Last week Greece’s state controlled electricity utility PPC signed an important agreement with ContourGlobal, a US energy company, which will help it secure a slice of the upcoming South East European single energy market. According to company sources this is a $600 joint venture where the European Bank for Reconstruction and Development (EBRD) would take a 10 per cent stake, the first such partnership between a regional electricity producer and an international institution. PPC and Contour will now aim in jointly acquiring existing generating capacity in the west Balkans, although some trading activity in Romania and Bulgaria has not been ruled out.
“With liberalization and accelerating economic growth, every market in this region is undergoing rapid change. We see strategic expansion as critical,” Dimitris Maniatakis, chief executive of Greece’s Public Power Corporation (PPC) said in a recent interview published in the Financial Times (4/8/06).
Under a European Union-backed treaty signed in Athens last October, nine Balkan states agreed to create the South-East Energy Europe Community – a single market for electricity with an integrated infrastructure for power generation and transmission, which will develop over the next 10-15 years.
With a population of 55m, the region could become Europe’s second-biggest electricity market, covering a wide geographical expanse between the Black Sea and the Adriatic Sea.
“The region’s going to need a significant amount of generating capacity. We’re looking at average annual demand growth of around 4 per cent,” said Joseph Brandt, chief executive of ContourGlobal, in the same FT interview.
According to EBRD estimates It will take about $15bn-$20bn in investment to create a competitive energy market that can complete with western Europe. A World Bank report further notes that top priority is the upgrading of transmission links among the grids of Albania, Montenegro, Kosovo, FYROM, Bosnia, Serbia, Croatia, Romania, Bulgaria, Greece and Turkey. Already work is in progress to establish a much needed electricity inter connector between Greece and Turkey while Greece’s electricity connections with Bulgaria are currently being upgraded.
PPC executives have calculated that by 2020 South-East Europe will need a minimum additional generating capacity of 15.000 megawatts. Another 13.000 MW of existing capacity would need extensive refurbishment to comply with EU environmental standards.
According to the above FT report “as the region’s aspiring EU member-states start restructuring the energy sector, privatization is set to accelerate. Power plants in Bosnia, Serbia, Montenegro, FYROM and Kosovo are slated for sale in the next 18 months”.
PPC and ContourGlobal, which is backed by Reservoir Capital, a US-based hedge fund, would be able to raise at least $3bn ($2.3bn, ₤1.6bn) in financing for investment in lignite-fired power plants, hydro capacity and renewables over the next five years, Mr Brandt told the FT.
PPC generates the bulk of Greece’s electricity from local lignite deposits, a soft coal with low calorific value. Similar lignite-fired plants are currently in operation in the west Balkans and in Bulgaria.
As some of the largest lignite deposits in Europe lie to the north of Greece notably in Kosovo and Bulgaria, PPC is in an ideal position to offer its considerable technical knowhow and experience with this fuel. PPC currently operates 7 large lignite fueled power stations, mostly in northern Greece, totaling 6.000MW of installed capacity.