Investors jostling for a place in the country’s power production market

Several domestic and international groups are preparing for their first battle for stronger positions in the Greek electricity market on Thursday, keeping an eye on Public Power Corporation (PPC) and the political decisions expected on it. February 22 is the deadline for the tender concerning the first private electricity-producing plant, conducted by the Electrical Power Transmission System Operator (DESMHE). The winning bid will secure guaranteed income for 12 years, amounting to 70 percent of the plant’s productivity. Income guarantee has been the state’s incentive for the entry of private investors into electricity production so as to proceed with the liberalization of the market since it had remained on paper since 2001. In the tender’s proclamation, DESMHE has set the minimum guaranteed income at 35,000 euros per megawatt and the maximum at 92,000 -/MW. The winning bid will be the one that sets out the lowest price. The battle to claim the license is expected to become concentrated between two Italian companies, Edison and ENEL. They own the majority stakes in bidding firms, as Edison has acquired stakes of the Hellenic Technodomiki and Viohalco groups, while ENEL has bought a stake in the Kopelouzos group. Also in the race are Spain’s Iberdrola, which has acquired 70 percent of Corinth Power of the Vardinoyiannis Group, and two autonomous Greek bidders: the Mytilineos Group, locked in negotiations with Spanish firm Edessa, and the Terna Group, also in negotiations for a strategic partnership with Austria’s Verbund. The investment interest in the tender highlights the dynamism of the local electricity market and its strategic significance. These two characteristics of the Greek market are confirmed by the intentions of companies (Greek and foreign) who have entered the tender to proceed with investments regardless of whether they qualify or not. The developments of the last two years in the local power market, as well as that of the broader market in Southeast Europe, have created a particularly favorable environment for investing in electricity production. The situation is partly due to the energy deficit created in the Balkans by the closure of two nuclear reactors at the Kozloduy plant in Bulgaria and the subsequent soaring of prices for exporting power, as well as the respective energy deficit in the Greek market due to both the delay in market liberalization and the delay by PPC in replacing old plants. Those conditions render investments in electricity production competitive and viable even without the guaranteed income by DESMHE, which two years ago was considered essential for the attraction of investment interest. Most investors say they will proceed with investments even if they do not land DESMHE’s guarantee. In this case, Greek authorities should consider not calling a second and third tender for two more plants, as planned for March and the end of the year respectively. Another factor that strengthens investment interest, which may be more important, is PPC itself. When referring to their strategic interest in the Greek market, all investors include PPC as well. They consider it certain that sooner or later more daring policies will be required for a company that is crumbling financially, while some believe that PPC today cannot fund a program for the replacement of old units, so it will need private investors’ help. Speaking to Kathimerini, the representative of a foreign investment group confirms that at the end of the road lies PPC; the greatest worry of investors participating in this tender is not who will be left out but what will happen to PPC.