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Fluxys team up with Enagas for DESFA tender possible

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Belgium’s Fluxys may end up joining forces with Spain’s Enagas rather than Dutch gas company Gasunie, as has been previously reported, for Greece’s renewed tender offering a 66 percent stake of DESFA, the natural gas grid operator, latest speculation on the various possible collaborations, often conflicting, is suggesting.

Fluxys and Enagas have successfully teamed up in the past for a tender concerning the Swedish natural gas grid operator.

Sources have also not ruled out bids from two teams to include non-EU investors as bidding partners. This prospect remains unconfirmed.

Bidders face an August 7 first-round deadline for non-binding offers. It was slightly extended following the late emergence of an unidentified Greek-American investor. At this stage, interested parties are seeking to assess what impact this late Greek-American arrival may have on the tender.

The bidding is expected to be intense, as was recently noted by Marco Alvera, chief executive at Italy’s Snam, another candidate firm that could team up with a fund for the DESFA tender.

Greek government officials are confident that the new tender will generate a higher price than the 400 million euros offered for DESFA’s 66 percent in the previous and now-defunct initial tender by Azerbaijan’s Socar, that sale effort’s winning bidder.

Italy’s Banca Imi has evaluated DESFA’s 66 percent at approximately 494 million euros. If confirmed, this would satisfy the government.

The new DESFA sale attempt has developed into a challenge of political dimensions for the Syriza-led coalition, whose moves proved instrumental in killing the initial sale attempt, launched by the country’s previous administration.

Just days ago, prospective investors requested additional guarantees and clarity concerning the tender’s terms, presumably driven to do so by the eventual collapse of the previous tender. It ended after revenue-limiting measures imposed on Socar by Greece’s then-energy minister played a key part in the sale procedure’s derailment.

Prospective bidders are demanding steady tariff levels and a weighted average cost of capital (WACC) until 2022. The investors also want further clarity on the terms concerning a recoverable amount of 350 million euros to be demanded from DESFA through tariff charges over a 20-year period.

Bidders want greater clarity on DESFA future operating terms

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Prospective investors looking to take part in Greece’s renewed tender offering a 66 percent stake of DESFA, the natural gas grid operator, have requested additional guarantees, presumably driven to do so by the eventual collapse of the previous tender for which Azerbaijan’s Socar had been declared the winning bidder before revenue-limiting measures imposed on the operator by the country’s then-energy minister played a key part in the sale procedure’s derailment.

Interested investors have requested additional guarantees so as to avoid any unpleasant legal framework surprises down the road such as those experienced by Socar when Panos Skourletis, the energy minister at the time, introduced measures limiting DESFA’s earning potential.

Guarantees demanded by the prospective bidders include an assurance that DESFA’s tariff levels and weighted average cost of capital (WACC) will remain unchanged until 2022. This demand clearly indicates the impact of the first DESFA tender’s developments on the follow-up sale attempt.

The investors also want further specification of terms concerning a recoverable amount of 350 million euros to be demanded from DESFA through tariff charges over a 20-year period. This demand is also linked to Socar’s bad experience.

Overall, potential investors are demanding absolute clarity on DESFA’s future operating conditions before any offers are made.

The new DESFA sale attempt has developed into a challenge of political dimensions for the Syriza-led coalition, whose moves proved instrumental in killing the initial sale attempt, launched by the country’s previous administration. The new tender will need to fetch more than the 400 million euros offered by Socar for DESFA’s 66 percent if it is to be branded a success.

The level of offers to be made by prospective investors will be determined by the level of clarity provided by Greek authorities on DESFA’s future operating terms.

Just days ago, a first-round deadline for non-binding offers was slightly extended to August 7 following the late emergence of an unidentified Greek-American investor who has expressed an interest in DESFA.

Belgium’s Fluxys and Dutch network operator Gasunie are expected to team up for a joint offer, while Italy’s Snam, possibly backed by a fund, is also regarded as a certainty. Spain’s Enagas also appears to be gearing up to join the list of interested parties.

 

Enagas displaying interest in renewed DESFA sale effort

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Spain’s Enagas appears to be gearing up to join the list of investors exploring the possibility of acquiring a 66 stake in DESFA, Greece’s natural gas grid operator, judging by a letter forwarded by the Spanish company concerning the details of an August 7 deadline set for non-binding offers.

This deadline was slightly extended just days ago, following the late emergence of an unidentified Greek-American investor who has expressed an interest in DESFA.

Enagas president Antonio Llarden, during a recent teleconference with analysts, on the occasion of the presentation of DESFA’s first-quarter results, had noted that the Spanish company is closely following the sale effort concerning the Greek gas grid operator, adding that an official commitment could not be made at that specific point in time.

Enagas already maintains an indirect market presnence in Greece as a member of the TAP consortium, with a 16 percent stake, for the gas pipeline project now being constructed and to cross the country’s north.

Enagas had also expressed an interest in the previous DESFA tender, which eventually collapsed late last year. Azerbaijn’s Socar had been declared the winning bidder.

Besides the Spanish interest in the new DESFA sale attempt, pundits contend that two other investment teams will definitely submit bids. Belgium’s Fluxys and Dutch network operator Gasunie are expected to team up for a joint offer, while Italy’s Snam, possibly backed by a fund, is also regarded as a certainty.

Snam had also become involved in the initial unsuccessful DESFA tender, as Socar’s minority partner, with a 17 percent share.

 

 

DESFA deadline stretched by late Greek-American interest

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The late emergence of an unidentified Greek-American investor who has expressed an interest in acquiring a 66 percent of DESFA, Greece’s natural gas grid operator, is believed to have convinced TAIPED, the state privatization fund, to offer an extension to the related tender’s deadline for non-binding offers, normally expiring today.

Sources noted that the Greek-American investor requested a deadline extension for the tender, essentially a relaunch following the collapse, late last year, of the country’s previous effort to sell an equivalent share of the operator.

TAIPED has set a new deadline for August 7, thereby granting the Greek-American investor some time to prepare a DESFA bid.

The extension offered is not connected to work being conducted by RAE, the Regulatory Authority for Energy, for new DESFA surcharges to apply over the next four-year period, as was previously believed, sources assured.

Pundits contend that two investment teams will definitely submit bids for DESFA’s 66 percent. Belgium’s Fluxys and Dutch network operator Gasunie are seen teaming up for a joint offer, while Italy’s Snam, possibly backed by a fund, is also regarded as a certainty.

Snam also became involved in the initial unsuccessful DESFA tender, as a minority 17 percent partner of Azerbaijan’s Socar, the sale effort’s winning bidder.

It remains unknown whether Spain’s Enagas will make an offer. The company’s leadership, on the occasion of the recent release of DESFA’s first quarter results, noted that Enagas is closely following the developments at DESFA.

Italy’s Banca Imi has estimated that DESFA is worth 900 million euros. Factoring in the Greek operator’s net debt level, a 66 percent share would be worth approximately 494 million euros. It is believed that bidders will exceed the 400 million-euro amount offered by Socar in the initial tender.

 

 

Two teams forming for DESFA tender, expected this week

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Two camps appear to be forming as the main candidates in a new sale offering 66 percent of DESFA, Greece’s natural gas grid operator, whose tender could be announced this Thursday.

