentions to withdraw from its Greek investment in gas distribution.

DEPA has decided not to exercise priority rights it holds for EDA THESS’s 49 percent stake.

Eni gas e Luce initially seemed to reach an agreement to transfer its EDA THESS stake to Italgas, Italy’s biggest gas distributor and Europe’s third largest. However, Greek officials objected, deeming such a move would have given Italgas an advantage over rivals in the sale of DEPA Infrastructure. Italgas is one of six bidding teams through to this privatization’s second round.

Following a period of stagnancy, Eni gas e Luce returned, late in 2020, with a fresh proposal to TAIPED, calling for the attachment of its 49 percent stake in EDA THESS to the DEPA Infrastructure sale.

Besides Italgas, the other five bidding formations that have qualified for the second round of the DEPA Infrastructure sale are: EP INVESTMENT ADVISORS; FIRST STATE INVESTMENTS (European Diversified Infrastructure Fund II); KKR (KKR Global Infrastructure Investors III L.P.); MACQUARIE (MEIF 6 DI HOLDINGS); SINO-CEE FUND & SHANGHAI DAZHONG PUBLIC UTILITIES (GROUP) Co., Ltd.

 

Operator DEDDIE 49% sale first-round bids submitted today

State-controlled power utility PPC and the government will be hoping today’s first-round, non-binding deadline for expression of interest in the 49 percent sale of the utility’s subsidiary DEDDIE/HEDNO, the distribution network operator, can attract a solid turnout of formidable bidders.

An onslaught of criticism against DEDDIE/HEDNO over the past few days following widespread power outages caused by Medea, as the extreme weather system was dubbed, certainly has not been good for the operator’s reputation.

On the other hand, the network’s deficiencies, exposed by extensive weather-related damages in the wider Athens area, lends tremendous support to the need of a powerful investor ready to finance the network’s badly needed upgrade, expected to cost 3.5 billion euros.

Expectations of a solid investor turnout have been high in the lead-up to today’s first-round deadline. PPC plans to announce this sale’s first round participants during the day.

Many prominent funds have shown interest in the sale but the identities of those that will follow through and participate have remained unclear. It also remains unclear if any of these funds will establish partnerships – for the DEDDDIE/HEDNO sale – with European network operators.

A market test staged in December, as well as contact with interested parties, has indicated that the American funds KKR and Blackrock, Australia’s Macquarie Group, and France’s Ardian, could participate in the sale.

The managerial rights to be attached to the minority 49 percent stake will be bolstered to not block potential buyers from crucial decisions.

DEDDIE/HEDNO possesses a regulated asset base worth over 3 billion euros, networks totaling 242,000 km in length, 240 high-voltage substations, 163 low-voltage substations, a 5,800-member workforce, and a client base numbering 7.5 million.

The company caters to annual demand of 43.194 TWh and 57,752 RES units with a total capacity of 3,926 MW.

Two funds submit DEDDIE interest ahead of sale’s preliminary deadline

Two undisclosed funds have jumped the gun to submit non-binding, first-round expressions of interest for the sale of a 49 percent stake in distribution network operator DEDDIE/HEDNO three days before a February 19 deadline, highlighting the heightened level of buyer interest that surrounds this privatization.

European and US investment teams, more so than network operators, have shown particular interest in the DEDDIE/HEDNO sale during its lead-up.

A market test in December revealed that 19 potential bidders include New York-based Blackrock, the world’ biggest investment fund, managing capital worth 7.8 trillion dollars; American giant KKR, handling 220 billion dollars; as well as French fund Ardian, one of Europe’s most dynamic, with involvement in over 150 enterprises and capital management worth more than 100 billion dollars.

Though it remains unknown if any of the aforementioned players were early birds, it has become very clear that funds will play a big role in this sale.

In an effort to add to the sale’s appeal, power utility PPC, DEDDIE/HEDNO’s parent company, has decided to bolster the 49 percent minority rights by offering potential buyers equal powers with PPC over crucial network operator decisions.

