ATHENS (Reuters) - Greek energy companies are seeking emergency bank loans to pay suppliers and avert widespread power and gas cuts during the vital tourist season, industry sources told Reuters on Friday.
A vicious cycle of shrinking power demand, bad debts and flawed regulation has created a 350 million euro hole in the finances of Greece’s energy system, which depends heavily on imported electricity and gas.
The looming energy crisis is compounding the country’s debt problems before a general election on June 17 that may decide its future in the euro zone. It also threatens to cause blackouts during the power-hungry summer holiday season, one of the few foreign exchange earners for the uncompetitive Greek economy.
Faced with disruptions, Greek power authorities and energy companies are about to seek the emergency bank loans until more permanent measures are taken later to fix structural flaws in the creaking system.
State-owned gas provider DEPA is talking to domestic banks to secure the cash it needs to pay for about 120 million euros of imports later this month, a company official said on Friday.
Greece imports all its natural gas from abroad. About 80 percent comes via pipeline from Russia. According to industry sources, DEPA faces a June 22 deadline to settle obligations to Russian gas giant Gazprom (GAZP.MM).
The loan that is being arranged with a string of Greek private and public-sector banks would help to keep the gas flowing for several weeks, a DEPA official told Reuters.
“DEPA is in negotiations with a consortium of Greek banks for a loan that will allow it to service its obligations for at least a month, until early July,” said the official, who asked not to be named.
Energy regulator RAE said on June 1 it would call an emergency meeting with industry players this week to resolve the impasse. The talks will probably be postponed until next week after a DEPA board meeting scheduled for Monday, a RAE official told Reuters.
At the heart of the energy system’s cash crunch is a 350 million euro hole in the accounts of power grid operator LAGHE, out of which the privately-run utilities are reimbursed.
LAGHE has run up the deficit because its revenues have not matched the big subsidies it pays to renewable energy producers, as part of Greece’s efforts to become Europe’s solar powerhouse.
The deficit has deteriorated in recent months due to Greece’s debt crisis. Two private electricity retailers went bankrupt without honouring their obligations to LAGHE. Unpaid electricity invoices have also soared after many consumers refused to pay an unpopular property tax charged on the bills of state-run electricity company PPC (DEHr.AT).
LAGHE has now taken preliminary steps to apply for an emergency loan from the Loans and Consignment Fund, a small public sector lender. “LAGHE has sought information on how the loan would work but it has not yet made a formal application,” an official involved in the talks told Reuters. “The Loan and Consignments Fund is inclined to give the loan, if it receives an official request,” the official added.
PPC, Greece’s biggest power company, is also in talks with banks to roll over debt falling due by the end of this month.
State-controlled PPC covers about 70 percent of Greece’s power demand, most by burning its own coal and hydro power supplies, and has a retail market share of almost 100 percent.
But despite its towering position in the electricity system, the crisis has struck hard. Cash reserves have shrunk to about 230 million euros, falling short of the 525 million euros it needs to roll over bank loans due this month.
With unemployment at record levels, 300,000 customers have applied for special lower tariffs. Electricity theft and looting of copper wire has rocketed, often leading to deaths as people clamber up electricity poles to tap power lines.
Standard & Poor’s lowered on Thursday PPC’s credit rating to ‘CC’ from ‘CCC’. “We believe the company has exhausted its liquidity sources and that its ability to honour its large financial obligations in 2012 mostly depends on external factors in the currently highly uncertain environment in Greece,” the ratings agency said.
In an interview with Reuters last week, PPC’s Chief Executive Officer Arthouros Zervos said he was confident the banks would agree to roll over the loans.
Greek lenders, which depend entirely on European Central Bank funding, obtained 18 billion euros in emergency liquidity in May as part of the country’s international bailout.
“No Greek bank would have an interest in pulling the plug from under our feet,” Zervos said.
LAGHE’s bank loan plans will not work without approval or tacit consent from the European Commission, the International Monetary Fund and the European Central Bank - collectively known as the “troika” which bankrolls Greece.
Greece’s lenders have so far objected to approving any such move over fears that it might constitute illegal state aid and remove incentives to fix the country’s flawed energy system.
The EU has long been pushing Greece to liberalise its low, regulated retail power prices and open its coal and water power deposits to private electricity producers. Energy players outside PPC are restricted to natural gas and renewables.
But one official said he expected the troika to soften its stance. “In the end, they’ll turn a blind eye,” this is an emergency, he said.
Reporting by Harry Papachristou; Editing by Greg Mahlich and David Stamp