snam

Snam not interested in DESFA sale without Socar as a partner

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Italian operator Snam wants to be a part of the DESFA (natural gas grid operator) privatization, but only if Azerbaijani energy company Socar stays in the arrangement offering 66 percent of the operator, sources have informed on the unfinished sale’s latest developments.

Officials at Socar, whose letter of guarantee for the DESFA sale expires at the end of this month, are pressing to meet with Prime Minister Alexis Tsipras.

According to energypress sources, a Snam representative who met yesterday with Greek energy ministry officials, reiterated the Italian operator’s stance, noting the operator has signed a preliminary agreement with Socar for the acquisition of between 17 and 25 percent of DESFA and intends to honor this commitment.

Socar, the winning bidder of a tender offering a 66 percent stake of DESFA, needs to surrender at least 17 percent of DESFA and assume a minority role, following European Commision intervention.

An announcement released by Greece’s energy ministry yesterday, following the meeting with the Snam official, made no reference to the Italian company’s intentions.

Keen to exhaust the remaining time period for a solution, the Greek government intends to  remain available for Azerbaijani officials. However, Socar officials will probably be received by the Minister of State Alekos Flambouraris, not the prime minister, as they have requested.

A date for the meeting has yet to be set, but both sides would like to meet as soon as possible in a bid to break the ice that resulted from a recent measure implemented by energy minister Panos Skourletis. It limits the operator’s network usage hikes and, therefore, revenue potential, as a means of protecting consumers.

Highlighting the communication breakdown, Athens unsuccessfully sought to contact Azerbaijani officials and inform of DESFA managing director Konstantinos Xifaras’s resignation prior to the move’s official announcement this week. However, they could not be reeached.

Socar contends DESFA’s market value has been affected by the energy minister’s recent revenue-restricting measure. The original sale price was set at 400 million euros for a 66 percent stake. The Azerbaijani company, backed by Snam, wants a compromise deal as a result of the DESFA measure. Otherwise, the sale appears doomed. Athens yesterday reiterated that it will neither budge from the price already set nor take back the revenue-limiting measure.

Fast-track DESFA procedure unlikely to satisfy Socar

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RAE, the Regulatory Authority for Energy, has just launched fast-track public consultation procedures for a new gas network tariff regulation, obviously in an effort to meet a bailout prior actions deadline leading to the disbursement of a subtranche of 2.8 billion euros.

The public consultation procedure, which ends Friday, leaves little leeway for a compromise solution that may satisfy Azerbaijani energy company Socar, the winning bidder of a tender offering a 66 percent stake of DESFA, the natural gas grid operator.

Socar, which needs to surrender 17 percent of DESFA and assume a minority role, following European Commision intervention, is disgruntled by a government measure that limits the network usage hikes possible at DESFA and, therefore, restricts the operator’s revenue potential.

Italy’s Snam appears to have reached an agreement with Socar for the 17 percent of DESFA it must surrender.

Over the past few days, various authorities, including government officials, have tabled proposals in search of a solution that may save the unfinished DESFA sale.

Energy minister Panos Skourletis met yesterday with a Snam representative, while the Minister of State Alekos Flambouraris is expected to soon meet with Azerbaijani officials.

The new regulation will take network usage fees back to levels that applied in 2012, leading to price reductions for various consumer categories.

Under the new regulations, DESFA’s weighted average cost of capital (WACC) stands to be reduced to 10.62 percent from 10.99 percent.

 

 

DESFA sale conditions will not change, Snam official told

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The energy ministry does not intend to make any changes to conditions and price levels concerning the ongoing privatization effort for DESFA, Greece’s natural gas grid operator, ministry officials informed a representative of Italian operator Snam at a meeting in Athens today.

Snam appears to have agreed to take on a 17 percent of DESFA from Azerbaijani energy firm Socar, ordered by Brussels to surrender this stake for a reduction to no more than 49 percent. Socar emerged as the winning bidder for a 66 percent share of DESFA in 2013 but the sale has remained unfinished.

RAE, the Regulatory Authority for Energy, is close to determining and setting a price for DESFA’s (natural gas grid operator) network usage fees, to be applied by the operator from here on. A decision is expected any day now.