Between four and seven investment teams have displayed the greatest level of interest in the DEDDIE/HEDNO sale. Some of these teams are believed to be engaged in negotiations to establish new formations for this sale.

DEDDIE bidders shaping teams as first-round deadline nears

Investors preparing to participate in the 49 percent sale of power utility PPC’s subsidiary DEDDIE/HEDNO, the distribution network operator, a procedure whose deadline for non-binding expressions of interest expires on February 19, are busy negotiating the details of their partnerships.

Between five and seven existing formations involving European system operators and funds, all appearing extremely interested in the sale, are seen reshaping into approximately three investment teams ahead of this week’s deadline, according to sources.

The investment interest is serious and lives up to the operator’s investment plan, estimated at 2.3 billion euros, for the next five-year period, sources said.

Meanwhile, sources at PPC have confirmed that investors will be offered a one-off 49 percent stake in the distribution operator following thoughts of a two-stage sale resulting in this stake.

The managerial rights to be attached to the minority 49 percent stake will be bolstered to give potential buyers equal powers with PPC over the operator’s new business plan and company expenses, PPC sources informed.

DEDDIE/HEDNO possesses a regulated asset base worth over 3 billion euros, networks totaling 242,000 km in length, 240 high-voltage substations, 163 low-voltage substations, a 5,800-member workforce, and a client base numbering 7.5 million.

The company caters to annual demand of 43.194 TWh and 57,752 RES units with a total capacity of 3,926 MW.

 

 

Four teams, backed by funds, display strong DEDDIE interest

Prospective bidders considering power utility PPC’s sale of a 49 percent stake in subsidiary firm DEDDIE/HEDNO, the distribution network operator, have flooded the seller with a stream of enquiries ahead of a February 19 deadline for non-binding expressions of interest.

Interested parties had until February 5 to make enquiries before they can officially express interest in the sale later this month.

Interest in the distribution network operator is definitely strong. Questions received at PPC indicate that four investment teams, with the involvement of major funds, are maintaining the strongest interest in the DEDDIE/HEDNO sale.

Prospective buyers lodged enquiries on a range of issues, including the sale’s rules for funds, whether participating funds will need to submit their equity line-ups in full detail, and if supporting documents can be submitted in languages other than English.

A market test for the upcoming partial privatization staged by Goldman Sachs in December disclosed that interested parties include New York-based Blackrock, the world’s biggest investment fund managing capital worth 7.8 trillion dollars, US giant KKR, backed by capital worth 220 billion euros, as well as French fund Ardian, one of Europe’s strongest, linked with over 150 enterprises and capital management worth more than 100 billion dollars.

In an attempt to strengthen the sale’s appeal, PPC will guarantee the strategic investor holding a 49 percent stake in DEDDIE/HEDNO no obstacles in decisions concerning crucial matters.

However, the minority rights for DEDDIE/HEDNO’s prospective 49 percent stakeholder will not be as strong as they are for power grid operator IPTO’s Chinese strategic partner SGCC. DEDDIE/HEDNO will retain the operator’s managerial control.

Authorities had considered a two-stage sale of DEDDIE/HEDNO’s 49 percent, beginning with a stake of about 30 percent and a further 19 percent at a latter date, when market conditions may have improved, before opting for a one-off procedure.

DEPA Commercial RES entry adds value to its ongoing privatization

Gas supplier DEPA Commercial’s move into the renewable energy sector through a 49 percent acquisition of North Solar, a company developing solar energy projects with a total capacity of 499.61 MW in northern Greece’s west Macedonia region, provides new prospects and added value to the gas company’s ongoing privatization procedure.

The agreement between DEPA Commercial and North Solar, announced last Friday, diversifies the gas company’s energy portfolio, activities, earnings potential and risk.

The move follows in the footsteps of strategies adopted by numerous international gas companies, expanding their reach into the RES sector to broaden their revenue sources and reduce environmental footprints.

DEPA Commercial is currently at the final stage of a sale launched by privatization fund TAIPED.

