Greece

GREECE: Light Shed on PPC Deals

Helene Ryding — Thu, 08 Dec 2005 00:19:00 GMT

Government backs development minister in suggestions of corruption link

2005-12-06 17:29:14

The government yesterday shielded Development Minister Dimitris Sioufas from claims made by the former president of the Public Power Corporation (PPC) involving him in allegations of corruption at the electricity firm, one of Greece’s largest companies.

Yiannis Paleokrassas, who resigned from PPC last Thursday, provided the press yesterday with his side of the events that led to him stepping down from his post. He said that Sioufas had backed senior officials at PPC who made sure that projects were assigned to specific business interests without going through the required tender process.

“It is obvious we are talking here about the development minister,” Paleokrassas said. Paleokrassas also said that Prime Minister Costas Karamanlis had put pressure on him to resign due to the influence exerted by Sioufas. Karamanlis had offered Paleokrassas the job at PPC in the first place.

Government spokesman Theodoros Roussopoulos left no doubt that the development minister had the prime minister’s support. “(Sioufas’s) work ethic, efficiency and absolute dedication is known,” Roussopoulos said.

The resignation of Paleokrassas has led to much speculation about claims of corruption within the state-run organization, which has annual revenues of more than 4 billion euros. The ruling conservatives have made much of their efforts to clamp down on corruption, especially within the state sector since being elected last March.

Sources said that the incident had a negative impact on the government which could only look on nervously yesterday as Paleokrassas aired PPC’s dirty laundry. Senior government officials, including Finance Minister Giorgos Alogoskoufis, were reported to have consulted their lawyers over the weekend and were ready to launch legal proceeding in the event of them being named in the corruption scandal.

Paleokrassas, who has served as a finance minister under a previous conservative government, also said that some 143 managers in the company have been demoted by senior management for speaking up against PPC’s shady business deals.

Opposition parties have been labeling the issue a personal failure for the prime minister. “Mr Karamanlis has been informed, is a participant and responsible for these issues being discussed today,” said PASOK spokesman Nikos Athanassakis.

Source: Kathimerini

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Greece: Lavrion plant tender gets Greece in trouble

Helene Ryding — Thu, 08 Dec 2005 00:11:00 GMT

Kathimerini Greece 29 Nov 2005

ATHENS

The European Commission is taking Greece to the European Court for irregularities in the bidding process for the power unit at Lavrion. The case is also to be examined by Greek courts, following recourse to law by current Public Power Corporation (PPC) President Yiannis Paleokrassas.

The project for the 400-megawatt thermoelectric plant was allocated by the PPC governing board to METKA for 193,962,846 euros on November 25, 2003, a day after Brussels notified the government of the time that it would examine the tender process.

Having dismissed the explanations offered by Athens, the Commission is now calling on the court to recognize that "since PPC accepted in the final phase of the tender two bids from companies not fulfilling the criteria proclaimed, Greece has violated the principles of transparency and equal treatment of bidders."

Brussels argues that PPC accepted the financial bid of the AEGEK-Aktor consortium although the latter did not meet the conditions of experience according to the tender's proclamation, and awarded the project to METKA whose financial bid regarding the long-term maintenance of the plant's turbine did not adhere to the tender's conditions either.

Other bidders were Alstom and Va Tech Hydro, but PPC rejected their bids in the early stages of the tender process.

The Commission has rejected Greece's claims of the need for a speedy awarding of the project, suggesting that this necessity should not hamper the completion of the procedure according to the principles of transparency and equality.

PPC originally made plans for a power unit at Lavrion in July 2001. The project is now deemed vital as needs for electricity have increased and the Attica grid requires steady power flow. The installation license was approved by the then development minister Akis Tsochadzopoulos in January 2003 and PPC proclaimed the tender two months later.

http://info.ekathimerini.com/4dcgi/news/content.asp?aid=936536

Greece: PPC chief warns low tariffs may make it easy prey for prospective foreign giants

Helene Ryding — Thu, 08 Dec 2005 00:07:00 GMT

Kathimerini Greece | By Seraphim Constantinidis - Kathimerini 28 Nov 2005

ATHENS T

he Public Power Corporation (PPC), Greece's main electricity utility, is in danger of becoming a problematic enterprise due to overbearing government control and the influence of colluding interests of media and senior public officials, its president and former finance minister Yiannis Paleokrassas warned in an interview with Kathimerini.

