June 10, 2013 / 11:36 AM / 6 years ago

UPDATE 2-Greek gas firm privatisation fails in setback to bailout

* Greece fails to attract any bids for natural gas firm DEPA

* Gets only one bid for gas grid operator DESFA

* Athens unlikely to meet bailout privatisation targets

By Harry Papachristou and Lefteris Papadimas

ATHENS, June 10 (Reuters) - Greece failed to attract any buyers for its natural gas company DEPA by Monday’s deadline for binding bids, in a major setback to the country’s ambitious privatisation program.

The failed sale overshadowed upbeat data showing Greece was on track to meet budget targets, just as inspectors from the European Union and the International Monetary Fund returned to Athens to monitor progress under the country’s latest bailout.

Failure to find a buyer for DEPA - which Athens hoped could fetch as much as 900 million euros ($1.2 billion) - leaves the country unlikely to meet privatisation goals this year, forcing the government to seek other savings to hit its bailout targets.

It also threatens to undermine improved economic sentiment in Greece that has prompted the government to declare an economic recovery has taken root. Investors took fright, sending Greece’s benchmark stock index down 5 percent.

“The DEPA sale surprisingly failed and that’s very bad for investor sentiment at a point when Athens looked like it was meeting its targets,” said Takis Zamanis, an Athens-based trader at Beta Securities.

Greece said it would relaunch the tender at a future date and the setback would have no impact on its bailout deal.

The sale floundered after Russia’s Gazprom, the frontrunner to buy DEPA, withdrew at the final stage of the sale before a deadline to submit binding bids expired at 1000 GMT.

Gazprom said it was worried about DEPA’s financial position, but Greece said the Russian firm may have been discouraged by fears that the EU would impose stringent conditions.

“We haven’t received enough guarantees that DEPA’s finance position would not get worse after the deal is completed,” said Gazprom spokesman Sergei Kupriyanov. “The company is already experiencing difficulties with users’ unpaid bills.”

Athens, which has a binding goal to raise 1.8 billion euros from asset sales by the end of September, got just one bid - from Azerbaijan’s SOCAR - for natural gas grid operator DESFA, a DEPA unit that it wanted to sell separately.

Greece said it would press ahead with the sale of DESFA despite the DEPA failure and may reconsider the timing for the privatisation later this year of state oil refiner Hellenic Petroleum, which owns 35 percent of DEPA.

GAME OF GEOPOLITICS

Earlier, Athens said it more than halved its central government primary budget deficit in the first five months of the year, keeping it on track to hit this year’s budget targets.

Data also showed the recession pushing consumer prices down for a third straight month in May, in a sign that an internal devaluation is making the economy more competitive. Still, industrial output fell by 1.8 percent in April.

Greece is in its sixth year of recession and unemployment is nearly 27 percent. Athens had hoped reviving the asset sales would help kickstart the economy. It completed its first major privatisation only last month, selling its stake in betting firm OPAP to a Greek-Czech investment fund.

Still, the DEPA failure came as a surprise to most: Greece had tried hard to woo Gazprom. Athens had offered assurances that DEPA’s austerity-hit customers would settle part of their arrears, and that Gazprom would not have to deposit part of the purchase price as a guarantee pending European Union approval.

But Greece’s direct talks with Gazprom and SOCAR may have angered their smaller rivals.

The only other suitor for DEPA, Greece’s M&M Gas, a joint venture between Greek energy firms Mytilieos and Motor Oil, also withdrew from the race, and two smaller bidders for DESFA, Russia’s Sintez and Greek-Czech group PPF/Terna, made no offers.

“The sale process degenerated into a game of geopolitics: it was handled in a very amateurish way,” a Greek energy executive said on condition of anonymity.

Another local energy industry source said Gazprom pulling out was good news because it would prevent the Russian energy giant from monopolising the local natural gas market. “We would just replace a state monopoly with a private one,” he said.

Greek energy companies say Gazprom was already selling natural gas to Greece at prices about 30 percent higher than in other European countries.

Gazprom, which had offered about 900 million euros for DEPA in a preliminary bid last year, supplies about two thirds of DEPA’s natural gas. This had raised concerns that the European Union would thwart or impose stern conditions on the deal.

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