Viohalco electricity deal with PPC sets standard for industry

Leading metal processing company Viohalco, Greece’s second-biggest electricity consumer, has reached an electricity supply agreement with the main power utility PPC following many months of negotiations, achieved following concessions by both sides and the constructive role of two crucial factors that set standards for the wider industrial sector.

Viohalco accepted a 10 percent tariff increase in exchange for an extended three-year agreement, from 2018 to 2020, offering clarity and foreseeable electricity costs until the end of this period, the biggest benefit of the deal. The industrial enterprise’s electricity consumption reaches 1.2 TWh, representing a considerable part of its overall expenses.

A government pledge, expressed publically, ensuring Viohalco energy cost-savings and competitive electricity tariffs through an extension of Greece’s demand response mechanism (interruptability), was a second crucial factor leading to the industrial player’s three-year deal with PPC.

The measure compensates major-scale electricity consumers when the TSO (IPTO) asks them to shift their energy usage (lower or stop consumption) during high-demand peak hours, so as to balance the electricity system’s needs.

Brussels grants investors one-month extension for PPC bids

Investors have been given a one-month extension for second-round binding bids concerning the main power utility PPC’s sale of lignite units following the European Commission’s approval of a request made by China’s CHN Energy, which has joined forces with the Copelouzos group for this sale.

Subsequently, prospective buyers now face a November 17 deadline for their binding bids. The deadline extension had been widely anticipated over the past ten days or so following hints made by energy ministry officials at the recent Thessaloniki International Trade Fair.

The additional time provides energy ministry and PPC officials with an opportunity to negotiate with Brussels for the possible inclusion in the sale of a CAT remuneration system for lignite-fired electricity generation.

CHN Energy and the Copelouzos group had requested up to two months of additional time but the deadline extension was limited to one month by a  Monitoring Trustee overlooking the overall sale procedure on behalf of the European Commission.

Both the energy ministry and PPC officials fear offers by investors could remain low, higher CO2 emission right costs being a key factor. CAT remuneration would offer some incentive for bigger bids.

Initial hopes of a total sale price of around one billion euros for PPC lignite units and mines representing 40 percent of the utility’s overall lignite capacity have now deescalated to levels of several hundred million euros. Some investors have suggested offers could be considerably lower.

GEK-Terna, which has united with the Czech Republic’s Seven Energy for the PPC sale; another Czech firm, EPH; ElvalHalcor, a member of the Viohalko group; as well as Mytilineos, are the sale’s other second-round qualifiers.

All first-round PPC units sale participants to make next stage

All first-round participants of the main power utility PPC’s bailout-required sale of  lignite mines and power stations representing 40 percent of the utility’s overall lignite capacity meet the procedure’s criteria to qualify for the next stage, PPC officials have unofficially made known.

A total of six bidding schemes submitted non-binding expressions of interest for the sale’s first round, expected to end today with the announcement of qualifiers.

As of Monday, the sale’s second-round qualifiers will gain access to the procedure’s data room for two months – once they have signed confidentiality agreements – to evaluate technical and financial information concerning the power stations and mines up for sale.

A consortium comprising Beijing Guohua, a subsidiary of China’s Shenhua, and Damco Energy, a wholly owned subsidiary of the Copelouzos group; GEK-Terna; ElvalHalcor, a member of the Viohalko group; Czech firm EPH (ENERGETICKÝ Α PRŮMYSLOVÝ HOLDING); Indoverse Coal Investments Limited, also Czech; as well as Mytilineos, all submitted first-round expressions of interest.

The wide turnout could lead to aggressive bidding in the next round, when investors will be expected to produce binding offers. However, not all pundits are convinced turnout alone will be enough to generate elevated bids for a lofty sale price.

PPC’s administration has stressed solid incentives are needed for the prospective investors, including CAT payment assurances for the units included in the disinvestment’s packages, one covering the country’s north and the other the south.

Second-round terms are expected to be announced to the qualifying schemes next week. PPC and the utility’s advisers have pushed the sale’s authorities for the most favorable terms possible in an effort to increase the sale’s appeal for investors.

PPC wants terms that will enable, even encourage, participants to join forces. Mobility is being reported among the first-round bidders, including the Czech bidders, believed to be maneuvering for possible partnerships.

