ATHENS (Dow Jones)--The board of directors at Greece's dominant electric company, Public Power Corporation SA (PPC.AT), will this week decide whether to proceed with a plan to jointly build two new power plants in conjunction with Germany's RWE AG (RWE.XE).
Specifically, the board will meet to approve an outstanding - but as-yet unsigned - memorandum of understanding with the German company that touched off a firestorm of opposition when it was first uncovered in the Greek press a month ago.
"The possible MOU between PPC and RWE will be debated by the board of directors this Thursday," a PPC official told Dow Jones Newswires.
"It concerns the construction of two new coal-fired power plants of 800 megawatt capacity each for a total of 1,600 megawatts," he said.
When the contents of the MOU were first revealed in mid-November, there was immediate and vocal opposition from PPC's powerful labor union. PPC's management, in a series of somewhat contradictory statements, tried to downplay the significance of the MOU and even the Greek government - 51%-owner of PPC - was forced to signal it might veto the MOU if it took effect.
At issue is a provision under the MOU which would give RWE a 51%-stake and management control of new, jointly-built power plants. PPC's employees' union sees the MOU as a step towards the further privatization of the company.
PPC, the one-time monopoly power provider, currently produces more than 90% of Greece's electricity and has some 12.7 gigawatts of installed capacity. Under E.U. rules to open the electricity market to alternative producers, PPC is allowed to replace - but not supplement - its existing capacity.
Specifically, PPC has approval to replace roughly one-third of its existing power plants, or about 3,200 MW of existing capacity. And last month, the company unveiled a mammoth 7-year, EUR12.5 billion investment program that includes some EUR4 billion to replace its aging power plants.
But the company is also looking at ways to circumvent the restrictions on new, supplemental capacity. By holding only a minority stake, and not management control, the new plants that might be built with RWE would not be counted towards PPC's 3,200 MW limit.
"This MOU only applies to new capacity, not to the capacity we are allowed to replace," the official sa