The interview began with a flashback to 1978. "What do you think of the Greek economy?" was the question. "What Greek economy? We have a Greek-Soviet economy," was his answer. "The reason is statism and the French left-wing culture of all political sides."

Eleven years later, in 1989, he wrote: "No market operates in Greece. Oligopolies, the expression of immorality in the economy, hold sway... Greece is a vast graveyard of competition, where the Greek graverobbers of protectionism wander with the blessings of the country's political and intellectual leadership."

Sixteen years later, nothing much has changed, Paleokrassas says. "Ireland has left us way behind. Bulgaria, if we don't change mentality, will do the same in a short time, indeed, with Greek investments. The only exception is merchant shipping because it operates outside the country's borders."

"It is clear that we have a problem," he continued. "I call it a peculiar mafia system which divides Greeks into protectors and proteges. In this system, the mechanism is not of the market but of favoritism and political clientele. Everything is regulated and everyone has his price... Those without a price and daring to go against the current are executed in public, usually by the corrupt media."

At loggerheads Ever since assuming his present post, Paleokrassas has been at loggerheads with the rest of PPC's board and has been widely criticized in the media for initiating legal tussles which have been holding the corporation's development back.

"This is my case," he said. "The funny thing is that the sources of most publications against me are in the pay of public utilities. And, of course, it is not just the instruments, there are also senior political ministry officials who act as conductors, completing the orchestra... "The score which the orchestra is playing is PPC's 900-million-euro investment program and the 1.7 billion euros of its annual procurements.

National suppliers which dominate all public utilities (PPC is no exception) are annoyed by the requirements for transparency and the keeping of lawful procedures. "But the worst thing is that the system enjoys political protection. Everyone's slogan is: 'For God's sake, don't touch the system.'

It serves the management system that used to prevail and was based on the bribing of the many and the terrorizing of the few. The big loser was always PPC, its workers and, ultimately, the economy," Paleokrassas said.

PPC's nine-month results were disappointing. How do you explain them? It seems there has been a slowdown in the growth rate of electricity consumption, possibly related to some saturation in the household sector and a fall in industrial production. Despite this, the small drop in sales would not have had a significant impact on profitability, had we not had a 30 percent, or 160-million-euro, increase in the cost of fuels, and the purchase of carbon dioxide emission rights, at a cost of 69 million euros, which appeared in nine-month results for the first time.

Without these costs we would have shown a pretax profit of 461 million euros, 15 percent higher year on year. PPC is pushing for the adjustment of tariffs to the higher fuel prices, in line with international practice, and the recovery of the cost of the collection of fees on behalf of third parties.

We have also begun a review of the corporation's business plan, with emphasis on the reduction of operating expenses, particularly regarding expensive fuels, oil and natural gas.

PPC's managing director, Dimitris Maniatakis, referred in Parliament to the low tariff increases approved by the government. How do you comment?

Unfortunately, all governments do not understand or do not wish to understand where the policy of low tariffs leads. In Greece, we have the highest per capita consumption of electricity in all of Europe. We have household tariffs subsidized by commercial and, a bit, by industrial tariffs. The opposite is the case throughout Europe.

The result is that we heat our homes with electricity, which requires three times the fuel which an ordinary central heating boiler consumes. Moreover, the tariff structure has become especially problematic with market deregulation.

Today, power importing suppliers are creaming off our clientele, offering slightly lower rates than those set for PPC by the Development Ministry. PPC, on the other hand, is not allowed to offer the slightest discount.