According to sources, energy ministry officials, clarified, during today’s meeting, that the privatization effort needs to comply with the European Commission demand that would restrict Socar’s role as a minority shareholder.

It was also pointed out that the sale price of 400 million euros set for a 66 percent stake of DESFA will remain unchanged. Any price revision would annul the current tender. Socar contends the amount is overpriced. The Azerbaijani company believes DESFA’s market value has dropped as a result of a recent revenue-restricting measure imposed on the operator by the ministry to protect consumers from hefty price hikes.

The ministry officials also explained that DESFA’s price hike-restricting measure will remain intact.

In recent months, the energy ministry – fearing a withdrawal by Socar from the DESFA sale as a result of the ministry’s measure, which comes as an addition to the setback caused by the intervention from Brussels – has encouraged Snam to consider acquiring a greater DESFA stake. The European Commission, which has always viewed Socar’s entry with hesitation, maintains a favorable outlook on a bolstered Snam role at DESFA.

Yesterday’s resignation by DESFA’s managing director Konstantinos Xifaras, requested by energy minister Panos Skourletis, comes with little negotiating time remaining in search of a deal. Socar’s letter of guarantee, which has been extended several times over the prolonged DESFA sale effort, expires at the end of this month. A new tender will need to be launched if the letter of guarantee expires without a result.

Make or break for DESFA sale scenarios, all set to be tabled

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Yesterday’s resignation by DESFA (natural gas grid operator) managing director Konstantinos Xifaras, a request made by energy minister Panos Skourletis, highlights the minister’s determination to possess full control over developments through collaboration with trusted officials. It also coincides with today’s visit to Athens by officials of Italian operator Snam, here at a crucial point in the troubled and long-running effort to privatize DESFA, for talks with energy ministry officials.

Snam appears to have agreed to take on a 17 percent of DESFA from Azerbaijani energy firm Socar, ordered by Brussels to surrender this stake after emerging as the winning bidder of an international tender in 2013 for 66 percent of the Greek operator.

A letter of guarantee provided by Socar, which has been extended several times during the sale effort’s overstretched procedure, expires at the end of this month.

Xifaras had been appointed to his DESFA post while the country’s previous administration was in power. DESFA is a wholly owned subsidiary firm of DEPA, the Public Gas Corporation, controlled by the Greek State with a 65 percent stake. The removal of Xifaras as DESFA’s managing director will serve the current Syriza-led coalition’s negotiations concerning the operator, including various future alternatives should the current sale effort not be finalized.

Xifaras, who had also submitted his resignation in the past, co-headed DESFA with company president Sotiris Nikas, still at his post.

One of three scenarios is possible at DESFA. Which one it will be will become apparent over the next few days. An agreement could be reached if mutual concessions are made. Also, Socar could assume a weaker role, which would allow Snam to acquire a stake greater than the 17 percent it appears to have currently agreed to with Socar – if the deal proceeds. Finally, the sale effort could collapse and prompt the need for the launch of a new tender based on new terms.

Socar officials will be expecting a new offer that reflects DESFA’s reduced market value, as perceived by the Azerbaijaini company. Socar officials believe the operator is now worth considerably less as a result of a revenue-limiting measure engineered and imposed by Skourletis, the energy minister, to protect consumers from steep network usage fee hikes.

RAE, the Regulatory Authority for Energy, could help save the sale effort by deciding to not significantly reduce the weighted average cost of capital (WACC), whose 11 percent level agreed to with Socar in 2012 is deemed as satisfactory at DESFA. RAE could also help by avoiding an interest rate reduction for irrecoverable funds at DESFA, currently at 10 percent. Resetting short-term contracts, which could significantly influence the operator’s earning potential, would also be constructive.

Snam officials in Athens this week for vital DESFA sale talks

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Top-ranked officials at Italian company Snam, a key player in the effort to finalize the stranded privatization of DESFA, Greece’s natural gas grid operator, will visit Athens this week for talks, it has been confirmed.

Snam appears to have agreed to take on a 17 percent share of DESFA from Azerbaijani energy firm Socar following European Commission intervention. This would reduce Socar’s share of DESFA to 49 percent, if the deal is completed.

Brussels has issued a decision specifying that Socar, the winning bidder of a DESFA tender completed in 2013, must remain a minority shareholder of the Greek operator.

