Some of Greece's largest companies are getting ready to bid for a majority stake gas company DEPA's commercial operations in a deal that may give them not only the edge in the energy sector but also in the broader economy.
The Hellenic Republic Asset Development Fund (HRADF) launched the sale procedure for a 65 percent stake on the company on Thursday. Gathering around DEPA Commercial are companies such as Mytilineos and Hellenic Petroleum (ELPE), possibly in cooperation with Italy's Edison, Motor Oil, GEK Terna, and the Copelouzos group.
Whichever company clinches the deal will strengthen its position not only in the energy sector but also in the business landscape as the timing of the sale could not be better. The strategic decision to shut down Greece's coal plants creates a void in the market that needs to be covered by natural gas, the energy source that will feature in the global market for decades to come.
According to the tender offer published by HRADF, interested investors have until March 6 to submit a non-binding offer. The big battle of DEPA Commercial, however, will take place somewhere around August or September, after the bidders have completed due diligence on DEPA in a procedure seen taking 3-4 months. Interest in the deal will initially focus on the companies that team up together in a bid to buy the state asset and the 35 percent stake held by ELPE.
There are many reasons why DEPA Commercial is considered to be a prized asset. Investors are drawn to the company by its portfolio, its subsidiary in the retail market, Natural Gas Attiki. With customers of close to 400,000 households and 10,000 businesses, Natural Gas Attiki offers an advantage, giving its owner a leading position in the market. Natural gas will play a crucial role in meeting the country's power needs, helping Greece's transition from coal to renewable energy.
DEPA's wholesale unit is also an attractive asset. Its market share may have fallen to 40 percent due to tough competition but this remains a significant position in the sector. It can also serve as a launching pad to expand into the Balkans and southeastern Europe, markets with strong growth prospects.
Another DEPA asset drawing investors is its long term supply contracts with international companies, which have been recently renegotiated by DEPA as they were considered to have been expensive and non-competitive in comparison with the cheaper LNG that is priced today at up to 50 percent less than natural gas transported via pipelines.
These contracts are with Russia's Gazprom, Azerbaijan's Socar, Algeria's Sonatrach and Turkey's Botas. They are tied to DEPA consuming a minimum amount of gas per year. In the case of the contract with Gazprom, a "take-or-pay" clause has been included in the agreement, but this has been renegotiated in favor of DEPA, according to officials at the Greek gas company. However, no matter how much a contract is renegotiated, it is difficult for the price of natural gas being pumped through a pipeline to compete with LNG.
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