Terna and RTE, tipped for IPTO 24%, need to resolve issues

Exploratory talks between Greek authorities and strategic investors considering a 24 percent stake in Greece’s power grid operator IPTO have taken a step further now that the sale’s international tender has been officially launched. Given the tight schedule imposed by the country’s creditors, preliminary talks with potential bidders had jumped the gun prior to the tender’s announcement, on Tuesday.

According to sources, officials of Italy’s Terna visited IPTO’s headquarters just days ago. Terna had also expressed an interest in IPTO when Greece’s preceding conservative New Democracy party-led government attempted to sell 66 percent of the operator.

Government officials are convinced Terna will submit a bid in the latest sale effort, a procedure through which IPTO is being split from its parent company PPC, the main power utility. Besides the 24 percent being offered to a strategic investor, a 25 percent share of IPTO will be sold to investors through the bourse and 51 percent will be transferred to the Greek State, which currently holds a 51 percent stake in PPC.

Certain sources contend that the 24 percent stake of IPTO being offered to strategic investors has been specifically customized to match with an older decision reached by Terna’s administration for a 400 million-euro spending limit on IPTO. The Italian company withdrew from the previous IPTO tender in February, 2015, shortly after the Syriza party had been elected to lead a coalition government.

Though Terna’s interest in the latest IPTO tender is considered certain, the company may need to overcome hurdles as a result of the Italian banking crisis, Europe’s latest threat, now surfacing. However, as Terna’s interest is based on a strategic decision to expand its presence in the Balkans, the country’s banking crisis is not expected to influence the decision. But this cannot be ruled out, especially if the Italian banking sector’s issues deepen. Italy’s Deposits and Loans Fund is Terma’s main shareholder.

France’s RTE, an EdF subsidiary, is also keeping a close watch on the IPTO developments. Though the French company is in a better financial state than Terna, European Commission competition regulations could get in its way.

Though the aforementioned Italian and French enterprises rate as the favorites for IPTO’s 24 percent stake, the State Grid of China Corporation (SGCC), which had taken part in the previous IPTO tender, could reemerge.

It has been widely misperceived that SGCC cannot take part as the corporation is a non-EU company. However, SGCC already holds a 25 percent stake in Portuguese energy company REN, acquired in 2012, meaning it can bid for IPTO. Although Chinese firms are generally looking to invest in Greece, SGCC has yet to renew its interest in IPTO.

 

 

Tight schedule for IPTO sale, Terna the likeliest candidate

Italy’s Terna appears to be the most probable candidate for the strategic investor’s role in power grid operator IPTO’s planned split from parent company PPC, the main power utility.

Last night’s ratification, in Greek Parliament, of a multibill carrying additional measures required as part of the effort to complete the first review of the country’s third bailout package, renews the effort to sell IPTO.

The schedule, based on the new law, will be tight, or may even be unrealistic, according to certain pundits. Facing intense time pressure, PPC must need to soon stage a shareholders meeting for approval of the IPTO sale plan, then, one month later, announce an international tender and have selected a prefered strategic investor within five months.

The previous IPTO sale attempt, when an effort was made to sell a 66 percent stake, had lasted nine months without producing binding offers from interested parties. The procedure was then cut short by snap elections.

As for the latest attempt, if the international creditors deem that no substantial progress has been made by October, then the threat of opting for a 100 percent sale of IPTO will reemerge.

The new plan entails selling a 51 percent stake to the Greek stake and 49 percent to private-sector investors, including a strategic investor.

In the previous effort, Italy’s Terna had decided it could offer as much as 400 million euros for IPTO. It withdrew its interest after the Syriza party was elected to power, as the coalition government’s head party, in January, 2015. Even so, Terna has continued to nurture strategic interests in the Balkan region and can be expected to express interest in the latest IPTO tender. The 400 million euro amount it had noted it could invest in IPTO would ensure the Italian operator a stake of between 20 and 24 percent of IPTO, as well as managerial control.

Chinese firm SGCC and Canadian fund PSP, two other investors who had declared an interest in IPTO during the previous effort, do not meet the sale’s prerequisites as they are not certified European operators and, therefore, cannot take part in the new tender. The stance to be adopted by Belgium’s Elia, also present in the previous attempt, remains unknown.

Terna officials remind Skourletis of their interest in 20% IPTO stake

Representatives of Italian operator Terna reiterated the company’s interest in acquiring a 20 percent of IPTO, Greece’s power grid operator, during a meeting in Athens late yesterday with Greek energy minister Panos Skourletis. The Greek government and the country’s lenders have agreed to sell a 20 percent of IPTO.

The Terna representatives, as well as other Italian corporate officials, joined Italian foreign minister Paolo Gentiloni, who was in Athens for an emergency meeting with Greek government officials on the refugee crisis. Bilateral business matters were also discussed during the visit.

Following the meeting at the energy ministry, sources noted that other companies have also expressed similar interest for an IPTO stake.

Besides the 20 percent of IPTO to be offered to strategic investors, the Greek government and the country’s lenders have also agreed for the Greek state to control a 51 percent equity share of the power grid operator, currently a subsidiary firm of PPC, the main power utility. The plan also entails listing the other 29 percent on the Athens stock exchange.

Other Greek-Italian business prospects, in the fields of electricity, natural gas, and hydrocarbon exploration and production, were also discussed during the Italian delegation’s visit to Athens. Officials representing the Italian energy companies Terna, Eni, and Edison, as well as PPC chief executive Manolis Panagiotakis and the top official at DEPA, the Public Gas Corporation, Theodoros Kitsakos, all took part.

In the electricity sector, PPC’s interest to establish electricity production partnerships with other European companies, which would help reduce the Greek power utility’s market share, a bailout agreement term, was also discussed. Italy’s Edison is already active in Greece’s electricity market, both in the fields of production and trade.

As for the natural gas market, DEPA and Edison have already joined forces through their Poseidon venture, seeking to develop Greek-Bulgarian and Greek-Italian pipeline infrastructure. The TAP (Trans Adriatic Pipeline), planned to run from the Greek-Turkish border area and conclude in Italy, via Albania, was also discussed. So, too, were plans concerning the transfer of natural gas from deposits in the east Mediterranean to the EU via Greece. Russia’s latest gas pipeline proposal for the southeast European region, which would replace South Stream, a prospect that also interests Italy, was also tabled.

Italian minister’s refugee crisis visit to include energy matters

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.

TERNA in major hydroelectric deal with China’s Sinohydro

A deal between Terna and Chinese firm Sinohydro is expected to be launched on the island of Crete with construction of a large 50MW-capacity hydroelectric facility in Amari, close to Rethymno. At present, Terna holds the largest portfolio of hydroelectric development projects in Greece, through its subsidiary firm, Terna Energy. A number of small 15MW facilities are already operating, while projects amounting to 4,360MW of prospective hydroelectric production await approval. In recent years, the Terna group has submitted over ten applications for approval of large hydroelectric projects totaling over 1,500 MW.

Chinese firm Sinohydro ranks as the world’s 14th largest firm in its field, while it is ranked sixth among Chinese construction firms, based on annual turnover. The firm is active in 55 countries, while its earnings figure in 2012 reached 20.4 billion dollars. At present, the firm’s unexecuted orders list is comprised of 486 projects in 70 countries, worth a total of 42 billion dollars.

The deal between Terna and Sinohydro includes the participation of the Industrial & Commercial Bank of China (ICBC), one of the world’s largest banks.