The Italian company’s role in the deal has acquired greater significance as a result of the increased likelihood of a withdrawal by Socar. The Azerbaijani company is dissatisfied by a network usage fee hike limitation recently imposed on DESFA by the energy ministry. The measure reduces the operator’s revenue potential.

Snam officials are expected to make clear the Italian operator’s position at the upcoming Athens meeting. Snam did not demand that the revenue-limiting measure be anulled when company representatives first met with Greek energy ministry officials over the DESFA sale about two months ago. This offers a glimmer of hope for the troubled deal.

Greece’s lenders, currently engaged in a review of bailout prior actions needed for the  disbursement of a subtranche of 2.8 billion euros, are applying pressure for an end to the long-running DESFA sale.

Snam could take on a greater share of the operator, roughly 30 percent, while ELPE (Hellenic Petroleum) appears keen to maintain the 35 percent stake it holds in DESFA.

Belgian operator Fluxys, which had expressed an interest in DESFA in the past, may also enter the picture again.

Socar now one step away from exiting delayed DESFA sale

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A direct reading of the latest developments concerning the pending sale of DESFA, Greece’s natural gas grid operator, leads to the conclusion that the tender held in 2013 and won by Azeri energy company Socar will not be completed.

The dwindling possibilities of the procedure’s completion have been drastically reduced as a result of yesterday’s departure by Anar Mammadov, managing director of Socar Energy Greece, in reaction to Greek energy minister Panos Skourletis’s recent submission to parliament of an amendment that drastically reduces the operator’s regulatory asset base (RAB), used to determine the operator’s revenues, including retroactive payments.

As things stand, Socar is now one step away from pulling out of the DESFA agreement. The Azeri energy company has warned it would do so if the amendment, intended to prevent excessive network usage fee increases, is ratified in Greek Parliament.

Socar had agreed to purchase a 66 percent stake of DESFA after winning an international tender in 2013 but, more recently, the deal was delayed when the European Commission ordered the Azeri company to surrender a 17 percent share and offer it to a certified European operator. This would limit Socar’s stake to 49 percent.

Socar’s withdrawal would automatically cancel the tender and require the launch of a new one.

Also, a Socar guarantee expires at the end of August. If not renewed, the tender, staged by TAIPED, the State Privatization Fund, will be declared void, prompting the need to start afresh.

This would provide the government an opportunity to negotiate new terms for DESFA’s sale with the country’s international creditors. The current tender was shaped under a preceding administration. A formula based on a sale procedure recently agreed to by the government and lenders for IPTO, the power grid operator, could be implemented. The IPTO sale entails selling 24 percent to a strategic investor, transferring 51 percent to the Greek State, and offering the remaining 25 percent through the bourse.

Given the solid bilateral ties binding Greece and Azerbaijan, a political effort could be attempted to keep the Azeri interest in DESFA alive, but this is highly unlikely. Socar would need to accept the DESFA revisions and acquire a 49 percent share, leaving 17 percent for Italy’s Snam, and 34 percent for the Greek State. Though unconfirmed, it is believed Socar has reached an agreement with the Italian company, in the event that the DESFA sale is pushed to the end. However, Snam, too, is not happy with the DESFA revisions.

Socar and Snam each hold 20 percent shares in the TAP (Trans Adriatic Pipeline) consortium, developing a natural gas pipeline to carry Azeri natural gas across northern Greece and Albania, then through the Adriatic Sea to Italy.

 

Socar official, minister meet today on DESFA amendment

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Anar Mammadov, managing director of Socar Energy Greece, the Azeri energy company’s local subsidiary, will meet with Greece’s energy minister Panos Skourletis today in an attempt to convince the latter to change his amendment submitted to Greek Parliament just days ago for a drastic reduction of the regulatory asset base (RAB) of DESFA, the natural gas grid operator, used to determine the operator’s revenues.

The Azeri company, which had agreed to purchase a 66 percent stake of DESFA after winning an international tender in 2013 but, more recently, was ordered by the European Commission to surrender a 17 percent share and offer it to a certified European operator, appears willing to accept revisions to the original agreement. However, Italy’s Snam, a prime candidate for the surrendered 17 percent stake, appears less flexible on the issue.

