Greece has launched the privatization process for gas company DEPA by announcing the start of the tender at an investor conference in New York amidst strong interest for the sale.
In addition to its symbolism, the decision by Finance Minister Christos Staikouras and Deputy Energy Minister Gerasimos Thomas to get the ball rolling on the sale of DEPA Infrastructure in New York reflects the strong interest likely to be expressed from US funds that have been eyeing Greece's domestic natural gas market.
In the current phase, the tone will be set by talks on DEPA Infrastructure, that will feature a 400 million euro investment plan for the next five years, in a sale that is seen as attracting only foreign players in the business of network management. Battle lines will then be drawn on the sale of DEPA Commercial at the start of next year in a sale that has drawn strong interest from mostly large Greek players.
The privatization of DEPA Infrastructure is based on the model adopted with the sale of DESFA, meaning that the government will sell its 65 percent holding of the company, along with the 35 percent owned by Hellenic Petroleum (ELPE).
European interest
Interest is coming from European investors including large companies that control natural gas networks and investment funds, that buy into the sector. The funds are likely to bid for the sale, in partnership with a Greek construction group. Germany companies such as EON, Italy's Italgas and the Italian-Belgian-Spanish joint venture SENFLIUGA, that controls DESFA, have up until now expressed their interest, either formally or informally, in DEPA.
They view DEPA as a solid investment in a low-interest-rate environment with a secured rate of return and low risk as to the capital needed for new networks and upgrading old ones, which will be acquired via the charges set out by energy regulator RAE.
SENFLUGA probably has one more reason to bid for DEPA Infrastructure: the acquisition of high and low-pressure networks allows it to build the foundations to create more deals in the Greek energy market from the best possible position.
The next step for the transition of the natural gas market is the privatization of DEPA Commercial, in a deal seen changing the country's business landscape. The tender is likely to be launched in January.
Mytilineos and ELPE have publicly confirmed their interest while others expected to bid include TERNA, Motor Oil, the Copelouzos group, Zenith, and Edison. If Mytilineos, a leader in the market with a share of 35 percent, is interested in DEPA Commercial, competition issues may arise.
"DEPA interests us, but to acquire it, we must first accept that we will drop clients and reduce our market share to acceptable levels for the Competition Committee," said chairman Evangelos Mytilineos, adding that his company will decide on whether to participate or not, after the terms of the privatization have been made public.
The biggest asset of DEPA Commercial is EPA Attikis, which has a client base of 400,000 households and more than 9,000 businesses as it continually expands its network across the broader Athens area.
In the wholesale business, DEPA's market share may have shrunk to 40 percent but its technical know-how, export potential in the Balkans and the importance of natural gas as a substitute to coal, mean that the winner of the tender will acquire a significant advantage against other players.
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