DEPA: Gazprom Emerges as Likely Winner

As the privatization of Greece’s DEPA comes to a close, it appears Gazprom’s bid may be most successful, particularly after Alexei Miller made his third visit in less than two months for high-level negotiations with local political leaders.

The process is set to end on June 10th with the opening of binding bids, and subsequently a Sale and Purchase Agreement (SPA), which contains several terms that Gazprom has worked in its favor. Most importantly for Athens to agree that should it abandon the Euro currency, the deal would be cancelled.

Secondly, debts of private electricity producers owed to DEPA, amounting to approximately €500 million, are scheduled for full payment by the end of 2014 and under the direct supervision of the Greek government.

Thirdly, Gazprom will pay an initial guarantee of 10 percent of the total amount it pays for the privatization. In the event the deal is cancelled through no fault of the Russian company, the guarantee will be returned in full. It is generally assumed that this is a result of Gazprom’s anxieties about the European Commission's Directorate-General for Competition obstructing this ageement at a later time.   

EU bodies will convene only after the deal is signed and will likely have made their decision by late summer 2013. Moreover, Gazprom agreed to play a substantial role in assisting Greek authorities with any data submitted to EU authorities regarding the privatization and its role in it.

It is also of interest to note that Gazprom linked, though not in writing, the takeover of DEPA with substantial gas price reductions for the Greek market and the construction of a South Stream arm in Greece to be used for transferring gas for an international LNG terminal to be made by its own investment budget.

All in all Gazprom is said to be offering around €950 million for DEPA, while its rival Greek consortium M&M no more than €400 million, which has been sidelined.

With regards to DESFA, which manages the gas network, the two main contesters are Russian Sintez, which made known it will not pursue its bid for DEPA and the Azeri SOCAR. Sintez initially offered €1.9 billion for both Greek gas companies, while SOCAR around €450 million for DESFA only.

Local press states that based on governmental sources, the Azeris are going to increase their bid and also link their offer with the construction of the Trans-Adriatic Pipeline (TAP), which contests with Nabucco West for the Southern Corridor route which is going to be decided around the same period that the Greek privatization will be concluded.

Natural Gas Europe has since 2012 estimated these would both coincide, since they are interlinked with the wider energy game being played in southeast Europe. The Greek government fully supports TAP’s route and Greek Premier Samaras paid a recent visit to Baku in order to lobby personally for its success.

Under these conditions it can be safely assumed that SOCAR has a chance to win the bid for DESFA, though the process may not be as smooth as Gazprom’s big towards DEPA.  Since Sintez also has proposed considerable network investments of up to €5 billion in the coming years, while the Azeri company's ‘strong card’ is the selection, or not, of TAP, the only pipeline scheduled to pass from Greek territory onwards to the EU markets.