If the minister’s amendment is ratified as is, which would greatly reduce DESFA’s network usage revenue potential, then Snam could well withdraw its interest for a 17 percent stake of the operator.

Officials at TAIPED, the State Privatization Fund, who have received complaints from parties interested in DESFA’s 17 percent, are keeping a close watch on the developments and could demand revisions to the amendment when the time comes for it to be ratified.

Yesterday, TAIPED’s president Stergios Pitsiorlas told journalists that the sale of DESFA’s 66 percent may be finalized by the end of this year.

Bill limiting DESFA network hikes casts doubts over sale

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Seeking to limit a planned customer-burdening network usage fee hike at DESFA, the natural gas grid operator, energy minister Panos Skourletis has submitted an amendment to Greek Parliament that will reduce the operator’s regulatory asset base (RAB) by about 200 million euros for the period covering 2012 to 2015.

The next step in the process to ensure that the network usage hike will remain subdued is to lower the interest rate for DESFA outstanding amounts. The interest rate reduction will be determined by RAE, the Regulatory Authority for Energy. The authority also needs to revise pricing regulations.

Skourletis, the energy minister, told Parliament that existing regulations would have led to “extreme and provocative” network usage fee hikes of about 68 percent at DESFA, noting such a development would negatively impact households and, primarily, local industrial enterprises using natural gas, as well as DESFA’s prospective buyer, the Azeri energy company Socar.

The existing conditions would have entitled Socar to receive 66 percent of 829 million euros, an estimated recoverable amount, Skourletis said.

It remains unknown how Socar and Italy’s Snam, an additional prospective buyer, may respond to the initiative.

Socar had agreed to purchase a 66 percent stake of DESFA after winning an international tender in 2013, but, more recently, the European Commission intervened to demand that a 17 percent share be offered to a certified European operator, which will reduce the Azeri firm’s control to 49 percent.

TAIPED, the State Privatization Fund, apparently had not been informed of the energy minister’s move. The fund’s response also remains unknown.

Some sources contend that both the Greek government and Socar would essentially like to see the deal cancelled, without being held responsible.

For Greece’s energy minister Panos Skourletis, the sale’s failure would be a success as it would serve his Syriza party line, seeking to maintain as much state control as possible over Greece’s energy networks. An end to the current DESFA plan could lead to an alternative part-privatization along the lines of the plan prepared for IPTO, the power grid operator.

As for the Azeris, who initially entered the DESFA sale primarily to facilitate their wider energy interests, they would like to withdraw as the drastic fall of oil and natural gas prices over the past year-and-a-half has placed great pressure on the company and the energy-dependent Azeri national economy, leading to the need for cost cuts. Even so, Socar is remaining covert about its DESFA intentions as a means of protecting its future energy interests in the wider region.

DESFA solution favorable for Socar, Greek State worked on

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RAE, the Regulatory Authority for Energy, is examining the prospect of a compromise solution for the network usage fees to apply for DESFA, the natural gas grid operator, in an effort to satisfy the Greek State, the Azeri energy company Socar, a potential buyer of a 49 percent stake in the operator, and the potential buyer of a 17 percent which Socar must surrender – as a result of European Commission intervention – from a 66 percent share the Azeri firm had originally agreed to acquire as the winning bidder of an international tender.

An ideal balance is being sought which would increase the network usage fees so that DESFA’s revenue potential could stand as a feasible prospect for investors without prompting a major cost increase for consumers, such as a 60 percent hike envisaged in a previous plan.

RAE, responding to an energy ministry request, is now looking at revising a tariff-setting regulation for the operator, which Socar officials appear to have accepted.

According to energypress sources, the energy ministry is interested in either reducing DESFA’s weighted average cost of capital (WACC) from a level of 11 percent that had been agreed to with Socar in 2012, lowering interest rates for irrecoverable capital, or proceeding with both.

Earlier this week, Stergios Pitsiorlas, president at TAIPED, the State Privatization Fund, contended that DESFA’s long-running sale procedure is expected to soon be completed. Pitsiorlas informed that Snam, the operator of Italy’s natural gas network, has agreed to acquire the 17 percent stake of DESFA surrendered by Socar. The TAIPED chief said that Socar officials appear to have accepted the prospect of lower WACC and irrecoverable capital interest rate levels.

