Gov’t to tread cautiously after DEPA failure

Following the failure of the Public Gas Corporation (DEPA) tender and hoping to save face in that for gas transmission network operator DESFA, the government is accelerating the privatizations program, giving priority to projects such as the Piraeus Port Authority (OLP), in a bid to reduce the shortfall expected in revenues and fend off pressure from its creditors to introduce more measures.

The coming week will be crucial for developments on the sell-off front as it should see definitive decisions regarding the outcome of the DESFA tender. The government expects to get a positive result to edge closer to the target for revenues of 1.6 billion euros from privatizations this year and reverse the negative picture created from the lack of bidders for DEPA.

From the statement issued by state privatization fund TAIPED on Wednesday after the sole binding offer from Azeri state energy firm Socar, it emerges that awarding the 66 percent stake in DESFA to the only bidder will depend on whether the Azeris raise their offer. TAIPED stopped short of revealing the price offered, but it is said to range between 390 and 430 million euros. A meeting of the two shareholders, TAIPED and Hellenic Petroleum, will decide on the offer “that is being examined on its details and concession,” said TAIPED.

The fund is hoping to convince Socar to raise its bid – something that will be seen next week – although market sources expect the government to announce its decision after the Azeri choice of a natural gas pipeline to Western Europe is made known.

Regardless of the DESFA tender’s outcome, the need to speed up the sell-off program and quickly restart the DEPA tender was clearly expressed by the European Commission through spokesman Simon O’Connor this week. He asked for “any consequences [on the Greek program’s timetable] to be minimized” as Brussels is worried about the opening of a funding gap that could deepen its rift with the International Monetary Fund as the latter would apply more pressure for another Greek debt restructuring.

In view of all this, TAIPED is putting projects such as port privatization at the forefront, starting with OLP, because they can move ahead faster. In addition to that, alongside the redrafting of plans for the DEPA tender, it is examining the possibility of lending priority to a further privatization of Hellenic Petroleum and accelerating the procedure for the sale of Public Power Corporation’s grid operator, ADMIE.

Regarding the new tender for DEPA, TAIPED has decided to make some careful planning before its proclamation so as to avoid the weak points that led to the failure of the first one. The deadlock in the tender was not due to the unexpected abstention by Russian energy giant Gazprom, but to the fact that it failed to attract any other investors.

The government may dismiss the reasons Gazprom has cited to stay away from filing a binding offer, referring to debts and the future financial state of the company as “mere pretexts,” but responsible government officials know very well that had these issues gone away, the situation in the tender would have been totally different.

As a result of that, the new tender will only be announced after the package of measures concerning the electricity market’s restructuring is concluded, as this is the source of the debts to DEPA that Gazprom referred to.