Italy’s Snam, emerging as the outright favorite, could bid alone or as part of a consortium with a non-operator co-investor such as the fund SFPI, which recently expressed an interest in DEFSA.

A consortium comprised of Dutch firm Gasunie, as the chief partner, and Belgium’s Fluxys, is expected to be the DESFA tender’s other prime candidate. Fluxys holds a 19 percent stake in the TAP (Trans Adriatic Pipeline) consortium, which could bring Spain’s Enagas, also a TAP shareholder, holding a 16 percent stake, into this bidding team. Marguerite, a European fund focused on infrastructure investments and comprised of capital from France, Italy, Spain, Germany, Poland and the European Investment Bank (EIB), could also join this second group.

France’s GRTgas, which has sought information on the new DESFA tender, could enter as a third bidder, but this would be considered a surprise development.

In the lead-up, the energy ministry yesterday tabled an amendment resolving pending DESFA-related legal issues. Previously, tender offers were limited to certified European operators. This could have prevented certain subsidiaries or SPVs that may be formed especially for the tender from submitting offers.

Bidders are expected to be given a period of at least 35 days to submit non-binding offers. Once the deadline has expired, certification held by participants will be examined. Bidders meeting the tender’s requirements will be invited to submit binding offers, possibly next autumn.

Though the Greek government will be hoping that the sale attracts bids of close to the 400 million-euro offer made by Socar – the winning bidder of the previous DESFA tender, which ended following interventions by the European Commission and Athens – an offer between 300 and 340 million euros appears to be a more realistic prospect for this renewed sale attempt.

TAIPED, the state privatization fund, maintains the right to request improved offers from participants  once binding bids have been submitted.

Given the current rate of developments, a preferred bidder could be named within the current year while a finalized agreement woud probably be signed in 2018.

DESFA tender nears, Italy’s Snam among the favorites

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A new tender to offer 66 percent of DESFA, Greece’s natural gas grid operator, expected to be announced within the next few weeks by TAIPED, the state privatization fund, has, in the lead up, drawn the interest of companies already familiar to the local market through expressions of interest made in the past as well as new parties.

Energy minister Giorgos Stathakis, commenting just days ago, informed that the tender will be announced within the current month.

Italy’s Snam, holding a 20 percent stake in the TAP (Trans Adriatic Pipeline) now under construction, is believed to be preparing to submit an offer to the DESFA tender, viewing a majority stake in the Greek operator as a springboard for further investments in the wider region.

Snam, seen as a favorite, had joined Azerbaijan’s Socar, the winning bidder of the previous DESFA tender, as a partner before that sale procedure collapsed late last year following interventions by Athens and Brussels that undermined the investment’s revenue potential.

Belgium’s Fluxys and Spain’s Enagas, which hold TAP consortium stakes of 19 percent and 16 percent, respectively, Dutch company Gasunie, Romania’s Transgaz, as well as new players, among them France’s GRTgas and two funds, SFPI and Marguerite, have also all been metioned as prospective contenders. Given the tender’s terms, the funds would have to make joint bids with certified European operators. The tender will be aimed at certified European operators.

A number of representatives of prospective bidders have made visits to Athens over the past few weeks seeking detailed information on the forthcoming tender. Many of these investors have already closely examined DESFA’s ten-year investment plan, according to energypress sources.

A government plan to pursue fast-track procedures for the DESFA sale with the aim of completing the sale by the end of this year is believed to be encouraging prospective bidders. However, the interest would have been even greater had tax incentives and other favorable measures been incorporated into the DESFA sale package, one pundit told energypress.

Current international conditions, the considerable number of respective enterprises up for sale at present, and a certain degree of uncertainty that has crept in as a result of the first tender’s demise are expected to subdue offers to less than the 400 million-euro bid submitted by Socar for DESFA’s 66 percent in the first sale attempt, according to market officials.

 

 

 

TAIPED to launch new DESFA tender, details not released

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The energy ministry is keeping under wraps the details of its plan concerning the relaunch of an international tender to offer a stake of DESFA, the natural gas grid operator, including whether the 66 percent stake offered though the previous sale attempt will be reduced.

TAIPED, the state privatization fund, is waiting for final decisions to be made at the energy ministry before it proceeds with the tender’s declaration. Meanwhile, a letter of guarantee worth 40 million euros that had been provided by the Azerbaijani energy firm Socar, the winning bidder of the first and ultimately unsuccessful DESFA tender, has yet to be returned.

At this stage, it appears certain that a new tender will be launched immediately following the festive season.

Legal experts have informed that no obtacles should prevent the first tender from being nullified as it was completed in 2013, when Socar was declared the winning bidder. A final agreement, however, was never reached and the process recently collapsed after Socar decided not to further extend its letter of guarantee.

After winning the first tender, Socar was eventually joined by Italy’s Snam as a partner in the deal in response to European Commission intervention ordering the Azerbaijani firm to surrender at least 17 percent of the 66 percent stake of DESFA it had agreed to acquire. The sale effort was further complicated by Greek energy ministry measures imposed last summer that severely restricted the operator’s revenue potential.

According to sources, Socar and TAIPED have already agreed to terminate the first tender signed three years ago without any penalties. As the next step, the Greek privatization fund will need to return the letter of guarantee to Socar after having cleared the failed sale attempt of any prospective legal complications.

The equity stake of DESFA to be offered by ELPE (Hellenic Petroleum), which holds a 35 percent stake of the gas grid operator, is another isssue that needs to be resolved before the follow-up sale attempt proceeds.

Given the rapid developments in Greece’s energy market, a number of ELPE officials believe that the petroleum company needs to maintain its interests in the country’s gas infrastructure, including the LNG terminal on the islet Revythoussa, just off Athens. This perception could restrict the DESFA stake ELPE would be willing to offer for the tender’s relaunch. Certain ELPE officials admit they would be more prepared to sell ELPE’s stake in DEPA, the Public Gas Corporation, rather than DESFA.

Greek government officials are now expected to inform parties interested in the upcoming new DESFA tender of the new sale procedure. These include Belgium’s Fluxys and Romania’s Transgas.

If all goes according to plan, the new DESFA tender is not expected to be completed before September, 2017.

Government preparing to launch new DESFA tender

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The Greek government and TAIPED, the state privatization fund, are preparing to launch a new international tender for the sale of a stake in DESFA, Greece’s natural gas grid operator, following the recent collapse of a long-running sale procedure through which the Azerbaijani energy firm Socar, joined later on by Italy’s Snam, were the candidate buyers for a 66 percent stake.

At this stage, it remains unclear how big a stake of DESFA will be offered through the new sale attempt.

Thoughts of keeping the original tender valid once negotiations broke down were expressed by the country’s international creditors, in a bid to save time, but this would not be legally feasible.

Officials at TAIPED informed energypress that, at best, the new tender will not be completed before the third quarter of 2017.

Though the original tender theoretically remains alive, it is now believed to be just a matter of days before TAIPED nullifies the procedure.

Over the past few days, energy minister Giorgos Stathakis, since his return from an official visit to New York City, has held talks with officials at TAIPED and ELPE (Hellenic Petroleum), which holds a 35 percent stake of the operator’s parent company DEPA, the Public Gas Corporation, also on the privatizations agenda.