As far as I understand, it seems that market deregulation will take place at PPC's cost. The problem of the inadequate deregulation laws, which were belatedly introduced in 1999 and again in 2003 despite the existence of an EU directive since 1992, is how to encourage private investment in power production.

The investment schemes stumble on the simple problem that banks do not wish to fund them at a low rate of return... And so the solution that has been adopted is for the indirect subsidization of private investment.

The tender which the industry's watchdog, the Electric Power Transmission System Operator (DESMHE), will issue for privately operated plants totaling a capacity of 900 megawatts aims at precisely that. DESMHE will seek to buy certificates of available capacity from the investors-to-be.

What will happen if these investors ask 100 million euros annually for the new certificates? Who will pay for them? We must take into account that big European power companies, such as ENEL, RWE and EON, are now paying huge sums and excessive prices to acquire capacity in the Balkans.

Why should Greece be an exception when it has the facility of the certificates? PPC is not allowed to take part in this tender and so, while we are in discussions with these European giants for partnerships outside Greece, we are excluded from Greece.

It is clear that DESMHE and the Regulatory Authority for Energy (RAE), which will express an opinion on the price of the certificates, must exercise the utmost caution not to cause irreparable damage to the country's energy infrastructure.

PPC is not afraid of competition, provided it is allowed to build its financial strength and participate in the game on equal terms. Nevertheless, PPC is a giant by Greek standards. Let me say that its dominant market position may be easily overturned. Let us not have illusions.

A financially weak PPC will be easy prey for any of the big European companies, or even domestic groups wishing to enter the market. Many would surely like to see it break up but I do not believe that this will come to pass.

I am more concerned by the fact that PPC is not allowed to recoup the higher fuel costs which other European power firms have done. It is not difficult for a public utility, indeed the country's biggest industrial concern, to become ailing and problematic. http://info.ekathimerini.com/4dcgi/news/content.asp?aid=936514

Greece: Power deregulation bill

Helene Ryding — Wed, 07 Dec 2005 23:46:00 GMT

Power deregulation bill Kathimerini Greece 9 Nov 2005

ATHENS

The government yesterday submitted to Parliament its long-awaited draft bill on the deregulation of the electric power market. "The bill provides a modern framework, attractive for large-scale investments in power production, with obvious benefits for employment and consumers," Development Minister Dimitris Sioufas said.

The document harmonizes Greek legislation with the requirements of EU Directive 2003/54 regarding a speeding up of the deregulation process, which had been pending for six years and for which the European Commission referred Greece to the European Court.

The new framework establishes freedom of selection of a power supplier for all consumers as of July 1, 2007; opens the way to the construction of new power plants and new grid lines by private producers and allows for the entry of new suppliers into the market.

It also deals with details regarding the separate management of transmission and distribution grids and their legal and operational separation. Under the new bill, the Electric Power Transmission System Operator (DESMHE) will assume distribution management in 2007 from the Public Power Corporation (PPC), currently the main utility, and will be independent of it.

DESMHE will guarantee the absorption of power by independent producers totaling 900 MW - which can be extended to 1,300 MW - to meet the country's energy needs up to 2010. Licenses will also be granted for private power producers on the islands not connected with the national grid, except those with very low consumption.

