Russian companies did not apply for DEPA and DESFA

The Russian Gazprom and Sintez, after several months of tense negotiations, unexpectedly refused to participate in the privatization of Greek gas assets. As a result, DEPA, which was claimed by Gazprom, will be put up for a new competition, and DESFA will go to the Azerbaijani SOCAR. Gazprom explained its decision not to apply for participation in the DEPA privatization by “the lack of guarantees that the company’s financial condition will not deteriorate by the time the transaction is completed,” and the Sintez group chose to remain silent.

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Photo: Kommersant / Sergey Mikheev / buy photo

Photo: Reuters / REUTERS/Gleb Garanich

Yesterday a competition was held to purchase the Greek gas trader DEPA and the operator of the Greek gas transmission system DESFA. The applicant companies, which included Gazprom, Sintez, the Azerbaijani state-owned SOCAR, as well as the Greek M&M Gas and GEK Terna, had to submit binding proposals to the privatization agency by 14:00 Moscow time. But, according to Greek Deputy Energy Minister Makis Papageorgiou, not a single application was submitted to DEPA. In this regard, the competition will be held again. Sintez, according to Mr. Papageorgiou, announced that it would not participate in the DESFA competition yesterday morning. As a result, the only application for DESFA came from SOCAR, sources familiar with the results of the competition told Kommersant.

Gazprom representative Sergei Kupriyanov confirmed that the monopoly refused to participate in the purchase of DEPA. According to him, “the company is already experiencing serious problems with non-payments from consumers, it faces restructuring to separate the DESFA division, and tender participants are not provided with guarantees that the DEPA state regulation regime will not worsen. All this creates significant risks that affect the value of the company, and the transaction price is proposed to be fixed already now, without taking these factors into account,” he says. Mr. Kupriyanov noted that all procedures for agreeing and completing the purchase after summing up the results of the tender could take about a year. At the same time, Kommersant's sources note that after the sale of DEPA to Gazprom, Greece expected to receive a discount on gas (last year about $475 per thousand cubic meters), but the parties did not agree on this issue. According to unofficial data, Gazprom offered about $1 billion for DEPA. The Sintez group did not comment on the situation.

A Kommersant source familiar with the situation notes that SOCAR was deciding until the last day whether to submit an application for DESFA. Mainly due to the fact that the company is involved in the Trans Adriatic Pipeline (TAP) project, which should pass through Azerbaijan, Georgia, Turkey, Greece and Albania to Italy. But it competes for a resource base (Azerbaijan's Shah Deniz field) with the Nabucco West project, which is planned to be built from the Turkish-Bulgarian border to the Austrian Baumgarten. A decision on which pipeline will transport gas from Shah Deniz should be made in the coming months. At the same time, Kommersant’s interlocutor says, if preference is given to Nabucco West, then the Greek networks will not be needed by SOCAR. The company could not be reached for comment yesterday.

DEPA's main activity is the wholesale sale of gas, the main supplier of which is Gazprom (the contract is valid until 2016). Greece also purchases gas from Turkey and LNG from Algeria. The share of Russian gas in Greece’s consumption structure is 60-65%. Greece consumes about 4.5 billion cubic meters of gas annually. DEPA, through its subsidiary DESFA, owns a network of gas pipelines and regasification terminals. DEPA also has a 51% stake in gas retail and gas supply companies in Greece. According to the results of 2012, the company's net profit fell by 30%, to €133.6 million, while sales increased by 10%.

The privatization of DEPA and DESFA dragged on for several months. Initially, privatization was planned to take place in March, then the deadline was shifted first to April 12, and then to May 29. But on the eve of the next date, the privatization agency again postponed the auction to June 10. During this time, the applicant companies managed to achieve significant concessions from the Greek government. One of the main ones is a halving (up to 10% of the transaction) of the amount of the deposit that had to be made before regulatory approval of the purchase. As well as payment of debts from DEPA customers (about €180 million), if the buyer cannot receive them on their own before 2015.

Vitaly Kryukov from IFD Kapital notes that if SOCAR bought Greek networks, the company is confident that TAP will be chosen to transport Azerbaijani gas. Otherwise, he says, the company, in addition to selling, still has the option of negotiating swap transactions with other suppliers. According to the analyst, Azerbaijani and American companies may become new contenders for DEPA after the re-tender is announced. At the same time, he doubts that the competition will be of interest to European companies, and Gazprom’s participation may be hindered by political reasons and pressure on the Greek authorities from the EU and the United States.

Olga Mordyushenko

Gazprom and Sintez abandoned Greece