In addition to the prospective benefits promised by its RES entry, the gas company is also expected to gain in value as a result of its detachment from previous gas-auction responsibilities maintained during the market’s liberalization process.

DEPA Commercial’s market share appears to have stabilized at levels of approximately 40 percent, while the company’s financial performance, according to sources, improved in 2020.

 

DEPA Commercial sale moving ahead as planned despite ELFE legal dispute

Privatization fund TAIPED intends to move ahead as planned with the next round of the sale of gas company DEPA Commercial by setting a spring binding-bids deadline for candidates, despite concerns that an ongoing legal dispute between the company and ELFE (Hellenic Fertilizers and Chemicals) could impact the privatization’s proceedings, sources have informed.

An appeal filed by gas utility DEPA, DEPA Commercial’s parent company, challenging an Athens Court of First Instance verdict that ordered the company to return 61 million euros to ELFE as a result of overcharging was yesterday deferred for September and will now probably be jointly heard along with a separate appeal case involving the two companies over a similar amount of unpaid receivables owed by the fertilizer and chemicals producer to DEPA.

This ongoing legal dispute has caused uncertainty among potential buyers of DEPA Commercial as it is complicating their bid calculations.

TAIPED is currently engaged in talks with the finance and energy ministries for the establishment of an appropriate formula concerning a related term in the privatization’s sale and purchase agreement that would offer candidates security to a great extent.

A court ruling in favor of ELFE, in the DEPA overcharging case, could prompt other DEPA customers, such as electricity producers and industrial producers, to take legal action against the utility over overcharging claims. This could end up costing DEPA many hundreds of millions.

Outcome of DEPA appeal against ELFE crucial for sale

The outcome of tomorrow’s appeal filed by gas utility DEPA against ELFE (Hellenic Fertilizers and Chemicals) following an Athens Court of First Instance verdict ordering a 61 million-euro return from the gas utility for gas supply overcharging will be crucial for the privatization of DEPA Commercial, a new DEPA entity formed for the sale.

According to legal experts, tomorrow’s hearing could be deferred until September so that it may be concurrently heard with an ensuing appeal filed, in response, by ELFE against DEPA to challenge a separate Court of First Instance decision in October, 2019 that ordered ELFE to pay the gas company about 60 million euros in unpaid receivables. DEPA had sought 86.7 million euros. This ELFE appeal was given a September, 2021 date.

Combining appeal cases is commonly practiced by courts, the legal sources pointed out.

Postponement of tomorrow’s appeal case until September may prompt the privatization fund TAIPED to extend a March deadline it had set for binding bids concerning the DEPA Commercial privatization. Potential buyers would want to know the outcome of the DELA-ELFE legal dispute before placing any offers.

A court ruling in favor of ELFE could prompt other DEPA customers, such as electricity producers and industrial producers, to take legal action against the utility over overcharging claims.

The Court of First Instance ruled DEPA overcharged ELFE between 2010 and 2015 by applying an oil-indexed gas pricing formula used by Russia’s Gazprom. ELFE sought 302 million euros, well over the a 61 million-euro return determined by the court.

Key issues in new minister’s first session with EC officials

Today’s first meeting, via teleconference, between Greece’s recently appointed energy minister Kostas Skrekas and European Commission authorities, as part of Brussels’ ninth post-bailout review, will focus on four key issues: power utility PPC’s lignite monopoly; the proper functioning of target model markets; energy-sector privatizations, and the decarbonization plan for west Macedonia, a lignite-dependent area in the country’s north.

The four issues were addressed in preliminary talks last week between Alexandra Sdoukou, secretary-general of Greece’s environment and energy ministry and Brussels technocrats.

It remains to be seen if the European Commission will again commend Athens, and to what extent, for the target model’s functioning, as Brussels had done last November, when the model’s new markets in Greece were launched as a step to harmonize EU energy markets.

However, weeks into the launch, balancing market costs skyrocketed, leading to sharply increased wholesale electricity prices. RAE, the Regulatory Authority for Energy, is now considering to introduce an adjustable price-containing measure to be set as a percentage of day-ahead market prices.

