«If they want investments in electricity production, they should pass legislation allowing for funding such projects,» said Yiannis Mytilineos of the Mytilineos engineering group which has a license for an electricity generation plant with a production capacity of 245 MW in Volos. «In an environment where there are few connections and where the monopoly depends on lignite for 65 percent of its production, one will need to look for investors for energy projects,» he said. «In this kind of environment, energy projects need subsidies and the State must control market regulation. Someone must pay the price of a free market and eliminate investors’ insecurities and make it easier for them to fund energy projects, especially now after Enron’s bankruptcy, banks are very hesitant of such projects.» Mytilineos said banks who do finance energy projects should have a comprehensive market system and provisional regulations to form the basis by which they can judge the viability of a project. Yiannis Desipris, who is in charge of electricity production at Mytilineos’s Volos plant, said the group is tired of the entire process. «We have been negotiating with energy watchdog RAE for a year. They give us their proposal, we go to the bank and then find it can’t be funded, we go back to RAE for another proposal, and the process starts again. We need legislation which sets out the provisional clauses and defines what the market is and how it works during the development stage. The effectiveness of the legislation should be judged by how easy it facilitates investments for energy projects. There is no other way for investment,» he said. Energy group Copelouzos, whose subsidiary Enelco has received a license to construct two plants with a capacity of 440 MW each, faces similar problems. According to Andreas Diamantopoulos, responsible for the electricity generation plants, a clear institutional framework and funding are needed. He said things would be better if the State had opened up the energy market for household consumers, a sector characterized by rising demand. He said getting funding has become more difficult since Enron. «Opening up the energy market is the State’s obligation and not investors’ who will only invest when they are sure the businesses will be viable,» Diamantopoulos said. Stelios Markianos, manager at Investment Bank in charge of energy projects, said problems are due to the peculiar characteristics of the Greek energy market. «The Greek market is small, relatively segmented; there are no connections. The Public Power Corporation (PPC) monopolizes the market, while there are no major industrial clients. Somebody should take all this into account and come up with a workable scheme,» he said. He said rising demand for energy, in conjunction with market deregulation, means the private sector needs to participate. He said a free market is based on the assumption that there will be multiple producers and numerous consumers but cautions that this situation cannot come about in a day. Markianos said a transitional period must include incentives to power producers, while there should also be efforts to prepare a comprehensive operational framework for the next stage. On banks’ hesitance to lend to energy projects, he said that globally banks have suffered major losses from energy companies, while the market is presently characterized by great uncertainty. «These are high-risk projects. Also, governments frequently change the operational framework with the result that investors cannot make secure forecasts. While RAE’s latest proposal covers banks against investors, the risks still remain. For example, the fuel risk is enormous. Electricity prices vary from fuel prices. Also no one has any guarantee that PPC will not abuse its dominant position, banks know very well that there are similar situations in other countries.» Markianos also pointed to another problem, namely that the system proposed by RAE does not exist in any other country and, thus, investors and banks are wary. He said prices will be high, as companies seek to avert the risks. Giorgos Kouvaris, management consultant at Hellenic Petroleum and in charge of constructing the group’s power plant in Thessaloniki, concurred with the opinions expressed by the others. He said the project, in which Belgium’s Tractebel and Greek construction company Aegek are partners, is a high-risk venture. «There is no clear framework, we are talking about an unknown market where investors are urged to invest some $250 million,» he said. He said the biggest risk is fuel and the take it or leave it clause. «About 60 percent of the cost of generating electricity comes from fuel. You sign a contract for millions of cubic meters of natural gas which you must pay for whether you use it or not. How can you take on these risks when you don’t know how many hours the plant will operate?» he asked. Kouvaris said investor insecurity is also due to the fact that no one can promise that PPC will not set up new units. For Hellenic Petroleum, securing bank financing is as much a problem as for other companies. «We have proceeded with the project while keeping an eye on developments as to amendments of the relevant legislation. If this does not happen, it will be very difficult to get bank financing, although the partners are willing to put in their own funds,» he said. Dangers of a blackout in 2005 While negotiations for creating a competitive market are still going on and are set to drag on for quite some time, the issue of whether Greece will have sufficient electricity in the coming years and especially in 2005 has come to the forefront. Regulatory Energy Authority (RAE), the industry watchdog, has to date not come up with any proposal to resolve the problem, even though it was the first to sound the alarm and cited the need for an additional 400 MW of power in 2005. The problem is gaining urgency in view of the fact that private sector investments are not moving forward. Referring to the energy sufficiency issue, RAE head Pantelis Kapros had previously warned of the dangers. «If the construction of new plants does not start in the summer of 2002, then Greece will have an electricity adequacy problem in 2005,» he had said. Since then, he has been preoccupied with opening up the electricity market and has not made the recommendation to the Development Ministry for the construction of a required plant by PPC as required by law. Since June 2001, PPC, in turn, has brought up the subject of Greece’s electricity insufficiency in 2005. It has urged the Development Ministry to approve the construction of a new unit with a capacity of 400 MW in Lavrion. While Development Minister Akis Tsochadzopoulos has proclaimed the project twice, he has yet to sign a decree allowing PPC to proceed. A PPC official said «the project should have been started by now. As long as it’s delayed, the bigger are the dangers of a blackout in 2005.» He also expressed his concerns that the blame would then be laid on the company.