The second-round terms are also expected to clarify whether participants will be permitted to submit a joint offer for the sale’s northern and southern packages. Sources said such a provision will be included in the second-round terms, based on a formula applied for the privatization of regional airports around Greece.

The PPC disinvestment’s Greek-Chinese bidding team of Beijing Guohua and Damco Energy, which yesterday signed a partnership agreement for this sale yesterday, made clear it is interested in both the northern and southern packages.

CAT eligibility vital for prospects of PPC units sale, chief notes

The level of investor interest, asset value and achievable sale price of a bailout-required sale of main power utility PPC lignite mines and power stations will depend on whether the units being offered will be eligible for CAT remuneration, the power utility’s CEO, Manolis Panagiotakis, has told journalists.

Strong political support by the government, perhaps from its top level, will be needed as European Commission directives issued so far exclude lignite units from CAT mechanism payments, the PPC boss noted.

Conventional power stations, such as lignite-fired units, must satisfy a CO2 emission limit of 550 grams per KWh to qualify for CAT mechanism payments.

A European Commission proposal calling for even stricter limits is gaining growing support throughout Europe.

Given the developments, the PPC lignite units placed for sale will most likely remain ineligible for CAT support. If so, this will severely limit their appeal for investors in general. They would need to be taken on by industrial enterprises active in sectors eligible for mechanisms offsetting a considerable percentage of CO2 emission right costs.

Meanwhile, taking the sale process a step further, PPC shareholders yesterday approved a split from the corporation of the two lignite unit packages being offered in the sale of lignite mines and power stations, representing 40 percent of the utility’s overall lignite capacity.

Yesterday’s approval now enables PPC to open a data room through which six candidate investors will be informed on the details of assets included in the disinvestment.

“Our work begins now – to correctly inform interested parties, make appropriate presentations and highlight the details that make the units attractive investment prospects – in order to to achieve a satisfactory sale price,” PPC’s chief executive, Manolis Panagiotakis, informed journalists. “Now is also the time for the government and the European Commission to show, with action, their support for lignite-related production,” he added.

Three major local players, GEK-Terna, Mytilineos and ElvalHalcor, a member of the Viohalko group, as well as a fourth, the Copelouzos group, joined by Beijing Guohua, a wholly owned subsidiary of China’s Shenhua, submitted first-round expressions of interest for the PPC lignite units. Two Czech firms, EPH (ENERGETICKÝ Α PRŮMYSLOVÝ HOLDING) and Indoverse Coal Investments Limited, also emerged as surprise participants.

 

 

 

Two Czech firms emerge as PPC unit sale’s surprise contenders

The emergence of two Czech firms, EPH (ENERGETICKÝ Α PRŮMYSLOVÝ HOLDING) and Indoverse Coal Investments Limited, for expressions of interest in the first round of the main power utility PPC’s bailout-required sale of lignite mines and power stations, is the procedure’s surprise development so far.

Expressions of interest by three major local players, GEK-Terna, Mytilineos and ElvalHalcor, a member of the Viohalko group, joined by Beijing Guohua, a wholly owned subsidiary of China’s Shenhua, had been widely anticipated.

EPH is the most recent buyer of lignite units in Europe. The Czech firm acquired facilities with a total capacity of 8,000 MW in 2016. Located in Germany’s east, these lignite units were sold by Sweden’s Vattenfall. Roughly half were built in the 1980s and the other half about two decades ago.

Vattenfall, a state-owned firm, is believed to have sold these units to EPH in order to reduce its portfolio’s exposure to CO2 polluting lignite.

The corporate size of EPH is comparable to that of PPC. Its assets are valued at 12.8 billion euros and annual total turnover reaches about 6 billion euros. However, the Czech firm’s profit figures are a lot more robust. The company’s most recent EBITDA figure was reported at 1.9 billion euros.

EPH maintains assets in central Europe – Czech Republic, Slovakia, Germany, Hungary and Poland – as well as in Italy and the UK.

The EPH group was established in 2009 with the PPF group, which has invested in Greece’s OPAP state lottery, among its founding shareholders. Through subsidiaries, EPH controls and operates lignite-fired power stations, mines, telethermal systems, natural gas networks and storage facilities. It also operates as a coal trader and supplier of electricity and natural gas and owns a number of renewable energy units.

