The emerging difficulties reported last week in the sell-off of a 35 percent stake in the Public Gas Corporation (DEPA) are increasingly coming to be seen as confirmation that Greece has a problem in attracting investment in the energy sector. On Friday, Economy Minister Nikos Christodoulakis confirmed that Spanish gas distributor Gas Natural, the sole firm to make a binding bid for DEPA, was pressing for a contract clause that would enable it to buy itself out of the investment in a few years’ time if the returns are not in line with those expected in the utility’s business plan. Although he advised against drawing any conclusions until negotiations, expected to begin this week, were concluded, the acknowledgement in the specific case clearly indicates wider obstacles in the development of Greek energy investments. In a growing market such as that of natural gas – itself part of a power market where requirements are increasing at a pace of 4.5 percent a year, compared to an average of 1 percent in the rest of the European Union – Greece has attracted very little of the huge sums of foreign investment in the sector worldwide. The only such investments in city gas networks to date, those of Shell and Cinergy, are showing signs of becoming problematic as the market proved to be unprepared. This muted picture of Greece’s energy sector appears in stark contrast to the broad mobilization of investment since the deregulation of the market in the rest of Europe and the forecasts of the International Energy Agency (IEA) for global energy investment totaling about 100 trillion euros in the next 30 years, 50 percent of which will be in power production. When Greece’s power market was formally deregulated in February 2001, Christodoulakis, who was development minister at the time, was buoyed by a wave of license applications in the field of renewable energy sources (RES); he spoke of «the biggest investment flow in Greece in the postwar period.» Unfortunately, we have only seen a trickle of that huge flow so far, and those few RES projects under way still have no independent power producer of any respectable size to challenge the monopoly of the Public Power Corporation. The situation remains unclear even after a recent amendment of the regulatory framework. Given the power and natural gas monopolies and the dominant presence of state-controlled Hellenic Petroleum (ELPE) in oil refining and distribution, the framework and operating conditions of the Greek energy market are primarily determined by government policy. Theoretically, this policy in recent years has been based on the restructuring of public energy enterprises and the deregulation of the power and natural gas markets. As regards restructuring, planning has been particularly unclear and lacking stable orientation, precious time was lost, and it ultimately got under way only as a result of fiscal pressures on the Finance Ministry. A good example is ELPE, for which the government had announced a third part-privatization through the stock market, then decided on a partnership with a foreign concern through an exchange of share blocks and finally abandoned it, deciding instead to issue an international tender for the sale of a 23.17 percent interest to a strategic investor. Three big foreign oil groups bid, two of which soon withdrew after (as it unofficially transpired) the government had no intention of negotiating a transference of the management to the strategic investor at any time. The tender was eventually declared void and a deal was finally struck whereby Greece’s second-largest refiner, Petrola, was absorbed through an exchange of share blocks, and under terms clearly different from those of the initial tender. The policy on DEPA is not much different from that for ELPE. Nine international gas distributors submitted bids in the initial phase of the tender, only to find out the investment was ridden with huge risks given the lack of a market regulatory framework. Only Gas Natural made a final binding bid.