Given the country’s rapid gas sector developments amid the sector’s ongoing market liberalization, a number of ELPE officials believe it is crucial for the oil company to maintain its presence in this domain’s infrastructure.

Greek government officials are now expected to inform parties that have expressed an interest in DESFA of the upcoming new tender. These include Belgium’s Fluxys and Romania’s Transgas.

Brussels pressures gov’t to seek DESFA tender extension

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Pressured by the European Commission, Greek government officials are searching for ways to prolong the just-expired tender offering 66 percent of DEFSA, the natural gas grid operator, rather than relaunch a new procedure from scratch, in an effort to avoid wasting more time, which would delay other imminent privatizations, such as that of DEPA, the Public Gas Corporation.

Over the past few days, local legal experts have been working on the prospect of launching a new tender as a result of last week’s demise of the long-running DESFA sale attempt. However, the latest pressure applied by the lenders on Greek officials, as part of the bailout’s second review, has brought about a change of direction.

A continuation of the same tender would end the government’s hopes of retaining majority control of DESFA for the Greek State and selling a minority stake.

The country’s lenders are believed to have applied relentless pressure on the Greek government over the DESFA sale, demanding immediate action, as last week’s sale collapse creates a hole in Greece’s privatization revenues while also blocking prospective – and interlinked – sales, those of DEPA (65%) and ELPE (35%).

DESFA is a wholly owned DEPA subsidiary and ELPE holds a 35 percent stake in DEPA.

The DESFA matter needs to be cleared up before a privatization tender for DEPA can be launched, pundits have highlighted, as an accurate evaluation of DEPA is not possible the way things stand.

The DESFA sale saga may still not have stuck major-crisis level considering the mild climate following a meeting between Greece’s recently appointed energy minister Giorgos Stathakis and Maros Sefcovic, the European Commission vice president responsible for Energy Union. However, a vicious cycle of further delays will need to be avoided.

The Greek government failed to sell DESFA’s 66 percent to Azerbaijani energy firm Socar, the winning bidder of an international tender in 2013, which was eventually joined by and Italy’s Snam as a partner in the deal.

 

Gov’t expected to announce DESFA plans next week

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The Greek government is expected to announce, next week, the details of its future plan for DESFA, the natural gas grid operator, following this week’s collapse of a long-running privatization attempt.

Athens will also need to start work on anticipated legal issues as a result of the failed sale to Azerbaijani energy firm Socar, the winning bidder of an international tender in 2013, offering a 66 percent stake, and Italy’s Snam, an eventual partner in the deal.

According to sources, government officials have already begun exploring the prospect of whether the tender could be kept alive as a means of avoiding the launch of a new procedure from scratch.

Legal experts contacted by energypress informed that a new tender is legally inevitable as a result of Socar’s refusal, on November 30, to extend its letter of guarantee following two successive one-month extensions.

If permitted by the country’s lenders, the Greek government is expected to try and retain 51 percent of DESFA for the Greek State and offer a smaller stake to investors. A plan through which the government is expected to offer between 25 and 30 percent of DESFA to a strategic investor, as well as shares through the bourse, all of which will not exceed 49 percent, is seen as the government’s prefered route. This approach would be based on the model being carried out for IPTO, the power grid operator.

Insiders informed that Socar had wanted to abandon the DESFA deal long ago, from the time the European Commission intervened, in 2015, demanding that the Azerbaijani firm surrender at least 17 percent to a certified European operator, which limited Socar’s share to no more than 49 percent.

 

 

Gov’t to try and retain 51% of DESFA for state in new tender

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The coalition and energy ministry will battle to retain a 51 percent stake of DESFA, the natural gas grid operator, for the Greek State in the new tender to be launched as a result of yesterday’s collapse of a long-running sale attempt offering 66 percent of the operator, sources have informed energypress.

“We did all that we could to finalize the sale and are now carrying on based on new conditions,” a ministry official commented.

For the time being, the coalition’s economic policy team will focus on reaching a decision next week on the percentage of DESFA to be offered in the follow-up sale attempt, which is considered certain as the operator’s sale is a bailout requirement.

Yesterday’s agreement collapse signaled the end of a marathon effort to sell DESFA’s 66 percent. The Azerbaijani energy firm Socar had emerged as the winning bidder for 66 percent of the operator in 2013. The European Commission eventually intervened over competiton concerns and demanded that the candidate buyer surrender at least 17 percent to a certified European partner, which brought Italy’s Snam into the picture as a partner in the deal.

The failed sale attempt creates a hole in the budget at TAIPED, the state privatization fund. The next set-up for the DESFA sale will need to be decided in conjunction with the country’s lenders. The details remain to be seen.

DESFA sale collapse raises a series of crucial questions

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Yesterday’s collapse of the long-running attempt to sell a 66 percent stake of DESFA, Greece’s natural gas grid operator, may have offered some leeway to the Greek government, which never felt completely comfortable about this specific sale, but it also raises a number of questions.

These issues range from how Greek officials will handle a letter of guarantee provided by Azerbaiiajni energy firm Socar, the initial buyer which was later joined by Italy’s Snam as a partner for the deal; the shape of the new tender; as well as bigger matters such as the country’s image as an investment market and the impact on Greece’s geopolitical standing.

Energy ministry officials, who hold the prospective buyer accountable for the collapse, contend that Socar’s letter of guarantee, worth 40 million euros, or 10 percent of the 400 million-euro sale price, should be nullified, which would deprive the Azerbaijani company of a refund. On the contrary, local legal experts believe that such an intention is groundless as the buyer did not deviate from the tender procedure’s regulations. It remains to be seen whether this separation will be a smooth process or not.

The failure to finalize the DESFA tender deprives TAIPED, the state privatization fund, of an anticipated 188 million euros in 2017. This amount represents DESFA’s 31 percent of the 66 percent share that was put up for sale. The country’s lenders will most likely demand that this monetary gap be covered by another sale. It remains to be seen which Greek asset will be chosen to make up for the shortage.

Also, ELPE (Hellenic Petroleum), which provided its 35 percent of DESFA stake to the sale, was expecting 212 million euros, based on a decision at a shareholders meeting back in 2013, when Socar emerged as the international tender’s winning bidder. ELPE had written off the possibility of a 212 million-euro cash injection this year, but it was anticipating that the amount would arrive at some point in 2017.

A new tender will need to be launched as the DESFA sale is a bailout requirement. The government is expected to seek retaining 51 percent of DESFA for the Greek State and offer the other 49 percent to a strategic investor as well as through the bourse, based on the IPTO (power grid operator) sale model now being carried out.

The new international tender will take at least a year to complete from the moment it is announced. Sector experts believe the price to be offered by bidders, regardless of the stake offered, will be proportionately less than Socar’s offer of 400 million euros for a 66 percent share in 2013. This offer had factored in a revoverable amount of 829 million euros for previous investments at DESFA. Following recent revisions, this figure has been reduced to 326 million euros, which reduces the incentive for investors. Officials maintaining an opposing view claim that the recent upgrade to the LNG terminal in Revythoussa, an islet off Athens, increases the operator’s market value. A new evaluation of DESFA is definitely needed before the the next tender is launched.