The European Commission, in the latest talks, can also be expected to push for the launch of a market test concerning an agreement offering independent players access to PPC’s lignite-based electricity production.

Though the interest of independent players for lignite-based electricity may have diminished given its increased cost, this antitrust case, unresolved for years, remains a big concern for the government as Brussels could associate it with pending Greek issues.

The complexity of PPC’s lignite monopoly case was deepened following a decision by the previous energy minister, Costis Hatzidakis, to bundle the matter with a Greek compensation request based on the utility’s need to keep running lignite-fired power stations for energy sufficiency. According to reports, his successor, Skrekas, will not sway from this policy.

As for energy-sector privatizations, a sale plan for gas supplier DEPA Commercial has attracted considerable interest but officials are concerned as parent company DEPA is embroiled in an ongoing lawsuit with ELFE (Hellenic Fertilizers and Chemicals).

DEPA has appealed a verdict awarding the producer a compensation amount of 60 million euros following overcharging claims. The case could be deferred until September, meaning binding bids by possible DEPA Commercial buyers may need to be delayed.

Greece’s decarbonization master plan features 16 key investment proposals that are expected to create over 8,000 jobs, directly and indirectly, in lignite-dependent areas. However, numerous complex matters need to be resolved, including the transfer of related property controlled by PPC, Brussels’ approval of a series of incentives for new investments, and scores of licensing issues.

Regulatory decision for operator DEDDIE most likely delayed

RAE, the Regulatory Authority for Energy, is not expected to reach a decision by March 31, as has been scheduled, on the regulated earnings and network development plan for distribution network operator DEDDIE/HEDNO’s four-year period covering 2021 to 2024 because the authority has yet to receive all necessary data and information, sources have informed.

The authority’s decision on regulated earnings, to apply retroactively as of January 1, 2021, is important for the DEDDIE/HEDNO privatization, to offer investors a 49 percent stake, as it will determine WACC amounts and other key dimensions.

RAE has already established formulas for calculating required distribution network earnings and WACC figures.

The operator’s new framework includes two four-year periods, 2021 to 2024 and 2025 to 2028, offering prospective buyers a longer-term outlook on this investment’s yield.

Last Friday, power utility PPC extended its expression-of-interest deadline for the sale of its minority stake in DEDDIE/HEDNO to February 19, from January 29, following requests by prospective bidders. They now have until February 5 to forward any related queries and February 26 to produce supporting documents needed for the sale’s preliminary expression-of-interest stage.

Five to six investment teams, comprised mostly of companies and funds, are seen participating in the sale of a minority DEDDIE/HEDNO stake.

Chinese firms barred from distribution operator sale

Conflict of interest, including in grid energy storage, a fast-growing market, has prompted power utility PPC to stop two Chinese firms interested in the prospective sale of a 49 percent stake in distribution network operator DEDDIE/HEDNO, a PPC subsidiary, from taking part.

State Grid Corporation of China (SGCC), a strategic partner of Greek power grid operator IPTO with a 24 percent stake, and another Chinese company, still undisclosed, both participated in a market test for the DEDDIE/HEDNO privatization, indicating an interest to submit bids.

A total of 19 firms reportedly expressed preliminary interest in the sale’s market test, conducted by the procedure’s consultants.

The DEDDIE/HEDNO partial privatization’s conditions include a term barring the participation of any firms directly or indirectly related to IPTO.

The conflict-of-interest term was included in the sale’s rules as electricity network companies, whether involved in high voltage, such as IPTO, or mid and low voltage, such as DEDDIE/HEDNO, are expected to find themselves competing in various electricity market services, including energy storage.

The grid energy storage market – offering large-scale storage systems that store electrical energy during times of abundance, low prices, or low demand before returning it to the grid when demand is high and electricity prices tend to be higher – is experiencing rapid growth on a global scale.

