In
the mountains of northern
Greece
lies an $800 million power
plant whose future may help determine whether the country can salvage its euro
status.
The
facility near Florina, a town known as “Where Greece Begins,” is the most
modern of four production units that state-controlled Public Power Corp. SA
(PPC) is scheduled to sell to competitors to meet four-year-old European
Union demands that the country deregulate its energy market. The most powerful
Greek union is now threatening nationwide blackouts at the height of the summer
tourist season to derail the plan.
“We
will make saving PPC a cause for all Greeks,” Nikos Fotopoulos, head of the
18,000-strong GENOP union, said last month in his
Athens
office adorned with photos of
communist revolutionaries including Vladimir Lenin and Leon Trotsky. “We
fight our battles with faith and passion, and we fight them hard. A serious
state must control businesses of strategic importance.”
While
on the surface PPC is another tale of Greek conflict during the worst economic
crisis of modern times, it encapsulates how
Greece
has found itself at the sharp end of Europe’s
struggle to keep the euro intact and what the country still faces to defend its
place in the currency.
Founded
in 1950 to distribute domestically generated electricity to Greek citizens, PPC is
a microcosm of political protection, vested interests and reliance on foreign
financing that have defined the economy for decades.
Resisting Change
It is
the country’s biggest employer and its eight plants fired by the soft,
brownish-black coal called lignite meet half of Greece’s power demand. PPC is
fighting to keep its monopoly on the fuel, which is so vital to the company
it’s in the process of moving a whole village to mine more of it.
“PPC
has a very strong union that so far has hindered changes,” said Stefanos Manos,
a former New Democracy industry minister who stood in the last election for his
own party. “The government needs a clear strategy of what it wants to achieve
in the energy sector in general and with the company in particular. I have yet
to see evidence of that.”
Since
forming a government after the June 17 election, the second in six weeks, Prime
Minister Antonis Samaras and his ministers have been in talks with the EU,European
Central Bank and International Monetary Fund to keep aid flowing
during the fifth year of recession. They are working on identifying 11.5
billion euros ($14.2 billion) of further budget cuts and are 3.5 billion euros
to 4 billion euros short of the target, Finance Minister Yannis Stournaras said
this week.
Selling Assets
Samaras,
61, has vowed to make the sale of state-owned assets a priority and last month
appointed former PPC Chief Executive Officer Takis Athanasopoulos as chairman
of the organization managing the privatization program.
Athanasopoulos,
68, a U.S.-trained business manager and university professor, battled
Fotopoulos, 48, at PPC during his tenure over issues ranging from job cuts to
teaming the company with partners such as Germany’s RWE AG. (RWE) PPC
employs 20,000 people, compared with about 38,000 in the mid-1990s, and is now
restricted to one new hire for every 10 departures.
“We
are determined, as a government of three parties, to press on with structural
changes, with state-asset sales,” Samaras told reporters on July 26. His New
Democracy party has formed a coalition with Democratic Left and Pasok, the
socialist group traditionally backed by the unions.
Reform Credentials
PPC
is a test of Samaras’s ability to prove to the euro area and IMF that Greece is
meeting their demands to open markets to competition, scale back the state and
cut red tape.
The
asset-sale program also may involve lowering the state’s stake in PPC to a
minority from the current holding of 51 percent. The company’s shares
collapsed by 61 percent in the past year and its net debt at the end of
the first quarter stood at 4.85 billion euros.
Greece
first has to resolve a dispute with the EU over PPC that predates the debt
crisis.
The
fight centers on Greece’s failure to heed EU competition rules and affects the
Melitis electricity plant near Florina in the northern Greek region of
Macedonia, a focal point of the 1946-1949 civil war in which communist forces
were defeated. Melitis, with a Russian-built generator and emissions- control
technology from German units of France’s Alstom SA (ALO), is PPC’s
state-of-the-art prized asset.
Lignite Mines
EU regulators ordered Greece in March 2008 to loosen
PPC’s stranglehold on lignite, saying competitors face unfair market barriers.
The EU said Greece violates European law by giving PPC “quasi-exclusive” access
to the coal.
PPC depends on lignite, among the most polluting
fuels, to help compensate for losses in its natural-gas business. The
Athens-based company said its cost of production is about half as much in
lignite as in cleaner gas. Greece is the third- largest lignite producer in the
EU after Germany and Poland, according to the European Association
for Coal and Lignite.
“We don’t consider giving existing lignite units to
private groups an investment in, and contribution to, the country,” Fotopoulos,
the union leader, said in a July 26 interview. “The only winners from giving
ready-made lignite factories to private groups are the private groups.”
