Work needed for convergence in energy bailout negotiations

Though the overall mood was reportedly positive during yesterday’s resumption of bailout review talks between Greece’s energy minister Giorgos Stathakis and the country’s creditor representatives on needed energy-sector reforms, the session’s developments were far from sufficient to warrant any imminent agreement.

Both sides presented their positions and, based on the proposals made, technical teams will continue examinations and talks with the objective of achieving some convergence by the end of this week when Stathakis and the creditor representatives are expected to meet again.

During yesterday’s session, the creditor representatives, back in Athens to resume the bailout’s prolonged second review, requested explanations for pending energy-sector matters.

The lenders sought details on the split and sale process of the power grid operator IPTO, a subsidiary of the state-controlled main power utility PPC, which faces a tough schedule. It appears to be on track.

On the low-cost lignite and hydropower electricity amounts PPC will need to offer independent traders through the recently introduced NOME auctions, the two sides, still far apart, essentially defended their positions which had been exchanged, in writing, prior to the meeting.

Both sides were also adamant on their views concerning structural reforms that would be demanded by the creditors if the NOME auctions fail to produce the desired results. PPC’s retail electricity market share must gradually drop to less than 50 percent by 2020. Intermediate target figures have been set. The utility’s dominant market share has remained resilient, persisting at just under 90 percent, despite the introduction of the NOME auctions about four months ago.

As expected, the creditor representatives pointed out the slow progress being made on the NOME front as the market shares of independent electricity suppliers have yet to make sufficient gains. The creditors want to conduct a review of the NOME plan’s progress in June. The government may be forced to sell 40 percent of PPC’s lignite and hydropower stations by July, 2018, if the NOME auction progress is deemed unsatisfactory.

The creditor representatives – especially the European Commission, which maintains a greater interest in EU energy market matters – believe that PPC’s production portfolio is a fundamental problem that is prompting a series of electricity market irregularities.

A recent raid by European Directorate for Competition officials of PPC and IPTO’s Athens headquarters, for the collection of data in response to market abuse complaints, including anti-monopoly law violations, by the dominant power utility, definitely boosts the negotiating position of the creditor representatives during this latest round of talks and increases the degree of difficulty faced by Greek officials.