Greece still lacks a legal framework covering this domain. The energy ministry is working on this pending issue, crucial for the country’s effort to achieve National Energy and Climate Plan objectives through greater RES penetration.

This legal framework will, amongst other matters, determine market participation and remuneration terms for energy storage units, as well as related services to be traded on the energy exchange.

PPC anticipates first-round expressions of interest from four to six consortiums for the DEDDIE/HEDNO sale of a 49 percent stake.

 

DEDDIE sale preliminary deadline near, China’s SGCC out of contention

Prominent US funds such as Blackrock and KKR, European funds, including Ardian, as well as distribution network operators, primarily from Europe’s south, and central Europe, are among 19 likely participants, to date, in power utility PPC’s sale of a 49 percent stake in subsidiary DEDDIE/HEDNO, the distribution network operator.

An approaching expression-of-interest deadline set by PPC expires on January 29. In the lead-up, some 70 possible investors have been approached by three consultants, Goldman Sachs, Eurobank and Grant Thornton, commissioned by the power utility for the DEDDIE/HEDNO sale.

State Grid Corporation of China (SGCC) cannot take part in the sale as its strategic partnership with Greek power grid operator IPTO, in which the Chinese company holds a 24 percent stake, would represent a breach of conflicting-interest rules.

SGCC recently made clear an interest to further develop its presence in the Greek electricity market by either increasing its IPTO stake or pursuing a share in DEDDIE.

DEPA appeal against ELFE on January 28, deferral possible

A January 28 date has been set for an appeal filed by gas supplier DEPA Commercial to challenge a 2019 ruling by an Athens Court of First Instance that vindicated an overcharging claim by ELFE (Hellenic Fertilizers and Chemicals), awarding the producer a compensation amount worth 61 million euros.

ELFE was seeking a compensation amount of 302 million euros, arguing DEPA – the gas utility from which DEPA Commercial later sprung forth as a new group entity – overcharged between 2010 and 2015 for supply to the producer’s facility in Kavala, northern Greece, by passing on the increased cost of DEPA’s oil-indexed contract with Gazprom.

Also in 2019, the Athens Court of First had concurrently delivered a separate verdict in favor of DEPA, vindicating the gas company for unpaid receivables owed by ELFE. The producer was ordered to pay a sum estimated between 59.5 and 60 million euros.

In response, ELFE, too, filed an appeal opposing this 2019 decision, the hearing’s date set for September, 2021, sources informed.

Legal sources explained that the two appeals could end up being heard concurrently in September, based on a decision that may emerge from the forthcoming appeal ten days from now. Combining appeal cases is commonly practiced by courts, the sources noted.

If so, the amount of time needed to resolve this legal dispute will be extended, which would impact privatization fund TAIPED’s scheduling of the DEPA Commercial privatization.

TAIPED has set a March deadline for binding offers. This deadline could end up being stretched beyond September.

Should DEPA Commercial’s appeal against ELFE ultimately fail, then other customers of the gas company, primarily electricity producers and industrial enterprises, could also seek compensation amounts for overcharging.

Some pundits have pointed out that electricity producers were probably able to pass on to their customers any cost increase resulting from DEPA’s oil-indexed contract with Gazprom. On the contrary, industries did not have such leeway.

South Kavala UGS tender qualifiers by early February

Greece’s privatization fund TAIPED will finalize its list of second-round qualifiers in a tender offering development and operation of an underground gas storage facility (UGS) in the almost depleted natural gas field of “South Kavala” in northern Greece by late January or early February, sources have informed.

Three parties submitted first-round expressions of interest: China Machinery Engineering Co. Ltd. (CMEC) – Maison Group; DESFA – GEK Terna; and Energean Oil & Gas (in alphabetical order).

Assessments of their supporting documents and other criteria are expected to be completed within the next twenty days.

RAE, the Regulatory Authority for Energy, still needs to deliver decisions concerning the operating framework of the UGS.

These pending issues include a RAE decision on the percentage of the UGS project’s capacity to be regulated, thus pre-determining this proportion’s revenue, and the earnings percentage to be determined by market forces.

