First Real Greek Bailout: Electricity
While Greece has had its fair-share of EURs funneled to it and through it over the course of the last year or two, it appears they have now created their first 'internal' bailout as things go from bad to worse. As Athens News reports, Greece will provide EUR250mm in emergency funds to its ailing electricity providers to prevent a California-style energy crisis. This liquidity injection to the country's power utlities was yet another unintended consequence of government intervention action. An increasing number of consumers stopped paying their electricity bills following the TROIKA's Greek government's infliction of EUR1.7bn property taxation via the electricity providers. The main power utility PPC had a liquidity hole blown through it as non-payments mounted and while regulators claimed the system needed at least EUR350mm to stay afloat, the government has agreed to allow PPC to hold EUR250mm of the property tax it has collected on behalf of the state until June 30 - by which time, it is hoped the utility will have managed to secure other lending facilities. Quite an incredible move - to force the electricity provider to gather the property taxes - and while this attempt clearly failed we suspect the next move will be food-and-water-rationing without proof of tax payment.
Greece will provide 250 million euros in emergency funds to its ailing electricity providers to prevent a California-style energy crisis, government officials said on Friday.
The liquidity injection removes the risk of a financial chain reaction which, according to regulators, was threatening to bring the country's electricity system to its knees.
The temporary aid will shore up the accounts of main power utility PPC, allowing it to maintain operations and reimburse other suppliers of electricity and natural gas on whom the smooth functioning of the country's energy system depends.
"The measure was taken to bolster PPC's liquidity position," one official told Reuters after a cabinet meeting that authorised the move.
Greece's energy market has fallen into disarray due to a combination of stagnant power demand, rising fuel costs and a government decision to use PPC as a tax collection vehicle.
An increasing number of consumers stopped paying their electricity bills after the government started collecting a 1.7 billion euro property tax through them last year, in a desperate effort to meet its budget targets under an EU/IMF bailout.
Non-payments blew a hole into the accounts of PPC, which is Greece's biggest power producer and its sole electricity retailer. PPC, which posted a record loss in the fourth quarter, is also the biggest client for upstart producers generating about 23 percent of Greece's electricity.
The liquidity crunch sparked fears of a power meltdown like the one that happened in 2001 in California, which suffered large-scale blackouts after its energy market collapsed.
In a paper released earlier this week, Greek electricity regulator RAE said the system needed an immediate liquidity injection of at least 350 million euros to stay afloat.
The government partly heeded the regulator's call on Friday, allowing PPC to retain until June 30 about 250 million euros of the property tax it has collected on behalf of the state.
This will be a temporary solution until the company's cash situation improves later this year, officials said. PPC said last week it agreed terms for a 960 million euro bank loan to cope with the liquidity crunch and roll over 1.12 billion euros of maturing debt later this year.
Energy is a sore point in the country's relations with its lenders. The EU and the IMF have been pressuring Athens to introduce more competition in its 5-billion euro retail power market by deregulating electricity prices and abolishing PPC's monopoly over coal, the country's cheapest and most abundant energy source. (Reuters)