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Greek Blackouts Risked as Power Companies’ Cash Runs Out

Greece faces the threat of rolling power blackouts as the economic crisis leaves utilities without cash to pay for natural gas imports and operate power stations, Bloomberg reported.
Regulators will meet with Greece’s power market operator as early as today to discuss an emergency loan of 300 million euros ($375 million) to cover payments for gas imports from Russia’s OAO Gazprom, Turkey’s Botas AS and Italy’s Eni SpA.
The country’s largest power producer is almost out of money and likely to default after unpaid accounts jumped more than 50 percent in a year, according to Standard & Poor’s.
Public Power Corp SA, the biggest electricity producer, is on the verge of default, Standard & Poor’s analysts Nicolas Rivier and Vittoria Ferraris said in a June 7 report.
PPC, as the Athens-based company is known, has seen cash flow drop as unemployment and falling wages leave many Greeks unable to pay power bills. A lack of cash to pay operating expenses may force the closure of some power stations.
PPC spokesman Kimon Steriotis said there was no immediate danger of power cuts because coal-fired stations were well- supplied and reservoirs at hydroelectric plants full. Power plants on islands not connected to the national grid also had ample fuel, ensuring power supplies during the tourist season, he said in an e-mail. He didn’t comment on the prospect of the company defaulting.
“PPC has almost fully depleted its liquidity, owing to sharply falling earnings, climbing overdue receivables, and the absence of new credit facilities,” S&P said in the report, cutting the company’s rating to the lowest level above default. “PPC will likely default on its obligations in the near term.”
With practically no gas or oil deposits of its own, Greece depends heavily on imports to keep power production and the transportation sector going. Oil represented about 55 percent of the country’s total primary energy supply while natural gas accounted for 11 percent in 2008, according to the International Energy Agency.
The prospect of sporadic power shortages come as officials grapple with a mounting social crisis. Unemployment is at 22 percent, the country faces shortages of imported food and drugs, and Bank of America Corp. says the country may run out of cash by early July.
The Greek electricity market operator has applied to the Greek Deposits and Loans Fund for a 300 million-euro loan to pay off its debt to PPC and other energy companies, which in turn owe 300 million euros to Greece’s gas company Depa, its spokesman said. Depa, which buys gas from Gazprom, Botas and Eni, has threatened to cut supply if it isn’t paid promptly.
Although gas provides only 22 percent of Greece’s power supply — the majority comes from domestically mined coal — disruption to imports could force limited blackouts, said Paris Mantzavras, an energy analyst at HSBC Holdings Plc in Athens.
“If gas supplies are completely cut off, then yes, there is a danger of blackouts,” he said in an interview. “Not major ones, but probably some rolling blackouts. It would be critical for the industry and manufacturing sector, and for tourism too. I would expect the government to do its best to avoid a complete cutoff.”
Tourism is Greece’s biggest industry, accounting for almost 16 percent of the economy in 2001, according to the London-based World Travel and Tourism Council.
Supplies of crude oil are also in question. Greece had been importing the majority of its oil from Iran, which stopped shipments at the end of March because of Greece’s failure to pay up. The country has since been forced to seek other suppliers from the Middle East, central Asia and Libya under less favorable conditions, analysts say.
“They have to rely on a couple of traders able or willing to handle the risk,” Petromatrix’s Jakob said. “But that comes at a price, of course.”
Greece agreed to reforms in the energy sector, including opening up the electricity market faster, as part of pledges to receive a 110 billion-euro bailout in May 2010 and a second aid package of 130 billion euros this year. Plans to sell energy plants and cut the state’s holding in PPC have been put on hold until after the election.
“Greece’s energy sector could collapse,” S&P said. “Repeated blackouts likely to ensue might discourage users from paying their electricity bills.”
(source: Bloomberg, Capital)

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