http://info.ekathimerini.com/4dcgi/news/content.asp?aid=936184

Gas pipeline will turn Greece into major gas transit hub

Helene Ryding — Wed, 07 Dec 2005 23:41:00 GMT

Gas pipeline will turn Greece into major gas transit hub Greek-Italian project to be completed by end-2009, carry 8 billion cubic meters Kathimerini Greece 4 Nov 2005 ATHENS Italy and Greece will sign today an agreement for the construction of a 300-million-euro pipeline that will carry natural gas from the Caspian Sea and Iran to Western Europe when it is completed, at the end of 2009. The 212-kilometer (130-mile) mostly underwater pipeline will be built by Poseidon, a company due to be set up by Greece's Public Gas Corporation (DEPA) and Italy's Edison, with each owning a 50 percent stake in Poseidon. The pipeline, running from the Greek port of Stavrolimenas, near the town of Igoumenitsa, in northwest Greece, to Otranto in southeast Italy, will have a diameter of 32 inches and a capacity of 8 billion cubic meters (282 billion cubic feet) of natural gas per year. Initially, however, it will only operate at about 25 percent capacity. In order for Caspian gas to reach Italy, two other projects must be completed: a pipeline from western Turkey to the Greek town of Komotini, and a 300-kilometer link connecting Greece's backbone gas pipeline network with Stavrolimenas. The latter is being built at DEPA's expense and will cost 600 million euros. The agreement for the Greece-Italy pipeline will be signed in the Italian town of Lecce by Development Minister Dimitris Sioufas and Italian Minister for Productive Activity Claudio Scajola. Turkey's Minister of Energy and Natural Resources Hilmi Guler will also attend the ceremony. The Greek delegation will also include Deputy Development Minister Giorgos Salagoudis, DEPA Chairman Raphael Moysis and high-ranking officials from the Development and Foreign Affairs ministries. The construction of these pipelines will turn Greece into a transit hub for natural gas to Western Europe. Initially, the natural gas will come from the Caspian Sea, via Azerbaijan and Turkey. Eventually, gas from Iran and Turkmenistan, and also from Siberia, via Russia and Turkey, will also run through the pipeline. The project is one of the European Union's five Trans-European Energy Networks, which are considered priority projects. Italian financial paper Il Sole 24 Ore wrote yesterday that the pipeline will be especially important as natural gas deposits in the North Sea are declining, adding that the World Bank has approved aid of 21 billion euros for the modernization of the gas transport network in Greece, Turkey and other Balkan countries. http://info.ekathimerini.com/4dcgi/news/content.asp?aid=936104 © 2005 Kathimerini

GREECE: Monitoring our public utilities

Helene Ryding — Wed, 07 Dec 2005 23:36:00 GMT

Editorial Kathimerini Greece 02 Nov2005

ATHENS

The mammoth deficits of public utilities, also known as DEKO, have long been a major source of the troubles besetting the economy - troubles that recently put Greece's economy under EU supervision. The problem is simply too acute to ignore.

The path toward economic reform must come about through a change in the current situation. Bad management is not just a question of the lack of political integrity. Of course that factor also comes into play but the problem is mainly a structural one.

It is no coincidence that over the previous decades, public corporations were notorious for poor management, corruption and entanglement with business interests. Certainly there were honest administrations that refrained from squandering public money on controversial contracts, but even these found it hard to resist political favors. As a result, they recruited excess staff. In addition, they easily yielded to union pressures for unreasonable pay hikes.

This sick mentality, coupled with the absence of free market criteria, transformed the public utilities into deficit creators. At the same time, their quality of services was substandard.

What is interesting about the government's initiative is that it attempts to get to the bone of the problem. Under the new legislative framework, any public utility will not be under the exclusive supervision of the responsible ministry. It will also be overseen by the National Economy Ministry which, at the end of the day, has the responsibility of covering DEKO deficits. This type of a joint supervision scheme will not concern DEKO operations - it will be limited to funding and management.

The above changes of course presuppose the adoption of international accounting standards and the principles of corporate governance. Public corporations will from now on be obliged to submit their business plans, on the basis of which they will be financed and monitored. The involvement of the Economy Ministry will make monitoring more effective.

At the same time, it will curtail the bad habit of ministers tolerating the management's poor administration while the management carries out the minister's political favors. If this change is often viewed as a shift in the in-government power balance, in truth it marks an important institutional change.

http://info.ekathimerini.com/4dcgi/news/content.asp?aid=936046

GREECE Trading emissions: PPC joins global fund to cut Kyoto Protocol compliance costs

Helene Ryding — Wed, 07 Dec 2005 23:31:00 GMT

Kathimerini Greece 27 Oct 2005

ATHENS

Public Power Corporation (PPC), Greece's state-controlled electricity company, has joined a privately managed emissions-trading scheme that will allow it to reduce compliance costs to Kyoto Protocol greenhouse gas emission targets.