RAE sources have said a WACC level of 11 percent is too high, as it reflects the country risk factor. The equivalent rate in other countries usually ranges between 5 and 6 percent.

Although DESFA has yet to forward an official request to RAE for tariff increases, the operator’s privatization can be expected to be completed within the next one or two months, RAE sources have informed. However, it should be noted that RAE is not renowned for functioning in a swift and decisive manner.

In a Reuters interview just days ago, Greece’s energy minister Panos Skourletis said Socar was having trouble finding an investor to take on the surrendered 17 percent of DESFA. He did not make any comments on the network usage fee revision plan.

Snam as well as Belgium’s Fluxys and Spain’s Enagas – the two had joined forces for DESFA’s 17 percent – had all expressed early interest before retreating. Judging by the TAIPED head’s comments this week, Snam’s interest has been revitalized.

Dutch firm Gasunie cited as latest DESFA candidate

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Dutch company Gasunie, according to comments offered by an official of the Azeri firm to azernews, is the latest candidate reported as being interested in acquiring a 17 percent of DESFA, Greece’s gas grid operator, which the main prospective buyer Socar will need to give up.

If true, this could provide new impetus to the long-delayed process. In the same article, the Socar official confirmed the withdrawal of Belgian company Fluxys from DESFA’s sale, while Azeri sources forecast the preocedure will be finalized by the end of 2016.

Socar had agreed to purchase a 66 percent stake of DESFA after winning an international tender in 2013 before the European Commission intervened to demand that the Azeri company surrender 17 percent to a certified European operator. This would leave Socar with a 49 percent stake in DESFA.

But, following much delay, the deal’s prospects of completion have been severely diminished, for a variety of reasons, including the deterioration of Azerbaijan’s energy-dependent economy amid plunging oil and gas prices over the past year and a half. All sides involved in the DESFA deal are suspected of seeking ways out of the process without being held accountable for its incompletion.

For the time being, all sides seem to still be working on a deal. Within the next two months, Greek officials are expected to finalize their revision of DESFA’s pricing policy regulations, which, as a result, will reduce a prospective gas network usage price hike to far less that the 30 to 35 percent permitted by the current terms. The Greek government wants to avoid a major price increase, fearing the political cost of such a development. According to sources, the Azeri firm is prepared to accept this revision.

Once DESFA’s pricing regulation has been revised, the next step will be to keep the process alive by renewing Socar’s gurantee, which expires in September, as a finalized deal stands little chance of being completed by then.

Latest developments indicate that Italy’s Snam remains interested in the 17 percent to be surrendered by Socar. Snam did not include a representative in an Italian business delegation that traveled to Athens recently, sparking assumptions that it was no longer interested in the DESFA deal. On the contrary, sources said Snam is carefully examining DESFA company data which it holds, while also maintaining open communication with Socar.

Socar, the aforementioned azernews article reported, considers its acquisition of a stake in DESFA as a move of major significance for Azerbaijan, as this would provide control of a European gas company and heighten the role played by Socar on the EU’s energy security front.

 

Local privatization fund fears DESFA sale will not progress

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TAIPED, the State Privatization Fund, fears the long-running effort to privatize DESFA, Greece’s gas grid operator, could be headed towards a dead end as a result of a number of negative developments.

Besides the problems faced by Azerbaijan’s oil-dependent economy amid the sharp decline in international crude oil prices over the past year and a half, which has affected the financial standing of the country’s state-run energy company Socar – the potential main buyer of DESFA – Belgian company Fluxys, considering a smaller stake, is having serious thoughts about investing in the Greek operator, driven by the country risk factor, sources have informed energypress.

Canadian shareholders holding a stake in Fluxys have appeared increasingly reluctant to commit to any investments connected with Greece as a result of permit issues faced by Canadian gold mining company Eldorado Gold in Greece.

One source has informed that Fluxys is preparing to withdraw its interest in acquiring a 17 percent share of DESFA. The Azeri company Socar, the winning bidder of an international tender offering a 66 percent share of DESFA, must surrender 17 percent following European Commission intervention, which would leave it with 49 percent.