Greece’s privatizations program has lost momentum for quite some time now. Yesterday’s collapse of a sale that had been agreed to back in 2013 is not good news for the international investment community. Leading government officials are scheduled to attend a Capital Link conference in New York City on December 12. They will seek to promote foreign investments in Greece. The timing, just days after the DESFA sale collapse, is not good.

It is no secret that the US was extremely keen on seeing Socar’s bid for DESFA finalized. The prospect was viewed as a positive step for US interests in southeast Europe, the objective being to break Russia’s dominance. As a DESFA stake holder, Socar, which holds a 20 percent stake in the TAP (Trans Adriatic Pipeline) project to cross northern Greece, would have had every reason to pursue new transboundary interconnection projects in the wider Balkan region. It should be noted that the US applied relentless pressure on Socar to complete the DESFA agreement.

 

Long-running DESFA sale attempt sinks without result

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Greece’s long-running attempt to sell a 66 stake of DESFA, the natural gas grid operator, to Azerbaijani energy company Socar and Snam, its eventual Italian partner in the deal, has officially ended without a result, the energy ministry announced tonight.

“In recent months, the government has been engaged in continuous discussions with representatives of Socar and Snam for the sale of 66 percent of DESFA. The climate of these discussions was constructive. However, the proposal tabled by the candidate buyers for a price reduction was legally impossible and would have nullified the tender,” the energy ministry noted.

The energy ministry also noted that various alternatives proposed by the candidate buyers, their intention being to improve the operator’s commercial potential, were examined but could not be implemented to the sale’s existing framework.

“The ministry’s proposals sought to improve the operator’s financial position by offering an increase to the recoverable amounts [for past investments],” the ministry announced. “These proposals were not accepted, and, as a result, the negotiations concluded.”

Socar was named the winning bidder of an international tender offering a 66 percent stake of DESFA in 2013,  under a preceding conservative New Democracy-led coalition for which Yiannis Maniatis of the socialist PASOK party, the government’s junior partner, was in charge of the energy portfolio. At the time, the energy minister signed an agreement with Socar president Rovnag Abdullayev for the transfer of DESFA’s 66 percent – 31 percent from TAIPED, the State Privatiation Fund, and 35 percent from ELPE (Hellenic Petroleum) – to Socar.

The European Commission eventually intervened over competition concerns and forced Socar to surrender at least 17 percent to a certified European operator, prompting Snam’s entry into the ordeal.

Negotiations concerning the deal’s details further delayed the sale and then, last summer, the recently replaced energy minister Panos Skourletis struck a devastating blow by implementing measures that severely limited DESFA’s revenue potential. This development was negatively received by the candidate buyers, who sought a price reduction, and ultimately drove the long-running sale attempt to tonight’s demise.

In the lead-up, Socar kept the process alive by offering two successive one-month extensions to the agreement’s deadline, which was originally due to expire on September 30 – all to no avail.

Gov’t exploring options as it waits for DESFA buyer reply

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The Greek government is anxiously awaiting a response from Azerbaijani energy firm Socar to its slightly improved offer concerning the 66 percent privatization of DESFA, Greece’s natural gas grid operator, while also exploring alternative options should the procedure sink, a prospect the government does not wish but which is highly likely.

The deadline, determined by a letter of guarantee provided by Socar, expires later today.

According to energy ministry sources, Greece’s new proposal forwarded to Socar and Snam, the Italian firm which has joined Socar as a partner for the deal, improves the market value of DESFA and places emphasis on recoverable amounts concerning investments made between 2006 and 2015. It remains unclear whether the improvement has satisfied the prospective buyers and to what extent.

An answer is expected within the next few hours. Rumors which floated about late last night gave the DESFA sale attempt little hope, which is why the government is already preparing alternatives.

The long-running DESFA sale attempt’s failure would affect the government’s second-review bailout negotiations with the lenders. The DESFA sale is a pending issue from the bailout’s first review. Failure to privatize now would also harm the country’s credibility in the eyes of investors. The tender’s failure would also negatively impact Greece’s wider relations with Azerbaijan and a number of energy project prospects such as the TAP natural gas pipeline, now under construction. Both Socar and Snam hold stakes in the TAP consortium. In addition, the country’s privatizations revenue coffer would be deprived of 180 million euros, which is the Greek State’s share of the 400 million sale price. The other 220 million would end up at ELPE (Hellenic Petroleum).

To minimize the fallout of a failed sale attempt, the government will need to relaunch a new DESFA tender as soon as possible. Government officials are already exploring plans to once again offer a 66 percent stake of DESFA or, alternatively, retain 51 percent for the Greek State and offer a total of 49 percent to a strategic investor and investors via the bourse. This latter option is based on the sale plan currently being carried out for IPTO, the power grid operator.

According to sources, other prospective investors seem ready to surface should the tender be relaunched from scratch.

Belgian natural gas grid operator Fluxys, also a TAP project shareholder, is likely to emerge as a potential buyer in association with Romania’s Transgas. Last week, representatives of these two firms, accompanied by their respective ambassadors to Greece, appear to have held talks with officials at ELPE, selling its 35 percent stake of DESFA as part of the 66 percent on offer. Fluxys and Transgas are believed to be interested in acquiring a 30 percent share of DESFA if Greece fails to reach an agreement with Socar and Snam.

The recently appointed energy minister Giorgos Stathakis appears to favor keeping grid management under the Greek State’s control. He is expected to promote the option based on the aforementioned IPTO plan and seek to sell 49 percent of DESFA.

Prime Minister Alexis Tsipras will need to decide on the next step should the current DESFA sale attempt sink.

All possible with DESFA sale deadline just two days away

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The level of urgency surrounding the DESFA sale attempt has intensified now that it has become known that the country’s lenders have elevated the matter by noting the sale needs to be kept alive if the Greek bailout’s second review is to be completed.

Just two days remain before the November 30 deadline, determined by a letter of guarantee provided by Socar, the Azerbaijani energy company which has been joined by Italy’s Snam for a 66 percent stake of DESFA. All is possible at this stage.

Certain officials closely associated with the negotiations have expressed strong doubts about the chances of an agreement following the rejections, by both sides, of various proposals made.

Socar has kept the sale process alive by offering two successive one-month extensions to its letter of guarantee.

Troubled by the lack of progress, the Greek side appears to have asked for a further deadline extension, which indicates that convergence is still a long way off.

Should the prospective buyers reject an extension request, the current international tender, from which Socar emerged as the winning bidder in 2013 with a 400 million-euro offer for 66 percent of DESFA, will be terminated, creating the need for a new tender to be launched. This would create problems for the Greek bailout’s second review.

The Greek side appears to be discussing a further concession by increasing the operator’s long-term revenue potential. This would be created by adding interest to recoverable amounts concerning investments made between 2006 and 2015, which, in turn would increase tariffs and revenues for the operator’s shareholders.

 

Gov’t makes final offer to buyers in DESFA sale attempt

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The Greek government appears to have played its last card in the long-running attempt to privatize a 66 percent stake of DESFA, the natural gas grid operator, hoping the potential buyers, Socar and Snam, will accept it and save the procedure from a demise as the November 30 deadline, determined by a letter of gurantee provided by potential buyer Socar, approaches.

The government has proposed a slight tariff increase for DESFA, which would raise the operator’s revenue potential, through a small interest rate to be added to every year of unrecovered amounts concerning investments made between 2006 and 2015.

