By Kakia Papadopoulou
Greek metallurgical and engineering company Mytilineos and Spain’s Endesa announced earlier in the week its strategic alliance with the establishment of a joint venture with initial capitalization of EUR1.2 billion. The new entity clearly positions itself opposite Pubic Power Corp, the country’s state-controlled electricity producer.
And it is almost certain that the move as such, will bring changes in the energy landscape not only in Greece but in the wider Balkan region.
“The financial power of the new company, the know-how of Endesa (one of the largest private multinational companies, with presence in more than fifteen countries of Europe, America and Africa), and the new relevant local presence and industrial dimension of the Mytilineos group, will allow the new company to face this ambitious development growth prospect,” the two companies said in a joint statement.
Endesa will have a 50,01% stake in the new entity with Mytilineos holding the remainder. The contribution of the assets is expected to start immediately and to be complete in 12 months.
“Our actual target is the new company to become the second largest energy player in the wider region behind the state-controlled energy producers in each country,” Ioannis Desipris energy director of Mytilineos told energia.gr.
The company is expected to enter the retail segment after the opening up of EU markets in July 2007.
Industry observers see the timing of the alliance as proper not only because of energy market deregulation but of PPC’s inability to cover the power deficit which has been created after the closure of the Kozloduy nuclear plants in Bulgaria. PPC’s bad financial status does not allow it to proceed with the necessary investments to cope with the increasing demands of the country.
Last Tuesday, PPC reported one of the worst set of earnings in its recent history with its full-year net profits recording a 83% drop, sharply below analysts estimates.
The company blamed the higher oil and gas prices in 2006 and the increased cost for energy purchases.
PPC said that tariff adjustments by 3.2% in September of 2005 and 4.8% last August were not enough to counterbalance the rising energy costs and the company’s expenses.
Development Ministry’s move to increase the industrial tariffs by 4% and the off-peak electricity tariffs by 5% last Monday, are seen as half-measures, although some analysts reckon that the move is preparing the ground for other increases to follow suit soon.
Greece willy-nilly has to abandon its protectionism towards energy. Players know it and position themselves accordingly.
Mytilineos concluded its announcement on the joint venture saying that the asset base of the company will include:
-a CHP of 334MW starting operationsa in June 2007,
-a 430 MW natural gas fired power plant under construction, which will be completed in June 2009
-a portfolio of more than 1000 MW of renewable projects
-a new coal-fired plant of 600 MW for which a license application has been made with the local regulators
-additional opportunities for the new venture will include a 310 MW trading license, additional natural gas fired power plants licenses and international coal fired power plants.