Besides the likely withdrawal of Fluxys, the interest of Italy’s Snam, which has also examined the prospect of acquiring DESFA’s 17 percent stake, is also in doubt. Snam officials were absent from a delegation of Italian energy officials that accompanied Italian foreign minister Paolo Gentiloni on a trip to Athens slightly less than a month ago.

A pending revision to gas network usage fees, the only source of income for DESFA, is also troubling investors. Based on existing regulations, these fees were headed for a significant increase before energy minister Panos Skourletis intervened to avoid sharp natural gas price hikes for households and businesses.

Consulting firms hired by Fluxys and Snam to assess the prospect of investing in DESFA have apparently provided negative reports to their clients, basing their advice on the country risk factor.

Potential DESFA buyers advised to withraw interest over Greek risk

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Indications of a possible withdrawal of interest by three European companies considering to acquire a stake in DESFA, Greece’s natural gas grid operator, are growing as a result of unfavorable developments concerning the company, as well as the Greek market and economy.

Italy’s Snam and Belgian-Spanish team Fluxys-Enagas have been looking into the prospect of acquiring a 17 percent of DESFA. Following European Commission intervention over EU energy security and competition concerns, the Azeri energy company Socar must surrender this portion from 66 percent initially agreed to with DESFA as the winning bidder of an international tender that was finalized in 2013. Socar’s offer of 400 million euros for a 66 percent stake in DEFSA had been accepted by the then-Greek government.

According to sources, consulting firms hired by Snam and the Fluxys-Enagas team have, in recent days, delivered unfavorable reports, primarily as a result of two key issues. Consulting firms are concerned about the risk factor concerning investments in Greece as well as current local discussion on possible regulatory revisions that would affect the gas operator’s pricing policy.

The Greek government wants to make revisions to avoid a sharp hike in gas network usage fees that could be made by the new owners under DESFA’s current operating regulations.

Snam officials did not join an Italian delegation of corporate figures that accompanied Italy’s foreign minister Paolo Gentiloni on an official visit to Athens less than a fortnight ago. Officials of Italian companies that are either already present in the Greek market or looking to invest joined Gentiloni, who met with Greek energy minister Panos Skourletis.

In another worrisome sign for the DESFA sale’s prospects, Snam and the Belgian company Fluxys have expressed interest in the sales of two other European natural gas networks, Germany’s Thyssengas and Austria’s Gas Connect. Considering the respective sizes of Snam and Fluxys, in particular, they will most likely not be able to take on all these deals, including DESFA, at the same time.

Italian minister’s refugee crisis visit to include energy matters

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Italian foreign minister Paolo Gentiloni’s emergency visit to Athens today, prompted by the refugee crisis, will also include energy matters on its agenda.

A series of meetings scheduled during Gentiloni’s whirlwind visit to the Greek capital include one with energy minister Panos Skourletis. The Italian minister will be accompanied by four Italian energy company executives who intend to remind Skourletis of their interest in doing business in Greece.

According to sources, an official representing Terna will point out that the company remains interested in buying a stake of IPTO, the power grid operator, regardless of whether this is a 20 percent stake the government plans to offer to a strategic investor or a 66 percent share if the Greek government’s proposal is not approved by the country’s lenders. Many officials believe rejection of the government’s IPTO plan cannot be ruled out.

An Edison official is expected to remind of the company’s interest for stakes in units owned by PPC, the main power utility. The company favorably views PPC chief executive Manolis Panagiotakis’s intention to establish partnerships with other European companies for PPC-related projects. However, the Edison official is expected to underline that hydropower plants will need to be included in the overall package.

An Eni representative will raise a compensation issue concerning the premature end of the company’s regional natural gas market monopolies in Thessaloniki and Thessalia, prompted by bailout-related gas market reforms. Eni holds 49% stakes in the Thessalia and Thessaloniki EPA gas supply companies. DEPA, the Public Gas Corporation, holds majority 51 percent stakes in both.

An Enel official is expected to point out the company’s interest to increase its presence in Greece’s wind energy market.

Though no officials representing Snam have joined the Italian delegation, Gentiloni, Italy’s foreign minister, will highlight to Skourletis the Italian company’s interest in acquiring a 17 percent equity share of DESFA, the gas grid operator. Azeri energy company Socar, the winning bidder of an international tender offering 66 percent of DESFA, needs to surrender 17 percent following European Commision intervention.