The operator’s current framework, revised last summer by the recently replaced energy minister Panos Skourletis, does not offer any interest for these past recoverable amounts.

Until now, a series of proposals made by the negotiating sides have been rejected, making this latest offer, coming just days ahead of the deadline, seem like the last chance for a successful completion of the DESFA sale.

Offers made by the potential buyers have included a rejection and overhaul of the Skourletis measures, which severely limited DESFA’s revenue potential; a sale price reduction; and payment through installments, plus interest.

The buyers have stressed they want the Greek government to provide a guarantee ensuring that any increases agreed to now will not be altered in the future.

TAIPED, the State Privatization Fund, has yet to publish its next Asset Development Plan (ADP), now overdue, as it is awaiting the outcome of the DESFA sale attempt. If the current effort sinks, DESFA will need to be added to the fund’s next ADP list.

Stream of proposals discussed in expiring DESFA sale talks

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All is possible in the ongoing negotiations for a solution to the long-running privatization attempt of a 66 percent stake of DESFA, the natural gas grid operator, as the November 30 deadline, determined by a letter of gurantee provided by potential buyer Socar, approaches.

The disputes separating the negotiating sides could be resolved, the overall effort could sink and force the Greek government to launch a new international tender, or a new deadline extension, which would be the third, could be offered.

One proposal after another is apparently being discussed by the two sides in the attempt to seal a deal. Amid the flow of activity, one certainty is that Socar, the winning bidder in 2013 of an international tender for DESFA’s 66 percent at a price of 400 million euros, and Italy’s Snam, the Azerbaijani energy firm’s partner in this deal as a result of European Commission intervention requiring Socar to surrender at least 17 percent to a certified European operator, have offered 300 million euros up front and 100 million euros in the long term, once recent improvements to the previous energy minister Panos Skourletis’s measures severely restricting the operator’s revenue capacity begin producing results.

The Greek side may be considering this future 100 million-euro payment as long as interest is added to the amount. However, conflicting reports continue to emerge on this detail.

Certain energy ministry officials have rejected the prospect of a payment in two stages. The potential buyers note that a double-payment solution is better than the sale procedure’s ultimate demise. The buyers contend that the Greek side has not rejected payment through installments.

According to information provided by other sources, the prospective buyers have proposed an increase of the operator’s recoverable amount for investments made between 2006 and 2015 to a level of slightly over the 326 million euro amount set by RAE, the Regulatory Authority for Energy. This proposal is being discussed, sources said.

The former energy minister’s measures had reduced this recoverable amount from 829 million euros to 285 million euros before RAE stepped in to raise it to 326 million euros.

 

 

 

 

DESFA buyers make new undisclosed offer as deadline approaches

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Azerbaijani energy firm Socar and Italy’s Snam, the prospective buyers of DESFA, Greece’s natural gas grid operator, have submitted an alternative proposal to TAIPED, the State Privatization Fund, in a bid to resolve differences and finalize the long-running attempt to sell a 66 share of the operator ahead of an imminent deadline on November 30.

Socar and Snam, which united for this privatization attempt after the European Commission forced the Azerbaijani firm to surrender at least 17 percent of a 66 percent share of DESFA acquired by Socar through an international tender in 2013, have submitted a series of proposals intended to limit the negative impact of recent revenue-restricting measures imposed on the operator by Greece’s just-replaced energy minister Panos Skourletis.

No details of this compromise attempt have been disclosed. Buyer representatives, emerging from a meeting yesterday with the new energy minister Giorgos Stathakis, said that leeway exists to find a solution.

The troubled sale attempt has remained alive as a result of Socar’s two one-month extensions to its letter of guarantee.

Socar was named the DESFA tender’s winning bidder after offering 400 million euros for a 66 percent stake. However, the Azerbaijani firm and fellow prospective buyer Snam insist that the operator’s market value is now worth considerably less as a result of the former minister’s revenue-limiting measures.

Azerbaijani media reports published yesterday put the Greek operator’s value at levels of around 260 million euros, roughly 40 percent less than the initial price, highlighting the gap between the negotiating sides.

Just days ago Socar proposed paying 300 million euros up front and a further 100 million euros in the long term once a series of Greek government measures implemented to soften Skourletis’s DESFA cuts begin offering benefits.

 

 

Ball now in new Greek energy minister’s court for DESFA sale

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The recently appointed energy minister Giorgos Stathakis is expected to meet with Socar and Snam officials over the next few days in a bid to find a solution with the prospective buyers of a 66 percent stake in DESFA, the natural gas grid operator, as a November 30 deadline approaches following two one-month deadline extensions.

Preliminary talks ahead of this next attempt seem to have taken place last week.

At this stage, revisions by the new minister to revenue-limiting measures imposed on DESFA by his predecessor Panos Skourletis appear to be the only way out of the impasse.

The buyers believe that DESFA’s 66 percent stake is now worth less than the 400 million euro amount originally agreed to prior to the former Greek energy minister’s measures.

Socar, which had emerged as the winning bidder of the operator’s 66 percent stake, and Italy’s Snam, which joined the Azerbaijani energy firm for this deal after the European Commission intervened and forced Socar to surrender at least 17 percent to a certified European operator, have proposed to offer 300 million euros up front and the other 100 million euros in the future, when the operator begins to benefit from recent RAE (Regulatory Authority for Energy) revisions concerning DESFA’s revenue capacity. The Greek side has made clear it cannot accept partial payments.

The former energy minister’s measures limited DESFA’s recoverable amounts for investments concerning 2006 to 2015 to 285 million euros from 829 million euros. RAE then revised this figure upwards to 326 million euros and halved the recovery time period to 20 years from 40 years. The operator’s tariff increase limit was also raised from 23 percent to 33.5 percent.

Socar offer to pay €300m up front for DESFA rejected

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Azerbaijani energy firm Socar, having consulted Italy’s Snam on their bid to acquire a 66 percent stake of DESFA, Greece’s gas grid operator, is prepared to offer 300 million euros now and a further 100 million later on, at an unspecified time, once the operator begins benefiting from revisions made just months ago by RAE, the Regulatory Authority for Energy, to improve the operator’s capacity for recoverable amounts, energypress sources have informed.

However, the Greek side has already rejected the offer by noting that it cannot accept a split of the total amount as this would violate the sale’s terms, set in an international tender. The same argument was used when Socar sought a price reduction.

Socar, which, in 2013, emerged as the winning bidder of an international tender for 66 percent of DESFA at a price of 400 million euros, was later forced to surrender at least 17 percent to a certified European operator following European Commission intervention. Snam then stepped in as a partner.

Time is running out for this marathon sale attempt. Socar’s latest extension to its letter of guarantee provided for the deal will expire on November 30.

The negotiating sides have been at odds over the sale price of 400 million euros. Socar officials contend that revenue-limiting measures imposed last summer by Greece’s recently replaced energy minister Panos Skourletis have severely affected the operator’s market value, arguing that a price of 300 million euros is now more appropriate. The Greek side has refused to budge from the 400 million-euro price tag.