The authority also needs to decide on the duration of the regulatory period and its WACC level.

Outcome of ELFE legal battle crucial for DEPA’s privatization

The outcome of an appeal filed by gas supplier DEPA Commercial to challenge a 2019 ruling by an Athens Court of First Instance that vindicated an overcharging claim by ELFE (Hellenic Fertilizers and Chemicals), scheduled to be heard next week, is pivotal for the gas company’s privatization plan.

If ELFE overcomes the appeal lodged by DEPA Commercial – which, as things stand, is expected to return 63 million euros to the fertilizer and chemicals company for overcharged gas supply between 2012 and 2015 – then this precedent will prompt more overcharging cases, for the same period, by other customers, primarily electricity producers and industrial enterprises.

Such a development, which, according to sources, could end up costing DEPA Commercial a total of up to one billion euros in rebates, threatens to derail the company’s privatization procedure as investors would not want to take on such a financial burden. Worse still, DEPA Commercial’s sustainability would be severely tested, the sources added.

DEPA Commercial was formed by gas utility DEPA specifically for its privatization.

The appeals court will require some time before it delivers its verdict. If the ruling is in favor of ELFE, then DEPA Commercial is expected to take the case to the Supreme Court. A prolonged legal battle would surely impact the gas company’s growth plans.

In 2019, the Athens Court of First Instance ruled that DEPA passed on to its customers the cost of an oil-indexed purchase agreement with Russian gas company Gazprom without considering lower prices available at natural gas hubs.

Taking into account this ongoing legal battle, privatization fund TAIPED has set an early-spring deadline for binding bids by potential buyers of DEPA Commercial as well as DEPA Infrastructure, the gas utility’s other new entity.

New minister, just appointed, has issues to resolve in 2021

Kostas Skrekas, just appointed new energy minister as part of the government’s cabinet reshuffle, in place of Costis Hatzidakis, who has headed the ministry for a constructive year and a half, faces a series of pending energy-sector matters that remained unresolved in 2020. They need to be addressed as soon as possible. Developments and conditions this year will be pivotal for these matters.

Skrekas was previously deputy minister for agricultural development and food.

Also in 2021, a year during which takeovers and mergers are seen occurring in the retail electricity and gas markets, rivals will continue battling for market share gains. The target model’s launch two months ago has brought about new conditions, strengthening the positions of vertically integrated suppliers.

The need for a normalization of the target model’s new markets stands as the energy ministry’s most pressing task at present. A sharp rise in wholesale electricity prices as a result of soaring balancing market costs has deeply unsettled the market, impacting the standings of non-vertically integrated suppliers, as well as industrial enterprises and consumers, who face rising bills.

Market coupling with Bulgaria’s day-ahead market, scheduled to take place within the first three months of the new year, is the next step of the target model, a procedure designed to harmonize EU energy markets and promote competition.

New energy-intensive industrial tariffs also need to be set soon. Though essentially a matter concerning state-controlled power utility PPC and Greece’s industrial players, the cost of industrial energy is crucial for Greek industry, carrying particular political and economic weight.

Also, Greece has little time left in its negotiations with Brussels for a framework to offer third parties access to PPC’s lignite-based generation. This issue is no longer as crucial as it once was because the country’s lignite output has been drastically reduced. Even so, it remains important for independent suppliers.

A number of energy-sector privatizations could be completed this year. Gas utility DEPA’s two new entities, DEPA Infrastructure and DEPA Commercial, electricity distribution network operator DEDDIE/HEDNO, and a tender for a tender for the development of an underground natural gas storage facility (UGS) in the almost depleted natural gas field of “South Kavala” in northern Greece are all on this year’s privatization list.

In renewable energy, the ministry needs to take decisions within the first few months to clarify terms regulating the sector. RES investment interest is currently high. Steps still need to be taken in an ongoing effort to simplify RES licensing procedures, while a legal framework must be established for energy storage, offshore wind farms and hydrogen use.

