By Costis Stambolis
When Greece’s Economy and Finance minister Prof. Nickos Christodoulakis decided last year to include the Public Gas Corporation,known as DEPA, in this year’s privatisation programme he could have hardly imagined the almost disastrous outcome of his government’s international quest for a strategic investor. The socialist government of prime minister Costas Simitis,encouraged by the partial privatisation, through its floating in the Athens and London exchanges two years ago of PPC, the electricity utility, had decided to move ahead full speed with further privatisations in the energy sector. Greece’ monopoly gas utility DEPA,with its brand new infrastructure and at the start of developing a promising gas market in Greece, presented an excellent opportunity.
DEPA’ s infrastructure comprises its extensive gas transmission system, a state of the art LNG terminal,metering and distribution stations and operation and maintanance control centres. The backbone of DEPA’s natural gas transmission system is the main high-pressure (70 bar) transmission pipeline from the Greek-Bulgarian border to Attica,of a total length of 512 kms.DEPA receives Russian gas through this pipeline which currently amounts to 2.0 BCM’s per year but could gradually rise up to 5.0 BCM’s Also in place are other high pressure transmission branch pipelines to eastern Macedonia and Thrace,Thessaloniki,Volos and Attica totalling 440 kms. DEPA has also developed extensive medium pressure(19 bar) and low pressure (4 bar) networks in most major cities and industrial areas. In Athens, Salonica, Volos and Larissa Gas Supply Companies have been established with the 49% participation of private equity partners,who are also responsible for their management,and hence responsibility for expansion of their distribution networks lies with them.
The Liquefied Natural Gas(LNG) terminal is situated on the islet of Revithoussa, in the gulf of Megara,near Athens,and houses delivery,storage and gasification facilities for LNG which is imported from Algeria.DEPA imports at present 0.5 BCM’s of LNG. The terminal has two LNG tanks with a total capacity of 130,000 cubic metres, tanker anchoring and cryogenic facilites and gasifiers for the regasification of liquefied natural gas.The short term ojectives of DEPA according to its development strategy include expansion of the transmission system as far as the Greek-Turkish border and interconnection with the Turkish network . In the long term DEPA’s plans foresee the linking of its network, via an underwater pipeline in the Adriatic, with the Italian gas system and hence the transit of Iranian and Azeri gas through Greece and Turkey,for sale in the western european market.
Government economists estimate DEPA’s current networth position at approx. 1.0 billion euros, which according to some market observers is grossly undervalued given the extent of the company’s infrastructure and the relative young age of its facilities. The creation of an infrustructure for the transmission of natural gas is regarded as Greece’s single most important post war project which continues to be implemented even today. Its significance can only be matched with the setting up of the country’s electricity generation and transmission network. Energy analysts note that the Greek natural gas system is one of the most advanced in Europe operating according to the most stringest of standards and with high safety margins.
According to the government’s official tender notice which was published last September expressions of interest were requested from experienced and well funded gas companies which were interested to aquire a 35% stake in DEPA. The succesful contender would gain a strategic position in Greece’s monopoly gas utility,participate in its board and assist the company in expanding further its operations in Greece but also in neighbouring countries.
Nine companies eventually responded to the government’s call which included the world’s heavyweights such as German Ruhrgas,Russian Gasprom ,Italian ENI and Gas de France. Algerian gas producer and trader Sonatrach, Spain’s Gas Natural, Italian companies ENEL and Edisson and French oil-gas conglamorate Total also participated in the tender’s first leg with the intention of making it to the shortlist. Following evaluation of their credentials and capabilities by the advisor to the sale, London based J.P.Morgan, all nine companies made it to the second phase of the tender. When asked,earlier this month, to submit initial offers only three companies responded and eventually two companies,Ruhrgas and Gasprom tabled non binding offers of 210 million euros and 205 million euros respectively. Both offers were substantilly lower from the government’s 300 mil.euro target.
The two ministers in charge of DEPA’s partial privatisation do not conceal their dissapointment with the state of the tender so far. They both admit that the timing of the exercise was not the best, a development which the government could not have foreseen when it set in motion the sale process last summer.Uncertainty as a result of the latest Gulf offensive,which was clearly in evidence in the performance of international markets over the last months,is attributed as the main reason for the lack of sustained interest in the case of DEPA. Disappointment with the DEPA sale comes soon after the government’s failure last January,in the case of Hellenic Petroleum, to secure the sale of a smaller stake (23,5%) to a strategic investor. A consortium consisting of a Latsis company and Russian oil giant Lukoil pulled out in the last minute having submitted an offer way below government expectatiions.
Sources close to the two ministers say that considerable scepticism now prevails as to the wisdom and eventual benefit for the government, if it should go ahead with the next and final phase of the tender by asking, through the advisor, the two remaining companies to submit improved final offers. Latest information suggests that Ruhrgas and Gasprom are in talks concerning the possibility of making a joint improved offer for the 35% equity stake at DEPA. Should such a move take place there is ground for the government to invoke certain clauses and thus cancell the tender by argueing lack of competition .On the other hand,some analysts argue, that if the government were to cancell the tender it may take it at least two years before attempting another return to the market by which time conditions may have deteriorated rather than improved. No wonder the government is now facing an impasse concerning the partial privatisation of the country’s national gas utility.