Talks regarding the sale of DESFA to SOCAR collapse

1 December 2016
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The Ministry of Environment and Energy officially announced that the talks with Azerbaijan’s energy giant SOCAR for the sale of national gas transmission system operator (DESFA) have collapsed

“In the last months, the government has been in ongoing talks with representatives of the companies SOCAR and Snam for the sale of 66% of DESFA. The atmosphere in the talks was constructive. Nevertheless, the offer submitted on the part of the prospective buyers regarding the reduction of the sale price (repayment in installments) was legally impossible and would have invalidated the tender” a Ministry announcement said.

Sources suggest that the Greek government will decide the next steps collectively in the coming week.This leaves open the possibility of a new privatization tender, since several European companies had shown strong interest in DESFA during the previous tender process.

The completion of the previous tender stumbled on objections raised by the European Commission’s competition directorate, which said that SOCAR’s stake in DESFA should be under 50%, rather than the 66% package of shares originally on offer. This demand was met by the Greek side, however SOCAR then demanded to pay less than the 400 million euros it initially offered, due to the reduction in the operator’s revenue.

The Ministry’s announcement further noted that alternative proposals suggested by the prospective buyers to improving the value of the offer through guarantee mechanisms were examined, but also proved impossible to implement under Community law. “The government’s proposals sought to improve the financial position of the company, on the basis of increasing the recoverable difference of past years in the framework of existing legislation. These proposals were not accepted, with the result that the talks were concluded” it stated.

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