The main shareholder at EPH, 42-year-old Daniel Kretinsky, sold 31 percent of EPH Infrastructure to Australia’s Macquarie Infrastructure and Real Assets in 2016. Kretinsky also holds stakes in Czech media and is a co-owner of the Sparta Prague soccer club.

Indoverse, the other Czech firm to emerge for the first round of PPC’s sale, is active in the Czech Republic’s coal market and operates one power station and mines. Early this year, the company’s head, energy-sector investor Pavel Tykac, who is ranked one of his country’s five wealthiest individuals, declared an intention to invest over one billion euros in European coal-fired power stations.

Tykac has been involved in a number of contentious issues and has needed to face legal charges prompted by unorthodox business practices, including aggressive takeover attempts.

He is the sole owner of Sev.en Energy Group, Indoverse’s parent company. The Sev.en energy group is far smaller than Greece’s PPC. It produces approximately 10 million tons of lignite each year and operates a 410-MW lignite-fired power station.

PPC sale draws expected local players, Shenhua, Czech firms

Three major local players, GEK-Terna, Mytilineos and ElvalHalcor, a member of the Viohalko group, as well as a fourth, the Copelouzos group, joined by Beijing Guohua, a wholly owned subsidiary of China’s Shenhua, have – as was anticipated – all submitted first-round expressions of interest for the main power utility PPC’s sale of bailout-required sale of lignite mines and power stations. Two Czech firms, EPH (ENERGETICKÝ Α PRŮMYSLOVÝ HOLDING) and Indoverse Coal Investments Limited, also emerged as surprise participants. The deadline for expressions of interest expired yesterday afternoon.

PPC needs to disinvest power stations and mines units representing 40 percent of the utility’s overall lignite capacity.

The list of first-round bidders could be revised if partnerships are established or entrants fail to meet criteria enabling qualification for binding bids in the second round. The PPC board will decide on the qualifiers.

Finalized investment schemes will need to be officially declared by the end of July. A September deadline is expected to be set for binding bids.

It is not yet known if any of the sale’s early participants intend to submit binding second-round bids. They are expected to decide after examining PPC’s financial, technical and legal information to be made available to first-round participants through a data room. Investors are not expected to decide any sooner than next month.

The sale price to be demanded by PPC will be a crucial factor for investors. Though definitely interested in acquiring lignite-fired power stations and mines as a means of  controlling their cost of electricity sold, participating suppliers are troubled by the rising production cost of solid fuel-based power generation, a development prompted by EU climate change policies.

PPC advisers upbeat on wider turnout for lignite units sale

The main power utility PPC’s advisers steering the utility’s bailout-required sale of lignite mines and power stations representing 40 percent of the utility’s overall lignite capacity, are confident that, besides local players, a considerable number of foreign investors will also emerge to submit first-round expressions of interest. The deadline for participants expires today.

Over the past few days, it has been rumored that the sale could attract investors from India. This remains to be seen, later today. For the time being, a number of local players, namely GEK-Terna, Mytilineos and Viohalco, as well as the Copelouzos group, expected to join forces with China’s Shenhua for this sale, are believed to be the only certainties.

It is not yet known if any of these probable participants will submit binding second-round bids. They are expected to decide after examining PPC’s financial, technical and legal information to be made available to first-round participants through a data room. These details will help participants determine whether the purchase of lignite units represents a sustainable investment or not. Investors are not expected to decide any sooner than next month.

The sale price to be demanded by PPC will be a crucial factor for investors. Though definitely interested in acquiring lignite-fired power stations and mines as a means of  controlling their cost of electricity sold, participating independent suppliers are troubled by the rising production cost of solid fuel-based power generation, a development prompted by EU climate change policies.

According to European Commission studies and forecasts, emission right costs in the EU, already elevated, are expected to climb further, from 14.43 euros per ton, yesterday’s price, to over 30 euros per ton in 2030.

Given these conditions, investor interest in PPC’s disinvestment of lignite units is expected to be limited to industrial enterprises eligible for offsetting mechanisms compensating such expenses.

 

 

PPC lignite unit bidders to move alone for sale’s initial stage

Most of the local corporate groups planning to submit first-round expressions of interest for the main power utility PPC’s bailout-required sale of lignite mines and power stations representing 40 percent of the utility’s overall lignite capacity are expected to move independently before forming consortiums for the second round, if the acquisition of units offered is deemed sustainable.