New York-based Natsource LLC, a provider of asset management services, transaction services and advisory and research services in emissions and renewable energy markets, yesterday announced that it had closed - that is, fully formed, with binding commitments - its Greenhouse Gas Credit Aggregation Pool (GG-CAP) with total commitments of 455 million euros from 26 participants.

These participants are mostly electricity companies, from countries such as Ireland, Japan and Norway, but also oil and gas firms, a spirits manufacturer (Japan's Suntory) and Google founders Sergey Brin and Larry Page.

"The GG-CAP is a 'buyers pool' that will combine the purchasing power of the 26 participants to acquire and manage the delivery of a large volume of compliance instruments created by the project-based mechanisms included in the Kyoto Protocol. These instruments - formally known as Certified Emission Reductions (CERs), created by Clean Development Mechanism projects (CDM), and Emission Reduction Units (ERUs), created by Joint Implementation projects (JI)- can be used by participants to comply with emissions reduction requirements from 2005-2012 imposed by the European Union Emissions Trading Scheme and by nations such as Canada and Japan seeking to comply with their obligations under the Kyoto Protocol from 2008-2012.

According to Natsource estimates, these countries will be approximately 3.75 billion tons short of their Kyoto Protocol emissions-reduction obligations from 2008-2012, based on current emissions trends," Natsource explained in a statement. "NAMC (Natsource's Asset Management Subsidiary) will identify, evaluate, purchase, and manage delivery of reductions that buyers can use for compliance.

Through the GG-CAP, companies will benefit from pooling large-scale demand to secure cost-effective compliance. They will also gain from GG-CAP's ability to use active risk management techniques to guard against under-delivery of contracted volumes.

These techniques include diversification, reserve margins, risk management contracts and insurance products. They will facilitate the development of a highly valued portfolio of compliance instruments that participants can use as a component of their overall compliance strategies. Importantly, the use of these instruments for compliance is supplemental to the participants' domestic efforts to reduce their emissions," the statement added.

PPC joined the fund to reduce the compliance cost, which reached 45 million euros in the first half of 2005, by almost half. Cost savings will be used to replace old polluting energy-producing units with new ones, using mainly natural gas. PPC also proposed imposing a "pollution charge" on customers, but the government, which still sets electricity tariffs, rejected the proposal.

http://info.ekathimerini.com/4dcgi/news/content.asp?aid=935995

Balkans join EU energy code

Helene Ryding — Wed, 07 Dec 2005 23:18:00 GMT

Kathimerini Greece 25 October 2005

ATHENS

Eight Balkan countries will join forces with the European Union today to establish a single regulatory framework for transporting energy in Southeastern Europe, in a bid to advance the region's position on the world power map.

A treaty will be signed by British Trade and Industry Minister Alan Johnson on behalf of the EU and by ministers from Albania, Bosnia, Bulgaria, Croatia, the Former Yugoslav Republic of Macedonia (FYROM), Romania, Serbia and Montenegro and Turkey.

It will help ensure that countries in the region adopt EU single market regulations on energy regarding petrol, natural gas and electricity markets.

Development Minister Dimitris Sioufas described the treaty yesterday as an historic agreement that will help unify the energy sectors.

"The signing of this treaty creates new conditions for the economy, peace, stability and security in the wider region," Sioufas said.

The treaty also aims at creating a stable regulatory environment that will boost energy investment in the region.

The World Bank has estimated that 21 billion euros will be poured into energy investments in the region because of the pact. The unification process has also drawn the interest of countries that are not directly part of it.

According to the Development Ministry, the United States and Canada have also given financial support to the treaty. Greece has played a central role in the issue as the country pushes ahead with plans to develop its link with different energy grids.

Apart from agreeing to run a natural gas pipeline from Turkey to Greece, which will then go on to Italy, the government has also signed a deal for a pipeline to carry Russian oil through Bulgaria to northern Greece.