Socar insists that the recent RAE revisions only partially cover the damage caused by the minister’s measures, which limited DESFA’s asset base and, as a result, drastically reduced the operator’s recoverable amounts for investments made between 2006 and 2015 from 829 million euros to 285 million euros. RAE then intervened to increase this amount to 326 million euros and reduce the recovery period to 20 years from 40 years, as had been engineered by the former energy minister. The authority also offered a provision that increases DESFA’s tariffs by 33.5 percent instead of 23 percent, as set by Skourletis. This slight rise is still quite a long way off the 68 percent figure prior to the minister’s measures, the prospective buyers have protested.

Prospect of nearing Eurogroup meeting to apply pressure on DESFA sale

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A Eurogroup meeting of EU finance ministers scheduled for December 5, just days after the latest one-month deadline extension for the DESFA (natural gas grid operator) sale, now reset for November 30, is expected to apply pressure on the Greek government to reach a final agreement with the operator’s prospective buyers.

The government wants to have completed the bailout’s ongoing second review before the December 5 meeting in order to immediately follow up with debt reduction talks.

Completion of the DESFA sale prior to this December date will lend some support to the government’s debt-reduction case. The DESFA sale is a pending issue that spilled over from the bailout’s first review.

It remains unclear whether the Azerbaijani energy firm Socar, the winning bidder of an international tender for a 66 percent share of DESFA, had the Eurogroup meeting’s timing and impact on negotiations in mind when it decided yesterday to extend, yet again, its letter of guarantee by an additional month.

Socar must surrender at least 17 percent to a certified European operator as a result of European Commission intervention. Italy’s Snam has moved in to take on a surrendered amount.

The Greek government would be taking a big risk should it send finance minister Euclid Tsakalotos to next month’s Eurogroup meeting without good news on the DESFA sale. Brussels and the US, both looking to diversify natural gas supply in Europe to lessen Russia’s dominance, are pushing for a deal.

DESFA’s negotiating sides remain at odds over the operator’s sale price. Socar, the winner of a tender in 2013 on the strength of a 400-million euro offer for a 66 percent stake of DESFA, and Snam, its partner in this venture, both believe the operator is worth far less as a result of revenue-restricting measures imposed last July by Greek energy minister Panos Skourletis. The buyers believe a price tag of 300 million euros is more appropriate, considering the DESFA revisions. Despite the gap, Socar and Snam officials believe a solution is possible.

A change to the original price agreed to through the international tender is not possible as this would cancel the procedure, the government insists. Intervention by RAE, the Regulatory Authority for Energy, or an amendment to the Skourletis bill will be needed if a final agreement is to be reached. An increased dividend yield could also be considered.

Whatever the case, officials at Socar, which has hung on to the long-running DESFA sale attempt for years, remain cautiously optimistic.

 

Gov’t seeking new DESFA sale extension amid dim prospects

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The Greek government hopes the Azerbaijani energy company Socar will respond favorably today to its proposal for a further one-month extension of a letter of guarantee concerning the beleaguered and long-running effort to sell 66 percent stake of DESFA, Greece’s natural gas grid operator. The current letter of guarantee, an extension of a previous letter, expires today.

The overall prospects are not good as Socar and Italy’s Snam – it entered the negotiating process to take on a DESFA share that must be surrendered by the Azerbaijani company following European Commission intervention – both believe the Greek operator’s 66 percent stake is worth considerably less than the initial price of 400 million euros initially agreed to as a result of revenue-limiting measures imposed on the operator last summer by the Greek energy minister Panos Skourletis.

The Greek government has not budged on the price issue, meaning that even if the sale attempt is kept alive today the prospects of a final agreement appear dim.

Representatives of all three sides will meet today. Energypress sources have informed that Socar is pressing for extreme gains as well as written guarantees from the Greek government in order to extend the sale process. Socar officials appear to have lost faith in the Greek government’s handling of the DESFA sale following the most recent round’s failure to produce finalized results.

Socar had emerged as the winning bidder of an international tender in 2013 for 66 percent of DESFA at a price of 400 million euros. More recently, Brussels ruled the Azerbaijani firm must surrender at least 17 percent.

 

Socar, Snam demanding lower DESFA price as deadline nears

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Despite significant progress achieved over the past few weeks – as a result of a number of compromise moves – in Greece’s long-running attempt to sell a majority stake of DEFSA, the natural gas grid operator, the procedure has stumbled again as the prospective buyers, Azerbaijan’s Socar and Italy’s Snam, are demanding a price reduction well below the original 400 million-euro price tag for the 66 percent share being sold.

Socar and Snam insist the operator’s price for this stake should be reset to around 300 milllion euros, possibly less.

Time is running out. The negotiating sides have just a few more days, until October 31, to reach a deal when a letter of guarantee provided by Socar, the winning bidder of an international tender in 2013, expires. Socar was later forced to surrender at least 17 percent to a certified European operator as a result of European Commission intervention, prompting Snam to move in for a share of the sale.

According to energypress sources, legal representatives of all three companies have been engaged in a series of increasingly urgent negotiations in Athens over the past few days in search of an agreement, to no avail so far.

Socar officials insist that revenue-restricting measures imposed on DESFA last summer by energy minister Panos Skourletis have significantly lowered the operator’s market value. Snam officials are believed to be pushing hardest for a price reduction, while the people at Socar are maintaining a milder, more diplomatic stance.

However, as has been repeatedly noted in previous reports, a revision to the original price is technically not possible as this would violate the tender’s conditions. TAIPED, the State Privatization Fund, had made this clear to all negotiating sides quite a while ago.

This crucial detail has been reiterated to Socar’s deputy vice president Vitaly Baylarbayov, who has been in Athens over the past few days, and Anar Mammadov, the former director of the Azerbaijani company’s Greek subsidiary, Socar Energy Greece.

The fate of this unfinished deal will be made clear during the day or tomorrow, the latest.

 

Crucial week for DESFA sale as October 31 deadline nears

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This week will be crucial in Greece’s long-running effort to privatize 66 percent of DESFA, the natural gas grid operator, a process facing an October 31 deadline, when a letter of guarantee provided by prospective buyer Socar, the Azerbaijani energy company, expires following a recent one-month extension.

Leading officials representing Socar, the winning bidder of a DESFA tender, which must now surrender at least 17 percent following European Commission intervention, and Snam, the Italian operator expected to take on the surrendered stake, will be in Athens for final talks with Greek government officials. Dimitris Liakos, the Prime Minister’s adviser, is representing the Greek government for the DESFA sale. A series of secret meetings have apparently been staged in Athens over the past few weeks.

A number of compromise moves have been made in an effort to satisfy the negotiating sides. DESFA’s network usage tariff is expected to be increased by 33.5 percent, an improvement on a previous percentage figure set by the energy ministry. A recoverable amount has been set at 326 million euros and concerns 2006-2016. A shorter collection time of 20 years rather than 40 years, as has been originally planned by Greek officials for this amount, is being offered. Also, a dividend yield of 9.23 percent has been set.

The Greek government has remained firm on the sale’s original price tag of 400 millon euros for DESFA’s 66 percent stake. Prior to the aforementioned revisions, Socar officials contended that DESFA’s market value had fallen as a result of revenue-restricting measures.