 

Strong market test turnout for DEDDIE sale, 18 players in all

A total of 18 prospective bidders have taken part in a market test staged by Goldman Sachs for power utility PPC’s forthcoming sale of a 49 percent stake in subsidiary firm DEDDIE/HEDNO, the distribution network operator.

The list, forwarded by Goldman Sachs to PPC, includes investors already familiar to the Greek market such as US firm Blackrock, specializing in transportation and energy infrastructure long-term investments; prominent infrastructure funds; as well as many European operators.

France’s Engie and Italy’s Enel, both often linked with the DEDDIE/HEDNO sale, were not among the 18 market test participants, sources informed.

Interestingly, no previous market test staged to gauge interest in the prospective sale of any Greek State asset has generated such a strong turnout.

Authorities behind DEDDIE/HEDNO’s partial privatization hope this more than promising response for the market test will result in intense bidding competition and a higher sale price.

A clear picture on the number and identity of the sale’s participants will become apparent on January 29, the deadline for the procedure’s first round official expressions of interest.

Officials have attributed the strong market test interest to five key factors: the operator’s new regulatory framework; an elevated WACC level of 6.7 percent for 2021 to 2024, well over levels of between 2.5 and 3 percent offered by other European operators; strong confidence in the governance of the country, pivotal for long-term investments; good timing, as, at present, no other network operator in Europe is up for sale; and a massive accumulation of global capital currently available for investment as a result of numerous lockdowns imposed in many parts of the world since March.

The Greek government will aim to complete DEDDIE/HEDNO’s partial privatization in the first half of 2021.

 

Investment funds targeted in operator DEDDIE’s 49% sale

Power utility PPC’s forthcoming sale of a 49 percent stake in subsidiary firm DEDDIE/HEDNO, the distribution network operator, will not be limited to potential buyers with energy-market backgrounds, according to the sale’s terms, published yesterday, suggesting the seller is aiming to attract investment funds.

DEDDIE/HEDNO’s investment plan for the next five years is worth 2.3 billion euros, including 850 million euros for a nationwide digital power meter upgrade, an amount the government will seek to draw from the EU recovery fund.

Three major infrastructure funds have already expressed unofficial interest in the operator’s sale through a market test staged by Goldman Sachs, sources informed.

The sale is planned to take place over two stages, beginning with expressions of interest by candidates until a January 29 deadline, followed by a second round of binding bids from second-round qualifiers.

They will be given access to a virtual data room for evaluations before binding offers are shaped and submitted.

The government will aim to complete DEDDIE/HEDNO’s partial privatization in the first half of 2021, energy minister Costis Hatzidakis noted during an online Capital Link Forum staged yesterday.

 

At least 10 candidates emerge for DEDDIE sale’s market test

At least ten prospective bidders, among them a number of infrastructure funds as well as European operators, have taken part in a market test staged by distribution network operator DEDDIE/HEDNO in the lead-up to its sale of a 49 percent stake.

The privatization’s officials have deemed the turnout as considerably satisfactory, both in terms of numbers and the reputations of participants.

Some of the funds, both from Europe and beyond, that emerged for this market test are either already present in the Greek market or have been considering to make an entry for quite some time. They specialize in infrastructure and energy projects as long-term investments.

The board at power utility PPC, DEDDIE/HEDNO’s parent company, will be fully informed on the market test’s participants at a meeting scheduled for today, before the privatization is officially launched.

The privatization’s exact number of first-round participants should become known by the end of January, when the expression-of-interest deadline is expected to be set.

Officials believe the overall sale procedure can be completed by spring in 2021. Attractive WACC levels set recently by RAE, the Regulatory Authority for Energy – 7 percent for 2020 and 6.7 percent for 2021 to 2024 – are expected to lure candidates.

DEDDIE/HEDNO’s ambitious 2.3 billion-euro investment plan, included in the operator’s preliminary network development plan, its projects featuring the installation of 7.5 million digital power meters, transmission network upgrades and expansions, as well as a fiber optics project, should serve as further stimulus for a solid sale price.