Greek DEPA Privatization Highlights Gazprom’s Role
The ongoing privatization process for the Greek natural gas company DEPA seems to be concentrated on Gazprom's role in it and more specifically on the premium this company is willing to commit in order to become the bidder.
According to a variety of reports from Athens, Gazprom is willing to invest a considerable premium for the company, up to 50% of its book value that is estimated at around 1.5 billion Euros, or 2 billion Euros if its subsidiary DESFA is included, which is the network manager of the domestic pipeline network. Already a board member of the Greek agency for privatizations (TAIPED), relayed to the local press, that "Who gives the most will certainly acquire the company, but he should also have the best business plan as well".
On the other hand, the possibility that Gazprom’s entrance into the Greek market, may contradict with the overall competition policy of the EU, has prompted TAIPED of postponing its ongoing selection for the binding offers for around 15 days, thus opening the ground for another round of behind the scenes talks between all stakeholders. Moreover it is of great interest that the three main contesters, Gazprom, Negusneft and SOCAR are three non-EU corporations, a fact that obliged TAPIED to require some extra information by them regarding regulatory affairs and their compliance with EU directives on natural gas sector.
Furthermore, Gazprom made another surprising move, by leaving space open for an eventual direction of South Stream through Greece to Southern Italy, a contradiction to its previous statement that this route is not commercially viable. According to the IENE energy institute in Greece, this is another tactical play by the company in order to boost its chances of acquiring DEPA and use South Stream as an added value asset during the privatization process.
In the meantime, the selection of the companies to submit binding offers should be concluded by the end of the first week of December. Afterwards the companies selected will be able to acquire analytic data regarding DEPA and they will have around 4 weeks to submit their final and binding offer. It is estimated by TAIPED that a final selection and signing of the agreement with the winner should be completed late January 2013.
That further correlates with Gazprom's advance into the Greek natural gas market, since in early January the visit of Sergei Lavrov the Russian foreign Minister is due on Athens, whilst preparations for a visit to Moscow of Antonis Samaras, the Greek Premier, have been announced for late January next year.
The EU authorities seem to keep a neutral perspective on the whole issue for a variety of reasons. One is the pressure being exercised by the EU for Greece to raise as much capital as possible from privatizations in order to reduce its debt, a stance that favors Gazprom's bid. In particular Germany, being the strongest voice in Brussels, wants Greece to have concluded all energy privatizations by January the latest, so as to be able to present to its own electorate, a relative success of the Greek stabilization program. The DG of Energy of the EU Commission, though seems to take a more defensive stance against Gazprom's entrance into Greece, and it has already submitted an official correspondence to the Greek government on April 2012, citing that "Offers for DEPA should be reviewed not only on a capital basis, but also in regards to the country's long-term energy policy". Makis Papageorgiou, the Greek alternate Minister and man in charge for the natural gas sector in the country, that has excellent relations with both his American and Russian counterparts, recently stated publicly that "Quality criteria should be met for DEPA's privatization process and more specifically the future energy strategy of the country".
Overall, several scenarios could unfold. One is that Gazprom wins the competition by simply offering a generous deal and scrapping its South Stream route to Greece, in order to avail any anti-competition arguments by the EU, or the privatization will be postponed even further until numerous antithetical forces, synthesize their business interests. In that respect, Azeri SOCAR could play a leading role by either engaging with Greek bidders such as the M & M Company or in another scenario, it may even form a peculiar but quite astonishing joint venture with Gazprom, that would solidify both the South Stream and Southern Corridor pipeline routes, at expense of the Nabucco West project. In any case, a series of developments should be expected, centered on DEPA's privatization trial.