If all goes well, Socar will sign a final agreement with TAIPED, the State Privatization Fund, for a 66 percent stake of DESFA. A total of 400 million euros will be paid, of which 180 million euros will be channeled to the privatization fund, selling a 31 percent of DESFA, and 220 million euros to ELPE (Hellenic Petroleum), selling 35 percent of the operator. Then Socar will sign an agreement with Snam. According to sources, the Italian firm will acquire at least 30 percent of DESFA.

Snam, Socar officials arranging final details for their DESFA roles

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Officials at Azerbaijani energy company Socar and Italy’s Snam are currently negotiating a shareholders agreement for DESFA, the natural gas grid operator, in anticipation of the Greek government’s imminent final proposal for the sale of a 66 percent stake of the operator.

Issues being worked on by the two prospective buyers include the percentage to be sold to Snam by Socar, the winner of an international tender for DEFSA’s 66 percent back in 2013; the price of this transfer; as well as the managerial and board roles of the two shareholders.

After winning the DESFA tender, Socar was asked to surrender at least 17 percent by the European Commission, seeking to keep the Azerbaijani firm’s stake in the Greek operator to no more than 49 percent.

The Greek government needs to forward its finalized proposal carrying all the issues agreed to in recent weeks by the Prime Minister’s adviser Dimitris Liakos with Socar and Snam officials.

These issues include a network usage fee increase of 35 percent for DESFA, well below a previous Greek plan, a recoverable amount of 326 million euros concerning 2006-2016, a shorter collection time of 20 years rather than 40 years as had been originally planned by Greek officials for this amount, as well as a dividend yield of 9.22 percent.

The prospective buyers are most likely to receive the Greek government’s final proposal next week as less than a fortnight now remains before a letter of guarantee submitted by Socar expires on October 31, following a one-month extension.

If all goes well, Socar will sign a final agreement with TAIPED, the State Privatization Fund, for a 66 percent stake of DESFA. A total of 400 million euros will be paid, of which 180 million euros will be channeled to the privatization fund, selling a 31 percent of DESFA, and 220 million euros to ELPE (Hellenic Petroleum), selling 35 percent of the operator.

Then Socar will sign an agreement with Snam. According to sources, the Italian firm will acquire 30 percent of DESFA, which would reduce Socar’s stake to 36 percent from the 66 percent share originally agreed to through the international tender. The Greek State will hold the other 34 percent.

According to sources, Greek officials recently asked Snam officials to buy as much as 36 percent of DESFA. This would make the Italian firm the operator’s main shareholder. However, Snam officials reportedly responded by informing that the Italian firm intends to honor an agreement already signed with Socar on this issue.

Snam leadership expected in Athens to seal DESFA sale

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The leadership of Italy’s Snam is expected in Athens for settlement of pending details and finalization of a long-running effort by Greece to sell 66 percent stake of DESFA, the natural gas grid operator.

The Italian operator is now believed set to acquire at least 30 percent of DESFA, well over the 17 percent originally planned.

Snam has apparently received consent from the Azerbaijani energy company Socar, the winning bidder, in 2013, of an international tender for 66 percent of DESFA at a price of 400 million euros. The European Commission later intervened and demanded that Socar surrender at least 17 percent as a means of keeping its stake in DESFA to no more than 49 percent. Snam then moved into the picture as a candidate for the surrendered amount.

The Greek government has made a series of revisions that make the DESFA sale more attractive for the prospective buyers following preceding energy ministry measures which limited the operator’s revenue potential.

According to sources, the buyers want to cover the 400 million-euro sale price over two or three installments, not as one lump sum. This request is not expected to prove an obstacle for the deal’s completion.

Socar kept the DESFA sale attempt alive last month after offering a last-minute extension to its expiring letter of guarantee, giving the negotiating sides until the end of October to reach a deal.

 

 

New pricing plan takes DESFA sale a step closer to finalization

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An increased recoverable amount and a shorter collection period represent two crucial details that may steer the Greek government, Azerebaijani energy firm Socar and Italy’s Snam towards a deal for a 66 percent share of DESFA, the natural gas grid operator. An agreement in principle appears to have been reached.

The vital details, included in a revised pricing regulation policy for the operator announced by RAE, the Regulatory Authority for Energy, confirm previous energypress reports.

In its announcement of the revisions, posted on the RAE website, the authority notes that DESFA’s recoverable amount will increase as a result of the addition of 2016 to the time period entailed. Previously, the period spanned 2006 to 2015 but has been widened to cover 2006 to 2016. The revision brings the recoverable total to 326 million euros, up from 285 million euros, the level that had been set by a previous energy ministry decision on DESFA, which prompted Socar to take a step back from the long-running DESFA sale.

Also, according to RAE, the collection time for the aforementioned amount will be halved from 40 years to 20 years.

Socar had emerged as the winning bidder of an international tender for a 66 percent share of DESFA in 2013. Last year, the European Commission intervened by demanding that the Azerbaijaini firm surrender ar least 17 percent to a certified European operator. Snam has since entered the picture.

An announcement of a DESFA network usage fee hike, one of the main contentious issues between the Greek government and Socar, still needs to be announced.

According to sources, the network usage fee hike will be set at 35 percent, rather than 68 percent as originally planned by Greece’s energy ministry, and 23 percent, as had been proposed by RAE.

DESFA’s new pricing policy, based on the revised regulations, will concern the years 2017 and 2018 before being revised for 2019-2022, based on 2017 as the reference year. A further revision will take place in 2022, covering 2023 to 2026, with 2021 as the reference year.

 

Agreement in principle reached for DESFA sale, sources inform

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The Greek government, Azerbaijani energy firm Socar and Italy’s Snam appear to have reached an agreement in principle for the sale of a 66 percent of DESFA, Greece’s gas grid operator, developments at a meeting today in Athens between the Prime Minister’s adviser Dimitris Liakos, a Snam official, as well as Socar official Anar Mammamdov, who took part in the session through a video link, strongly indicate.

Energypress sources went as far as to say that a final agreement for DESFA’s sale can be considered certain following the Greek government’s revisions that make the operator a more attractive prospect for investors, as well as a pledge for further constructive revisions.

Socar is also believed to have made compromises too, such as acceptance of a reduced WACC (Weighted Average Cost of Capital) level of 9.22 percent.

A final agreement is expected to be achieved within the next meeting or two, possibly during the week to come, when final technical details are settled, sources said.

The negotiating sides have until the end of October to strike a deal. Socar recently extended its letter of guarantee by a month, which kept alive negotiations for this long-running sale attempt.

Socar emerged as the winning bidder of an international tender in 2013 for 66 percent of DESFA at a price of 400 million euros. The European Commission intervened last year, demanding that the Azerbaijani firm surrender at least 17 percent of DESFA to a certified European operator, which would limit Socar’s share in the Greek operator to no more than 49 percent.

Italy’s Snam is believed to be moving in on a DESFA stake of well over 17 percent, possibly even greater than 30 percent, according to energypress sources.

Earlier in the day, energypress reported:

Currently in Athens for a series of meetings with leading local officials on the long-running DESFA (Greece’s natural gas grid operator) sale, officials of Snam – the Italian operator seeking to acquire a stake in the operator which Azerbaijani energy company Socar is required to surrender following European Commission intervention on the unfinalized sale – are suddenly seeing fast progress being made.