Greece: Utilities in line for shake-up

Helene Ryding — Wed, 07 Dec 2005 23:15:00 GMT

Kathimerini Greece 22 Oct 2005

ATHENS

A new law designed to reform the way state-controlled utilities are run is set to be approved by the government this week, with its main focus on tackling what Economy and Finance Minister Giorgos Alogoskoufis told Sunday's Kathimerini was the "undoubted" waste within the organizations.

The Inner Cabinet is due to meet tomorrow to give the green light to a draft law which will seek, among other things, to set up a cross-ministerial committee which will approve the business plan of each utility, especially their budgets.

Improving the administration of enterprises such as the Public Power Corporation (PPC), Hellenic Railways Organization (OSE) and Olympic Airlines has been declared as one of the ruling conservatives' main economic policy goals. In his annual economic speech at the Thessaloniki International Fair last month, Prime Minister Costas Karamanlis made a point of highlighting his government's determination to reform the utilities, beginning with an end to jobs for life.

The financial problems for many of the state-controlled utilities seem to be mounting as their total outstanding debts have risen from some 9.3 million euros to 11.7 million euros over the last two years. OSE's revenues, meanwhile, only cover a fifth of the organization's costs.

The government thinks these developments are due to poor financial management within the utilities. "There is undoubtedly waste in the utilities, which can be provocative as it is linked to benefits and high wages," Alogoskoufis told Sunday's Kathimerini. "There is still mismanagement, which has been aided by the lack of state inspections."

Under the new bill, utilities will be required to comply with international accounting standards and produce financial statements every three months so the government can keep an eye on how public money is spent. "Is it just by chance that many utilities do not publish their accounts?" Alogoskoufis said. "Theft and waste can hide in this darkness."

Greece: Way open for major private investment in the energy sector

Helene Ryding — Wed, 07 Dec 2005 22:21:00 GMT

Kathimerini Greece | Chryssa Liaggou - Kathimerini 06 Oct 2005

ATHENS

The Development Ministry is expecting energy sector investments amounting to 3.5 billion euros in the next few years.

The two new bills for the liberalization of the electricity and natural gas markets, approved by the government on Tuesday, will pave the way for those investments, Minister Dimitris Sioufas said yesterday. "The time of private initiative has come," said Sioufas, expressing his optimism about investments in electricity production for the creation of new units.

Asked about the industrial action planned from next week by the Public Power Corporation (PPC) staff union GENOP, the minister explained that changes can still be made to the draft laws and that he is open to further negotiations with all parties concerned up to the passing "of the last clause in Parliament," as he said. He also noted the already long discussion of the bill after a GENOP request, during which there was an agreement on main issues.

He then called on GENOP to show "some seriousness and responsibility as well as respect to citizens," which, he conceded, are qualities the union does possess. GENOP's main cause of concern, triggering a 24-hour strike on Monday with more to come, is the bill's provisions for the separation of the distribution arm of PPC. The union has demanded that the new company be set up as a 100 percent PPC subsidiary. Sioufas, however, gave an indirect answer to GENOP, saying the draft regulations are required by EU law, emphasizing the delay in the country's harmonization with the EU directives regarding the electricity and natural gas markets' liberalization, which, he announced, provoked the country's referral to the European Court last Tuesday.

The terms for the new power unit tenders are already under preparation for the process to be completed by May 2006. This means the first production unit will join the network by end-2008.

The minister did not make it clear whether the tenders will include the Hellenic Petroleum unit in Thessaloniki besides the two 450-megawatt units to be allocated to private investors. He did specify though that PPC cannot participate in the tender for the two units, as the law passed by the previous government dictates.

Bidders can only be licensed private parties and those who secure a license by the beginning of the process, expected at the end of the year. He further announced that the two market liberalization bills, as well as those for the introduction of biofuels and the establishment of the National Energy Strategy Council, will be tabled in Parliament next week.