All investors, expect for the Copelouzos group, which has made clear it intends to join forces with China’s Shenhua from the start, are expected to bid alone in the first round.

The deadline for first-round expressions of interest expires this Thursday. At this stage, GEK-Terna, Mytilineos and Viohalco, along with the Copelouzos-Shenhua partenership, are expected to emerge as the first round’s local bidders.

No further partnerships involving Greek firms are expected at this preliminary stage of the sale process despite ongoing talks between various parties. Talks for the establishment of consortiums are seen maturing in July, once the short list of second-round qualifiers takes shape.

The sustainability prospects of units offered by the sale’s terms will be crucial in determining the bidding interest of second-round qualifiers.

According to sources, current talks between interested parties not only concern initial equity line-ups but long-term partnerships for power supply.

Given the increased CO2 emission right costs, investor interest in PPC’s disinvestment of lignite units is expected to be limited to industrial enterprises eligible for offsetting mechanisms compensating these expenses.

Two major Greek industrial groups, Viohalko and Mytilineos, are eligible for offsetting mechanisms.

 

PPC announces lignite units tender a day ahead of schedule

The main power utility PPC has just announced an international tender offering a bailout-required sale package of lignite units one day ahead of tomorrow’s scheduled date.

Prospective investors will have until June 21 to submit official expressions of interest and June 11 to forward any queries concerning the overall sale procedure.

Power stations and mines representing 40 percent of PPC’s overall lignite capacity have been included in the sale package.

The preferred bidder is scheduled to be officially announced on October 17. Binding offers will need to be submitted by September 1. Then, PPC’s board is scheduled to meet on September 20 to endorse the sale and purchase agreement as well as a financial appraisal procedure.

On July 3, the PPC board plans to endorse prospective investors who express interest as well as the procedure leading to the submission of binding offers.

It remains to be seen who the participants will be and how much they will be willing to offer for PPC’s lignite units.

At present, three investment teams are expected to submit official expressions of interest. The Copelouzos group, joined by Chinese energy company Shenhua, is one of the three, Terna Energy is another, while the metals industry Viohalco, one of the country’s biggest energy consumers, is the other player seen as a certainty.

The aforementioned players could also establish partnerships between them of with other investors still out of the picture.

Whether these prospective investors will progress beyond the preliminary stage to submit binding bids is another story. This will largely depend on the variable costs of units, currently not known; lignite’s level of participation in the country’s energy mix; as well as other still-unspecified matters, such as the CAT eligibility of lignite units.

 

 

New energy project giant Cenergy eyeing global prospects

Cenergy, a new Viohalko corporate group energy-sector company recently established through a merger deal involving Corinth Pipeworks and Hellenic Cables, faces the challenge of vying for and securing multi-million euro deals amid an extremely competitive environment that nevertheless offers considerable prospects.

The new company established by the merger is worth over 700 million euros in turnover and an operating profit of 63 million euros, based on financial data covering 2015.

The combined strength offered by this merger enables its participants to target major international energy-sector ventures being developed by energy giants. Companies of such stature demand top-grade financial guarantees, advanced technical knowhow and experience to entrust new suppliers.

Through their new partnership, Corinth Pipeworks and Hellenic Cables will be able to vie for larger projects which they would normally not be in a position to take on alone. Their access to better financing deals will also be made easier, while the partners stand as a more attractive and competitive business prospect for major international players.

The development prospects of international interconnection projects over the next few decades stood as a key incentive behind this merger decision. According to forecasts for 2050, the world’s population is expected to reach 9 billion; electricity production will double; demand for interconnection projects in Europe will rise as a result of the region’s energy security policy; while renewable energy and natural gas demand will rise as a result of the international climate change agreement reached in Paris late last year.

Cenergy will focus on projects in Europe, the Mediterranean, Africa and North America. The new company is expected to bid on prospective natural gas projects such as the IGB, TANAP, Turkish Stream, Nord Stream 2, BRUA and Eastmed.  In the electricity sector, projects being eyed by Cenergy include the Greek power grid operator IPTO’s interconnections for Crete and other Greek islands, North Sea interconnections, as well as network development in countries such as the Germany, Norway and the UK.

The two companies involved in the merger already employ 1,900 persons and are expected to hire more personnel.