Though the prospect of an agreement between the Greek government and Socar appeared doomed following an extended stand-off that was prompted by a revenue-limiting measure imposed on the operator by Greece’s energy ministry, it now appears that a deal could be reached by the end of this month, when a Socar letter of gurantee expires after Azerbaijani officials decided to renew it for an additional month.

Socar emerged as the winning bidder in 2013 for a 66 percent stake of DESFA at a price of 400 million euros. Last year, Brussels intervened by ordering Socar to surrender at least 17 percent, limiting the Azerbaijani company’s involvement to no more than 49 percent. The recent ratification of revenue-limiting measures prepared by the Greek energy ministry for DESFA, designed to protect consumers, prompted Socar to take big step back.

Snam officials yesterday met with the DESFA issue’s Greek working group, led by the Prime Minister’s adviser Dimitris Liakos. The Italian officials are expected to follow up today with meetings at the environment and energy ministry as well as the Prime Minister’s office.

Sources close to the negotiations informed energypress that the majority of the sale’s technical issues are now down to fine details and close to settlement.

“Barring unexpected developments, I see an agreement on the DESFA sale, key aspects being a tariff increase to a reasonable level, an increase in the operator’s recoverable amount for past revenues over a shorter time period and a satisfactory dividend yield,” noted one well-informed source.

Though Socar officials also feel that an agreement is now within reach, the company’s deputy president Vitaly Baylarbayov was more subdued in recent remarks offered to the Euractive news portal, noting “we cannot guarantee that our objective will be achieved, but we can hope.”

The negotiating sides are working on increasing DESFA’s network usage fees by 35 percent, rather than 68 percent, as was stipulated in an earlier plan.

An improved WACC (Weighted Average Cost of Capital) figure is also being looked at for a 10.99 percent performance instead of 10.06 percent. Officials are also looking to shorten the time period over which the operator will recover revenues concerning 2006 to 2015. The energy ministry’s recent DESFA measures drastically reduced the recoverable amount to 285 million euros from 829 million euros. The current year is now also being added to the time period, bringing the total to about 326 million euros.

Greek officials had originally engineered a 40-year recovery period for the aforementioned recoverable amount but this could now be halved.

Some officials closely linked to the negotiatons believe an agreement could be reached ahead of the October 31 deadline.

 

 

Azerbaijani impressions vary on Socar’s DESFA meeting with PM

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Socar has described as “positive” and “sincere” a crucial meeting held in Athens Tueday between Greek Prime Minister Alexis Tsipras and the Azerbaijani energy company’s president Rovnag Abdullayev as part of the effort to find a solution for the troubled sale of DESFA, Greece’s natural gas grid operor, according to a Socar announcement released yesterday.

The sale was kept alive following Socar’s last-minute decision to extend an expiring letter of guarantee by a month, which now gives officials until October 31 to reach an agreement. The previous letter of guarantee’s deadline had been set for September 30, three days after this week’s crucial meeting.

During the meeting, which lasted one-and-a-half hours, the Greek Prime Minister described Azerbaijan as a strategic partner for Greece and Socar as a strategic investor, the Socar announcement noted.

Tsipras also said all efforts would be made to facilitate Socar’s Greek market entry, according to the company statement, which also informed of the details of the working group established to seek common ground for a solution.

Azerbaijani press reports reflected Socar’s positive comments. However, comments made by the country’s ambassador to Greece, Rahman Mustafayev, who attended the meeting, suggest that the session was anything but smooth. He also indicated that the formation of a working group was proposed by Socar, adding that it will closely with Snam, also a potential buyer of a stake in DESFA.

Socar emerged as the winning bidder of a 2013 international tender offering a 66 percent stake of DESFA. The European Commision eventually intervened, requiring the Azerbaijani company to surrender at least 17 percent stake of DESFA to a certified European operator. Snam and Socar are believed to have reached an agreement for the surrendered stake, if the deal is finalized. Most recently, Socar was angered by a revenue-limiting measure engineered and implemented by Greek energy minister Panos Skourletis. This development prompted an extended communication breakdown. The Azerbaijani company has since contended that the market value of DESFA’s 66 percent is now worth well under the 400 million euros it had originally offered.

Citing the unfavorable developments that have ensued since 2013’s tender, an AzerNews media report noted Socar will seek an agreement only if the DESFA sale price is significantly reduced. This news source also reported Snam remains interested in acquiring DESFA’s 17 percent.

The overall impressions following Tuesday’s meeting indicate that the road towards a deal will be far more challenging than what Athens, cautiously optimistic, has described. Azerbaijani officials appear determined to have the upper hand in the negotiations.

 

Socar boss in Athens next week in late bid to save DESFA deal

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Socar president Rovnag Abdullayev is scheduled to travel to Athens next week for a meeting with Prime Minister Alexis Tsipras following the Azerbaijani state energy company’s insistence for talks with Greece’s head of state, and no subordinates, in an effort to clinch a last-minute privatization deal for DESFA, the natural gas grid operator. A letter of guarantee provided by Socar expires in one week, on September 30.

Though a date has yet to be set for the meeting as the Greek Prime Minister is currently in the US, a midweek session is most likely, energypress sources have informed.

Abdullayev confirmed the news of the pre-deadline meeting during comments offered to the Azerbaijani state news agency APA.

A recent revenue-limiting measure imposed on DESFA by the Greek energy ministry to protect consumers from hefty hikes has disgruntled Socar officials. Just days ago, RAE, the Regulatory Authority for Energy, staged a swift public consultation procedure for DESFA’s plan to increase natural gas transmission tariffs by 23.2 percent in 2017. Azerbaijaini officials had anticipated a 68 percent increase based on an older DESFA pricing formula, now abolished following initiatives taken by energy minister Panos Skourletis.

Small mutual concessions by the negotiating sides as well as Greek political commitment to Socar investments in Greece could possibly be enough to produce a last-minute agreement on the DESFA sale, a well-informed local pundit told energypress.

A network usage tariff hike of around 30 to 35 percent, rather than 23.2 percent, as well as reassurance from Athens on Socar being viewed as a strategic investor in Greece could suffice for an agreement.

The Socar boss’s willingness to travel to Athens suggests the Azerbaijani company remains interested in reaching an agreement, Greek government sources believe.

Should the two sides converge and reach an agreement, the DESFA stake to be acquired by Socar is expected to fall well below 49 percent. In this event, Italy’s Snam would take on between 30 and 35 percent of the Greek gas operator. Belgian operator Fluxys could also get involved.

Socar had emerged as the winning bidder of an international tender completed in 2013 for a 66 percent stake of DESFA at a price of 400 million euros. The European Commission then intervened and demanded that the Azerbaijani company surrender at least 17 percent to a certified European operator, which would leave Socar with no more than 49 percent of DESFA. Snam, Fluxys and other operators emerged as prospective buyers of Socar’s surrendered stake.

Socar and Snam hold 20 percent stakes, with Fluxys holding 19 percent, in the TAP (Trans Adriatic Pipeline) consortium developing a natural gas pipeline to run across northern Greece, through Albania and across the Adriatic Sea to Italy. It will supply Azerbaijani natural gas to Europe.

Greek government officials are concerned that the DESFA sale issues could affect the TAP project’s progress, despite the multinational involvement in the pipeline’s development and lack of signs indicating any spillover.