Political Change
The previous New Democracy government proposed to meet
the EU’s 2008 deregulation order by expanding mining capacity.
Seeking to give competitors to PPC access to 40
percent of exploitable Greek lignite reserves, the government decided to invite
bids for exploitation rights at four deposits, including one called Vevi from
which the nearby Melitis plant is counting on getting supplies.
Greek elections in October 2009 produced a Pasok
government that pulled the plug on that plan, which EU regulators had approved
two months earlier.
The Pasok government of former Prime Minister George
Papandreou, pledging to promote cleaner energy, ended up preparing to sell four
existing PPC power units, including Melitis, and to limit new exploitation
rights to the nearby Vevi deposit, which had been mined until about 10 years
ago.
The Pasok plan remains on the table as the new Samaras
administration evaluates options. The other three units on the sale list
include two at the Amindeo power station southeast of Melitis and one in
Megalopolis in southern Greece.
“The government is committed to proceeding with the
privatization of PPC in an organized fashion,” Assimakis Papageorgiou, Greece’s
deputy energy minister, said in an Aug. 1 e-mail. He declined to elaborate on
the plans, saying they are still being developed.
Ticking Clock
Time is pressing not just for the government, which is
scrambling to meet an Aug. 20 deadline to repay 3.1 billion euros of debt held
by the ECB, but also for Melitis. It has been forced to take stopgap steps,
including importing coal, after losing supplies from two nearby lignite mines.
One mine, Achlada, which furnished more than half of
Melitis’s lignite in 2011, shut down temporarily earlier this year as Greece’s
economic slump deepened. The other, Klidi, closed four years ago after a
hillside collapsed.
The 330-megawatt unit at Melitis, whose technology
limits discharges of pollutants such as sulfur dioxide, nitrogen oxides and
dust particles, is getting some of its lignite from as far away as Turkey andBulgaria,
according to Constantinos Tzeprailidis, operation department manager at the
plant.
Natural Wealth
“It’s a little difficult,” Tzeprailidis said in a July
28 interview in his office that looks onto countryside where sheep graze and
wheat, corn and sunflowers grow. “It’s a shame to have national wealth that’s
not exploited.”
About 75 kilometers (47 miles) south of Melitis, amid
the lignite mines that make up Greece’s energy heartland in the Kozani area,
PPC’s hunger for the fuel is more conspicuous.
The landscape is marked by active open-pit mines that
supply larger, older, PPC power stations nearby.
These include Agios Dimitrios, the company’s largest
lignite-fired station that alone meets about 20 percent of Greece’s electricity
consumption, and Ptolemaida, the oldest station where power generation began in
1959.
“We work 24 hours a day, 365 days a year,” Olga
Kouridou, director of mining for PPC in the region, said on July 27 as she
approached a 50-meter precipice in the area’s largest mine.
A German bucket-wheel excavator, the size of a
multi-story building, churned the earth and dozens ofdump trucksroared
down the makeshift dirt roads. “We don’t stop at all. We have enormous
activity,” she said.
Moving Earth
Residents of the nearby village of Mavropigi can
attest to that. The village, whose name in Greek means “black source,” is due
to be moved within months to make way for an expansion of mining by PPC.
Mavropigi will be the sixth village in the Kozani area to be relocated since
the 1970s because of mining.
Dimitris Emmanouil, a retired construction worker who
was born in Mavropigi in 1941 and got married there, said he and other
residents hear the ground moving at night as a result of the digging for
lignite.
“It’s dangerous now because the soil is slipping,” he
said on July 27 while seated at a table in a closed-down café in Mavropigi,
where earthquake-like faults in the ground are visible. “There’s no other
choice. The village has to go.”
PPC needs the lignite under Mavropigi and surrounding
fields for a planned 1.4 billion-euro unit at the Ptolemaida plant, according
to Ioannis Kopanakis, an Athens-based general manager for generation at PPC.
The company is asking German development bank KfW to arrange a 700 million-euro
loan and intends to fund the rest itself, he said.
“The matter has gone to the highest decision-making
levels in Germany,” Kopanakis said in a July 30 interview. “We expect progress
in these issues in the near future.”
This is the kind of project that PPC representatives
say highlights the company’s importance to Greece, boosting investment, jobs
and technological expertise.
“It’s the last producer on this scale that is left in
Greece,” said Kouridou, the mining director in the Kozani region. “We need to
keep that. If this stops, the whole area will lose out, but so will Greece.”