Greece and its lenders start talks on Monday on how to split off its electricity grid operator from dominant power utility PPC and make other reforms needed for Athens to receive fresh aid under its international bailout.
Prime Minister Alexis Tsipras' leftist government halted the sale of a 66 percent stake in grid operator ADMIE after winning elections in January. It agreed under a third bailout deal signed in August to either restart the tender or find alternative ways to open up the electricity market.
Greece wants ADMIE to remain in state hands and has proposed acquiring a 51 percent stake in the firm owned by state-controlled power utility PPC, instead of selling it to a private investor.
Energy Minister Panos Skourletis said on Monday the lenders had agreed to discuss the alternative plan at talks starting later in the day. But a source close to the lenders said alternatives put forward so far were complex and insufficient.
Athens needs to enact a solution for the grid operator and other reforms, including making its state revenue agency independent and finalising how a new privatization fund will operate, by Dec. 18 to qualify for 1 billion euros ($1.1 billion) in fresh eurozone aid before starting its first bailout review which would open the way for debt relief talks.
Other outstanding issues include a long-term reform of the complex, underfunded pension system and how to deal with banks' non-performing loans to businesses.
Mission chiefs from the European Commission, the European Central Bank, the eurozone's ESM rescue fund and the International Monetary Fund return to Greek for the next round of talks starting on Tuesday evening.
"We have agreed that we are not discussing the scenario of privatizing ADMIE… and we are looking for an alternative," Skourletis told Greek television.
The power grid should stay under state control, he said, as was the case in a majority of European countries.
"I think (our proposal) will pass," he said.
A senior energy ministry official told Reuters that a major sticking point was how the government would compensate PPC for buying its 51 percent stake in the operator, estimated to be worth about 450 million euros.
Greece has proposed swapping shares it owns in other companies but the lenders question whether the government will be able to transfer those shares from their current owner, the country's privatization agency, to PPC, the official said.
The lenders also want a strategic investor in ADMIE to take over the management from PPC but the government is resisting that, the official added.
A senior government official close to Tsipras said: "It's not like you stick on the label privatization and it makes things work. Everybody should be pragmatic."
"I don't see why selling off the networks of the electricity facilities or the water facilities would boost the economy… It's just a matter of rent-seeking," the official said.
Referring to a gas pipeline project that Moscow put on hold after Turkey shot down a Russian warplane, Skourletis said that alternative routes via Bulgaria were being examined. He met Russian government and Gazprom company officials in Moscow last week.
The Turkish Stream pipeline was conceived as an alternative to the South Stream project that Moscow scrapped last December after European Commission objections. Greece has strongly supported Turkish Stream.
Greece and Russia signed a memorandum in the summer on extending the planned pipeline to Europe across Greek territory, with financing coming from Russia.