DEPA's Privatization Attracts Interest for Pipeline Plans

The DEPA privatization process by the Greek government reached an most important phase, with receipt of final offers by international energy companies including Gazprom and SOCAR interesting in buying a controlling stake in Greece's natural gas company.

Out of original 14 candidates, four expressed their interest pointing out that the main attraction is the wider geo-economic environment of Southeastern European, where multiple pipeline projects for the transfer of natural gas to Europe, are to be established.

Another aspect is the exclusion of EU companies, which according to sources from the Greek Ministry of Energy, is mainly attributed to the "political and business risk" the country experiences, since an exit from the Euro currency cannot be excluded, as recent Citibank and Bloomberg analyses have pointed out.

Furthermore, regarding the lack of the Italian's ENI proposition for DEPA, it is likely that it is connected with a change of its tactics regarding investments in the Balkans and more specifically in its reliance in assisting Gazprom to push the South Stream plan. In that sense, instead of ENI to invest itself critical capital at a difficult stage for the Italian economy, it waits to view if Gazprom's plans are successful, and then ENI as a shareholder of South Stream will benefit for the long-term. Otherwise, it does not risk a loss in terms of a potential investment in DEPA. 

Thus, the main contesters that remain are inexorably related to the gas pipeline plans at hand.

First it is Gazprom Finance.  Gazprom is obviously trying to forward its South Stream project in Greece, in order to be used as a gateway for transfer to Italy and perhaps as an LNG hub, due to Greece's already formed terminal infrastructure and multiple Sea port facilities for future investments. Alternate Minister of Foreign Affairs of Russia, Vladimir Titov, paid a visit last week in Athens in order to prepare the visit of his Minister Lavrov in Greece in early 2013. Amongst the agenda which was dominated by oil and gas projects,  was the possibility of Gazprom, should it succeed into acquiring DEPA, of developing Greece's LNG facilities.

Another bidder is Russia's Negusneft. Unlike Gazprom, Negusneft is not seen as an important player by local pundits that expect that it may join Gazprom in a later stage of the privatization competition.

Another leading candidate is Azerbaijan's SOCAR, which seeks to secure the Greek territory for its wider "Southern Corridor" strategy.  Since Greece has already backed the Trans-Adriatic Pipeline, SOCAR bets for a long-term continuation of energy relations with Greece, also as a gateway to Italy and the EU markets. Moreover as TAP plans have showed Greece is seen as an ideal terrain for the supply of gas to the Western Balkans and in particular Albania, Montenegro and through there to Bosnia and Croatia.

The last competitor is the Greek natural gas consortium M & M Gas, which is equally owned by two of the country's most influential business groups, the Vardinoyannis and the Mytilineos families. The former owns the Motor Oil refinery in the country, the AVIN oil petrol stations chain, a media group and controls the country's third biggest bank along with numerous other strong positions in tourism and real estate interests. The latter owns a major metallurgical company METKA, specialized in the construction of electricity stations, as well as a holding company operating in electricity, aluminum and vehicles trade and industry. It can safely estimate that this particular consortium will pay a decisive role on who wins the competition.

Vardinoyannis enjoys excellent relations with the Presidency of Azerbaijan and SOCAR as well, whilst it has also opened channels of communication with all major energy players in Moscow over the years. Mytilineos has already joint business activities with Italian companies and a wide range of business interests in other Balkan countries. Due to their domestic clout they enjoy in Greece, should they proceed with an alliance with either Gazprom or SOCAR, they would significantly influence the outcome.

Gazprom for the time being is seeing as the heavyweight in the competition since it has skillfully relayed it is prepared to pay a considerable premium for acquiring DEPA and it has already promised a whole range of secondary business advantages to the Greek side. The completion of South Stream's preparatory phase with Bulgaria, Serbia, Hungary and Slovenia's agreement is also another added value point on its side, regarding its negotiation influence over the Greek side.

On the other hand, the recent clash of Gazprom with the EU’s Competition Directorate, along with a mostly negative stance by American diplomacy towards the company are considered as obstacles. SOCAR on the other hand bets on its Shah Deniz gas field that aims to fulfill Greece's gas needs as well, and on the wider diversification policy of the EU.   In reality, SOCAR"s  advantages are the negative points of its main competitors Gazprom.

The Greek state agency TAIPED,  which is responsible for the competition, will convene in the coming weeks to decide which companies are to be selected for the last round of the process before they are able to submit binding offers. In the meantime it is very probable that alliances amongst the four may be at hand, that would further clarify the likely winners.