SOCAR to hold talks on DESFA deal

By Azernews

By Nigar Abbasova

Representatives of Azerbaijan's energy giant SOCAR will hold a meeting with Economy Minister of Greece Giorgos Stathakis to discuss the deal on the acquisition of a share in the Greek gas network operator DESFA.

The meeting will reportedly play a significant role for the final deal. Representatives of Italian Snam Company are also expected to participate in the meeting, Greek media reported.

SOCAR agreed to buy a 66 percent stake in the crisis-hit gas supply grid operator for €400 million in 2013. But the acquisition stalled after the energy giant of Azerbaijan faced EU concerns about a potential breach of its competition law. SOCAR was ordered to sell 17 percent of DESFA to a third party so that its stake drops to 49 percent and satisfy EU competition authorities. 

Italian gas grid operator Snam is interested in buying the 17 percent DESFA stake that SOCAR has to sell to satisfy EU conditions.

The deal was further marred by more uncertainty when Greece passed a law, which raised DESFA's gas tariffs by a much lower amount than expected.

Given the new conditions, the Azerbaijani side reportedly assesses the purchase of the share at €260 million, saying that DESFA's price should be now half of its initial value, as the new rules restricted profitability of the deal.  

SOCAR had previously said it would only go ahead with the deal should the cost was cut significantly; given that a number of obstacles had emerged since it first agreed to buy DESFA in 2013. SOCAR, the losses of which amounts to 40-50 percent of DESFA’s total cost given the revised tariffs (according to preliminary estimates), repeatedly expressed its readiness to fulfill all obligations, should previous conditions stay in force.

SOCAR earlier agreed to extend a term of a letter of guarantee under the tender on the acquisition of a share in DESFA till November 30. The letter was due to expire on September 30 and October 31.